Why Cash Value is Significant In a Life Insurance Policy
One of the many reasons why most people opt towards getting a whole life insurance policy is the cash value account that comes with it. Like most accounts in a bank, a cash value account has a similar system to it. This system allows the cash to grow at a steady return rate which can go up to 4%.
A cash value account also allows you to withdraw money, borrow it, or use the cash in the account to make the payments required in the insurance policy. If you die without utilizing the money in the cash accounts, this money will go to the insurance company instead of your beneficiaries.
If you take a loan from the cash value account and pass away without paying it back, the money from your death benefit will be subtracted and your beneficiaries will receive a smaller payment than what they’re owed. We understand if you’re still unsure about the kind of policy that suits your needs. There are many more types of whole life insurance policies out there that might be perfect for you.
Universal Life Insurance: Although this policy might sound similar to the whole life insurance policy, its flexible premiums allow you to choose how much you’re gonna pay when you’re required to, this accessibility in an insurance policy is yet to be matched. A universal life policyholder also has the option to increase or decrease the death benefit amount, which your beneficiaries will be getting.
The interest earned in the cash value account of universal life insurance is variable and offers a guaranteed return, but if you withdraw cash from the account and it ends up being more than your paid premiums, you’ll owe tax. Although the cash value can’t affect the death benefit, any money left in the account will go to the insurance company and not to your beneficiaries.
Variable Life Insurance: A variable life insurance policy covers you for life while guaranteeing a solid death benefit for your beneficiaries after you pass away; while also allowing you to have a say in the way your cash value grows over time. This policy allows you to decide how your money in the cash value account is spread out. You can choose to invest in stocks, bonds, or mutual funds and if you invest intelligently, you can build up more and more cash value.
Although this is a risky venture since investments can go wrong, they are still a good option for those who have a good eye for the stock. If you do mess up and go red, you’ll end up having to pay more in premiums so you can cover the loss in your cash-value account. As most variable life insurance policies come with an investment management fee which is to be paid on top of your premium, you can still choose whether you want to take the risk or not.
If you’re still unsure of which policy would work best for you, you can consult one of the many top tier insurance companies out there https://www.insuranceandestates.com/top-16-best-whole-life-insurance-companies/. Get life insurance now, and have your loved ones reap the benefits after you pass away.