Comparison of Types of Cash Value Life Insurance
Cash value life insurance offers both lifelong coverage and a savings component. However, it’s important to understand how policy features work before choosing the right option.
What Is Cash Value Life Insurance?
Cash value life insurance is a type of permanent life insurance that combines death benefit protection with a built-in savings component. A portion of your premium goes toward building cash value, which grows over time on a tax-deferred basis.
Policyholders can access this cash value through withdrawals or policy loans. However, unpaid loans and withdrawals may reduce both the cash value and the death benefit. In some cases, surrender charges and income taxes may apply. If the policy is classified as a modified endowment contract (MEC), early withdrawals may also be subject to penalties.
There are several types of cash value life insurance, including whole life, universal life, and variable life insurance. Whole life offers guaranteed growth, while universal life provides flexible premiums. Variable life insurance allows investment in market-based subaccounts, which can increase returns but also carries higher risk.
*Policy loans, withdrawals, and payments made from the policy’s cash value may reduce the policy’s cash value and death benefit and may cause an investor to receive less than the original amount invested. Withdrawals may be subject to surrender charges and income tax. Penalties may apply to withdrawals made before age 59½ if the policy is a modified endowment contract.
To better understand how cash value works inside a policy, read:
https://asofsp.com/what-is-cash-value-life-insurance-learn-how-it-works/
**Any guarantees associated with payment of death benefits, income options, or rates of return are subject to the claims-paying ability of the insurer.
Note:Variable life and variable universal life insurance policies are offered by prospectus, which you can obtain from your financial professional or the insurance company. The prospectus contains detailed information about investment objectives, risks, charges, and expenses. You should read the prospectus and consider this information carefully before purchasing a variable life or a variable universal life insurance policy.
