Cash Value Life Insurance
What Does Cash Value Life Insurance Mean?
Cash value life insurance is a type of permanent life insurance that provides a death benefit while accumulating value over time. The policyholder can borrow against the cash value, use it to pay policy premiums later, pass it on to their heirs, or utilize it as a non-taxable investment. Not all permanent policies build cash value at the same rate, and some begin accumulating it faster than others. You can read more about which type of life insurance policy generates immediate cash value to compare how quickly each option grows.
Insuranceopedia Explains Cash Value Life Insurance
Cash value insurance typically costs more than term life insurance because it is a permanent policy that includes a savings component. There are three main types available:
- Whole Life: This type accumulates cash value based on the performance of the life insurance company’s investment portfolio. Because premiums stay level for the life of the policy, whole life tends to be the most expensive of the three. For a breakdown of typical pricing, see how much whole life insurance costs.
- Variable Life: This allows the policyholder to choose investments from mutual funds and other investment vehicles.
- Universal Life: This expands investment options to include money market and Treasury securities.
Ultimately, it is up to the individual to decide which option best suits their needs and investment style. However, some critics have pointed out that these policies may have limited investment options and that the returns could be smaller than what an investor might achieve independently.