Does a life insurance policy count as a tangible asset?
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Asked April 27, 2015
Life insurance can be a very important asset to have, protecting your family against potential hardship. However, since there is no understood payout amount-- that is, you cannot mark a date on the calendar when you will receive a payment against the policy-- it is considered an intangible asset, not a tangible one.
A tangible asset, by common definition, is anything of value that you can touch. A car or home is a tangible asset, but an insurance policy is not. This is especially true of life insurance where there is no benefit payment until you have passed away. The face value of the policy may be quite high, but it is still a zero value policy until your death.
Because life insurance is not a tangible asset, it cannot be counted against you for things such as food stamps or other assistance programs. Those programs typically require you to divulge any savings or financial accounts you have in force, and can reduce or deny your assistance based on your total tangible assets. This is because a tangible asset can be liquidated, and the proceeds used to pay for financial obligations, while an intangible asset exist in something akin to limbo, and only pays out if very specific conditions are met. With life insurance, the policy value does not become tangible until you have died, and that means the value of the policy cannot be held against you because the policy cannot benefit you at all and only benefits others if you are no longer in this world.
However, the cash value of a life insurance policy can be used to determine your financial worth. The face value of the policy is intangible, but dividends or cash values that you can collect or borrow against are very tangible. Since you have the option of withdrawing or otherwise manipulating the cash value of the policy, and even have the option of borrowing against that amount, it is considered a tangible asset. Before you can qualify for assistance, you will have to first withdraw the cash value of the policy and use that. As long as the cash value exists, you have a tangible asset that must be accounted for.
Answered April 27, 2015 by Anonymous