What is the usual length of time it takes for cash to accumulate in my life insurance policy?
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Asked October 29, 2015
Life insurance is not widely regarded as a way to get rich quick. It is designed to relieve the financial burden on loved ones after you pass away, and any income earning ability is secondary and minimal in nature, unless you contribute directly. If you do that, most permanent life insurance policies have the potential to grow or shrink remarkably; fluctuating with the markets they are invested in.
Beware of life insurance policies which promise you a high return. If making money is your goal, investing in stocks, bonds or even durable goods would have as much or more potential for short term returns. It is possible to make a lot of money from, for example, a variable universal life insurance policy, but you are just as likely to have little more than the face value if the markets are particularly erratic.
You can boost the accumulated cash value by contributing to the account. In that situation, you are using the cash value and associated functions almost like a savings account that is tied to your life insurance, and the rate of return will be based on the amount of contribution and the behavior of the investment markets being used. For the best results, choose policies which purchase into market indexes rather than investing heavily into individual stocks because indexed investments have a higher potential for steady growth over time.
The amount of excess contribution you make, interest rates and investment choices will all play a part in determining how quickly a life insurance policy accumulates a cash value. If the general economy has low interest rates, the value will grow slowly, but higher interest rates could cause the cash value to escalate quickly. If you think of the accumulated cash value of a life insurance policy as a hybrid form of a savings account or even an IRA, you can estimate the expected growth over time.
Answered November 10, 2015 by Anonymous