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Permanent life insurance policies typically feature a savings component known as cash value, which provides numerous benefits to the policyholder.

Depending on your policy, the cash value of your life insurance may grow at either a fixed or variable interest rate. Additionally, you can take out a loan against the accumulated cash value in order to access additional funds should you need them. In the event you have a universal life insurance policy, you can use its cash value to adjust your death benefit or premium amounts.

How Does the Cash Value of Life Insurance Work?

The cash value of a life insurance policy is an important feature that allows policyholders to accumulate savings within the policy, while also providing a death benefit. This cash value is created over time by investing part of the premiums paid into a variety of investments available through the insurer.

Depending on the type of permanent life insurance purchased, these investments may include stocks, bonds, mutual funds, and other securities. As long as the premiums are paid regularly, the investment earnings will be credited to your policy’s cash value account and can be accessed via loans or withdrawals against your policy’s face amount.

The great thing about this form of investment is that it can grow with minimal effort from you. Your money is working for you without you having to actively manage it. You also don’t have to worry about market performance because your money is secure, regardless of the ups and downs of the stock market.

Not only does a life insurance policy help you secure your dependents’ financial future, but it can also be a great investment option to preserve or grow your wealth.

Can I Use My Life Insurance Cash Value While I’m Alive?

Yes, you can cash in on the value of your life insurance policy while you’re alive. Everyone who does this has their own reasons, but it’s important to consider the cash value of your policy when you’re dealing with a lot of unforeseen debt (such as medical debt).

Two ways you can use your life insurance cash value include the following:

  • Take out a loan against your policy’s cash value. If you want to keep your life insurance coverage but need money right now, borrowing against your policy can help. As with any loan, however, you must pay it back with interest or the deficiency may be deducted from your death benefit. Should you borrow all of your policy’s cash value, this will likely cause the policy to terminate.
  • Sell your life insurance policy. Most people don’t often think of life insurance as a financial product that they can sell, but you may be able to do this. If you decide to cash in on your policy, you can do so by selling it back to the insurer. This will have tax consequences, however, and your dependents will not receive a death benefit when you pass away.

Keep in mind, however, that either of these options represents changes that can affect your death benefit amount or even cancel your policy altogether.

How Can I Learn More About the Cash Value of Life Insurance?

If you have any additional questions about life insurance, its cash value, and how you can secure the financial future of your dependents, you can always reach out to Insurance Specialists, Inc. for assistance.

Our expert insurance brokers have a unique understanding of the insurance industry and the various products out there that people can use to protect what’s most important to them.

To get in touch with us, all you need to do is send us a message online!