Cash-Value Insurance
Combines death benefits with an accumulation feature. The
buyer of a cash value policy pays more in the early years
than for term insurance, but the money not needed to pay for
the cost of the death benefit accumulates at interest. If
the policy is surrendered before the insured dies, there may
be a cash value paid to the owner. Make sure the agent/broker
provides you with the method by which the cash value is determined
and that they obtain this information based on the policy’s
guaranteed value. As a general rule, it is not a good idea
to buy cash value life insurance if you plan to surrender
early. If all premiums are paid, cash value insurance usually
lasts for the whole life of a person, and pays death benefits
to the beneficiaries named in the policy upon the death of
the insured. The cash value can be used as loan collateral
for borrowing funds at the interest rate specified in the
policy. Any outstanding loans are deducted from policy proceeds
at death or surrender. Some of these products may enjoy tax
advantages. A policy lapse or surrender may create a taxable
event and may generate a Form 1099. Be sure to check with
your tax advisor. Some of the most popular types of cash value
insurance are described below:
Whole Life Insurance
(also known as straight life, ordinary life and traditional
permanent insurance) has guaranteed premiums and death benefits,
and a minimum interest rate which will be credited to the
funds accumulated in the policy. On some whole life policies
higher interest rates may be credited to those funds depending
on the future performance of the company’s investments.
Life Insurance 1
Life Insurance 2
Life Insurance 3
Life Insurance 4
Life
Insurance 5
Life Insurance 6
Life Insurance 7
Life Insurance 8
