What is the purpose of building cash value inside of a life insurance policy?
What is the purpose of building cash value inside of a life insurance policy?
Who is this type of policy ideal for? I am almost thrity and considering many options at this point, but I don't want to consider any options solely based on my representatives opinion. What is the purpose of building a cash value in an insurance policy?
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6 Responses
2.1.2010
Cash value life insurance is good for a minority of people. It allows you to save up money you may need later. However, the commissions and other expenses of cash value insurance suck away a lot of your money. You will usually make more money in the long run if you buy term life insurance and invest the money you save in an IRA, 401K, or no-load mutual fund. If you look at financial sites not run by insurance companies, they are almost unanimous in recommending term life insurance. Look at big name sites like Yahoo, CNN, Motley Fool, SmartMoney.com and Kiplinger's, and they all recommend term life insurance for most people.However, read these sources and make up your mind for yourself. You may be one of the rare people who could use cash value insurance.Sources:Term vs. Cash Value Insurance Articles:http://www.fool.com/insurancecenter/life…http://finance.yahoo.com/insurance/artic…http://money.cnn.com/pf/101/lessons/20/i…http://www.smartmoney.com/insurance/life…http://www.kiplinger.com/basics/archives…General Information on Life Insurance:http://www.fool.com/insurancecenter/life…http://finance.yahoo.com/how-to-guide/in…http://money.cnn.com/pf/101/lessons/20/i…http://www.kiplinger.com/basics/archives…
2.1.2010
In case you ever need to borrow money against your policy.
2.1.2010
a whole life, or universal life policy is good for young people. Your premiums will be low, and by the time you are 40 or 50 years old, you will have a considerable cash value that you can borrow from. The best part is that you will have protection for your family in the event of illness, disability, or death. If you try to wait until you are 40 or 50 to get insurance, the premium will be a lot higher for a much lesser benefit, and you will not have the cash value.My parents bought me a whole life policy before I went to college. After about 15 years, I was able to take out a loan, against my cash value, that I used as a down payment to buy my first home. I have since paid back that loan, and I still have considerable cash value and a death benefit… all at a very low monthly premium.If you ever see yourself getting married and having children. It is not a bad deal. Don't look at it as an investment, because it is not. Like all life insurance policies, it is to protect your family in the event of your untimely death.
2.1.2010
Lisa, your still young, If you can , buy limit time payment only whole life plan from mutual company, ( limite time mean, you only need to pay 10 years or 15 yreas only, than you oblication is done), mutual life company can pay you better dividend each and every years to your cash value until you pass away, you can see the cash value power 20 years later, use cash value loan money out to buy any thing that you want without tax,you can pay for Health insurance, car , down payment fo ryour home, pay for your kids insurance, vacation…….. as long as your loan money intrest not exceed your each year new coming dividend, so you don't need to out of pocket money to pay the intrest, don't forget your intrest still go back to your account cash value any way, that why, your cash value will fill up again 5 or 7 years later. than enjoy again, this is a cash flow investment plus life coverage. Peolpe do think, invest mutual fund and make 10 % a years, but don't forget the market risk, Tax, probate, law sue…. will take away their money, unlike limite time payment whole life insurance. if you want to know more, send me a e-mail, I will tell you more. I am not life insurance agent, but I bought 10 payment whole life insurance for my both kids and myself. I like long term cash flow. only mutual comapny can pay 9 to 10% of dividend. stock company make money to pay for share holder first, not to policy holder, that why, stock company not sell much on whole life, they use to sell VUL and Trem life, because premium is less, easy to sell, that how they make money. you will see some life company sell 20 or 30 years premium refund term life insurance, when the term end, they will refund all of your premium, but cost is a lot higher than reqular term life, the one that I bought 10 payments whole life, after 10 years, the account cash value will have all my paid premium already, mean I will have free whole life insurance plus life time cash flow.
2.1.2010
The main purpose of the cash value in a whole life policy is to keep the premiums level through out your life and the life of the contract. Term insurance does not build cash value and when the term ends and you renew, you will pay a higher premium. You can purchase more insurance in term but only whole life will guarantee to be there when you need it (at death). I generally recommend a combination. Mostly term to cover your major needs and some whole life to always be there as you get older. Everyone is different. No one plan is right for everyone. You must decide what is right for you.
2.1.2010
Deep5223 has it exactly right. It is to keep the premiums level and the policy in force.