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Benefit From Your Life Insurance Plan While You're Living

We all know that life insurance is a necessity – it will provide for your family if you were to die unexpectedly, covering expenses like the mortgage, groceries and your child’s education. But, you may not know that the death benefit isn’t the only benefit of a life insurance policy.

A cash value life insurance policy, more commonly known as permanent life insurance, allows you to benefit from your life insurance plan while you’re living. With cash value life insurance, the premium you pay each month is allocated three ways—toward the death benefit, fees and overhead of the insurance company and the cash value account. If you don’t use the funds in your cash value account, you could be missing out on a valuable opportunity. Here are 4 ways to make sure you don’t miss out.

1. Take out a loan

You can take out a loan against your policy with interest rates that are typically lower than a bank loan rate and there’s no credit check, so it won’t appear on your credit report. It’s up to you whether or not you repay the loan, but the money you borrow plus interest will be deducted from the death benefit when you die.

2. Make a withdrawal

If you’re in need of cash, making a withdrawal might make sense for you. Similar to taking out a loan, making a withdrawal of your cash value would reduce your death benefit – or possibly deplete it completely. Some policies reduce the death benefit by an amount that is greater than what you withdraw, so be sure you know the details of your policy before withdrawing funds.

3. Increase the death benefit

If you don’t have plans to use the cash value for yourself, you may be able to increase the death benefit for your beneficiaries. Before you purchase your policy, let your insurance agent know that you’d like this benefit. The cost of insurance will increase, but would allow the policyholder to make withdrawals without sacrificing the death benefit amount.

4. Use it to pay your premium

Most insurance companies will let you use your cash value to pay your premium payments. This won’t work well if you start too soon, before your cash value has had time to accrue. But, if you have a healthy cash value accumulation, you can fund the policy either partly or completely using the cash value.

Term life insurance policies do not have cash value components, which is why they are less expensive than cash value policies.

This content is intended for informational purposes and should not be considered legal or financial advice. Consult your financial advisor or insurance agent to discuss which products work best for you.

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