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How does a Cash Value in a Life Insurance Policy Really Work?Posted by: Ken Himmler / Category: Life Insurance |
What is cash value?
Term insurance charges an increasing premium (annually or in bands) to reflect the fact that the insured is aging and, each year, more likely to die. Cash value life insurance has a level premium that is larger than necessary in the early years of the policy to offset the increased costs of insuring the individual in the later years. This excess premium is invested and kept in an account known as the cash value account. In the event that you surrender the policy before death, this excess premium and its earnings are returned to you.
Cash value, by any other name . . .
Since cash value life insurance, also known as permanent life insurance, comes in many product varieties, people often get confused. Whole life, variable life, universal life, and variable universal life are among the most common cash value life insurance products found in today’s marketplace. All of these policies operate in much the same fashion. (For the purposes of this discussion, where they differ is in how the cash value is invested.)
For more information on other life insurance such as life insurance to pay estate taxes, you can go to http://kenhimmler.com.
