what insurance policies have cash values?
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Asked August 9, 2016
When it comes to investing for your future, how much thought have you given to the benefits of owning a cash-value life insurance policy?
In the world of insurance, there are several flavors of income protection that companies can offer both you and your loved ones, many of which can actually provide you with tax-sheltered savings available long before your policy reaches its eventual maturity.
Whole life, variable life and universal life are all types of insurance which are known as cash-value policies, meaning that they offer not only coverage to the policy holders beneficiaries, but also have the potential to provide earnings during the policyholders lifetime themselves. They each differ from the other major category of life insurance, term insurance, which typically covers only a period of time such as 10 or 30 years, or until the policy holder cancels it, by covering the policyholder throughout their entire lifetime. This lifetime coverage is the reason cash-value policies are also known as permanent insurance policies.
When you make payments to a permanent life insurance policy, a portion of these premium payments go towards the policy's stated death benefit, often based on your age, health and other underwriting factors, a portion goes towards covering the insurance companies operating costs as well as profits, while the remaining amount goes towards your policy's cash value. This cash-value is usually invested by the insurance company in conservative-yielding investments that grow over time, but other options are available.
The options on how this balance accumulates over time is determined by the exact type of permanent policy you have, and can include the following : Whole life insurance has premiums, death benefits and rates of return that are fixed by the insurer; Universal life insurance allows policyholders to change their death benefit amounts with certain restrictions and offers flexibility on premium payments; Variable life insurance allows the policyholder to maximize their choice of investment options, providing for higher returns, and potential losses; Variable universal life insurance, combines the benefits of both universal and variable life policies.
Once their cash-value has accumulated to a certain point, policyholders are then able to use their earnings in a number of different ways. They can use their available funds to pay their policy premiums, take out loans at market-discounted rates, invest in specific vehicles or even to supplement their retirement income.
Answered August 11, 2016 by GWGLife