Cash Value Life Insurance - Does it Make Sense For Me?

Many people are under the misconception that cash value life insurance doesn't really exist. This is a common mistake made by many consumers. The truth is, while most life insurance polices don't pay out death benefits, there are some that do. If you're unsure of what kind of policy you want, cash value might be a good option for you. Click here to get to decide on the right policy for you!

Most people think that cash value life insurance only exists in traditional, federal income tax forms. It is true that in these policies the death benefits will be paid out upon the policy holder's death. However, some life policies provide two different features: A federal income tax-deferred feature and a death benefit feature. These two options can be valuable for certain consumers.

For example, let's say you've saved all your cash for your retirement. You want to build your nest egg for the future, but you also realize that you'll likely live longer than your retirement age. If you take out a cash value life insurance policy, you can leave your beneficiaries' money in the bank for their retirement and use the interest from the account as well as Social Security taxes when you reach retirement age. By the time you reach retirement, you'll have paid off the initial premium with a federal income tax deferred benefit that you'll never have to pay. Read more about the cash value life insurance here.

Another scenario often considered when it comes to cash value life insurance is an outstanding loan. If you take out a loan to purchase a cash value policy, you typically have to make repayments based on a set schedule. Usually you'd have to make the first payment when you took out the loan, and then every six months until the loan is repaid. If you take out an adjustable rate mortgage, your payments may be based on the markup of your adjustable rate mortgage and may vary depending on the market. Many people choose to take out these policies when they need coverage, such as following a divorce or the death of a primary caregiver. However, many insurance companies don't allow you to take out a loan or a mortgage to pay off your policy, so the only way you'll be able to remove it is by taking out a cash withdrawal.

In addition to cash-value life insurance policies, some people choose to purchase a term or permanent whole life policy. A whole life policy is usually more expensive because you're paying for a guaranteed cash value while your premiums are often fixed. Term life policies come in a variety of plans. You can choose to take a term policy for a specific duration of time or for a specified amount of time. However, usually the terms of term life policies are very short-lived, which means that you'll probably be paying high premiums and not earning any cash value.

For many consumers, cash value life insurance is one of the best ways to protect their families and their finances. Insurance companies offer competitive rates and many of them have no age restrictions. Because these policies are so affordable, most people don't even consider them when buying a family insurance policy. The premiums, however, aren't cheap, and you'll probably need to pay several hundred dollars a month to enjoy the benefits.