Life Insurance Policies and Cash Value
Cash value is an attractive part of many permanent life insurance policies. When the cash value inside a life insurance policy builds up, you may take a loan or a withdrawal from the cash value, subject to provisions of the life policy, that can help you with expenses.
Only permanent life insurance policies can build cash value, so that means if you are looking for a life policy to build cash value, you may want to investigate whole life or universal life policies.
Whole Life policies allow you to have a cash value that builds slowly but steadily as long as you pay your premiums on time. As long as you pay your premiums on time, you will have a cash value that builds slowly but steadily. As the cash value increases, you’ll see it grow too - so it pays to be patient!
Universal life policies also build cash value, but they do so in a little more complicated way. The value inside of a universal life policy is usually not guaranteed, which means you may receive more cash value than expected - or you may get none at all. If you want a life insurance policy that may build cash value you can access while protecting your family, talk to your agent about overfunding - paying slightly more than the normal premium in order to increase your cash value. However, over-funding is generally not encouraged by the insurance company so be sure you have the company's consent prior to using this strategy! Just like a whole life policy, the larger the cash value gets the faster it grows, so taking advantage of the flexibility of a UL plan by overfunding means you may receive more cash value!