Yes – many permanent life insurance policies can be used in ways other than providing a death benefit if the owner passes away.
What is Whole Life Insurance?
Whole life insurance is designed to payout whenever you die (unlike term insurance) as long as you pay the premiums and keep the policy active. A whole life policy usually has a set monthly premium that will not vary or change as you age. As long as you continue to pay your premium, you’ll continue to have the policy benefits.
The benefit of whole life insurance is that this type of insurance policy pays dividends to policy holders on an annual basis. You can choose whether or not to put that dividend towards your death benefit or towards the investments being made with the cash component.
While the majority of your premium will go towards the death benefit, a small portion does go towards the cash value each year and earns interest. The cash value can be borrowed against or cashed in and is considered an asset on your personal balance sheet.
How to Take Advantage of the Cash Option
You’ll need to talk to your insurance professional to find out what options your life insurance company gives you for taking advantage of the cash value portion of your policy. Some companies give you withdrawal options, while others will also include a loan option. A withdrawal will usually cause both your death value and your cash value to decrease (unless you.
It is important to understand the terms of your life insurance policy as well. The size of your withdrawal may impact whether or not it is taxable or whether or not it is considered income.
There are a lot of great ways to save money for emergencies or for retirement. While the cash option on your whole life policy may be worth having access to, it’s not recommended you make it your primary source of savings for an emergency. Talk to your insurance agent to find out if this type of policy, Universal Life, is a proper fit for you and your life insurance goals.