How to find the best cash value life insurance companies
Above all else, life insurance is intended to provide financial protection for those you love. But certain permanent life insurance policies have additional features, namely the ability to accrue cash value, that justifies the higher price point for some people. If you’re trying to find the right cash value life insurance policy, searching through all the options can feel overwhelming, but you don’t have to go it alone. eFinancial can quickly compare quotes across multiple insurers to help you find a cash value life insurance policy that meets your needs and budget.
Understanding cash value life insurance
Cash value life insurance is a form of life insurance that provides a death benefit to support beneficiaries and can also set aside money in a separate account. By making premium payments over time, policyholders can build up cash savings in their policy, known as “cash value.” This cash value builds up slowly over time and grows tax-deferred.
Cash value will grow at different interest rates depending on the type of policy, whether whole, universal, or variable. For example, whole life insurance policies have guaranteed interest rates locked in when approved. In contrast, variable life insurance allows the policyholder to choose the underlying investments, making the cash value and sometimes death benefit prone to market fluctuations.
For many permanent life policyholders, the cash value acts like a safety net. If you encounter financial difficulties, you can borrow from your policy as a loan to cover an emergency. But it’s important to understand that unpaid loans could be deducted from the policy’s death benefit if you fail to repay what’s owed before you pass away.
Because you’re paying for two features, the death benefit and the cash value, permanent life insurance policies tend to be more expensive than term life for comparable coverage amounts.
Who should consider cash value life insurance?
Cash value life insurance is typically best for people who have a plan for how they’ll use the cash value during their lifetime. For example, people who have already maxed out retirement accounts and other tax-favored long-term investment vehicles may benefit from using permanent life insurance as another tax-deferred savings option. Another use case is if someone wants to pay more into a permanent life insurance policy in their working years and then later uses the cash value to pay premiums. Without a specific plan for the cash value, an affordable term life insurance policy may be a better option.
Regardless of your situation, speaking with a licensed insurance agent is the best way to find a reputable cash value life insurance company with a policy to fit your needs and budget.
4 Questions to ask a cash value life insurance company
1. Which types of cash value life insurance do you offer?
There are three main types of cash value life insurance: whole, variable, and universal.
- Whole life insurance is designed to provide long-term financial security for your family or business. It provides a level death benefit and premiums over the policy’s lifetime, along with a guaranteed interest rate for cash value.
- With variable life insurance, your cash value is exposed to more risk as the underlying securities are invested in the stock market. And instead of the insurer choosing those underlying investments, you have the power to do so as the policyholder.
- Universal life insurance provides the flexibility to change premium payments or alter the death benefit amount as your needs evolve over time. The cash value in a universal life policy changes based on the market rate, but there’s often a minimum guaranteed rate.
All three policy types offer cash value accumulation that accrues tax-deferred, so you can access it later in life.
2. How does the policy accrue cash value?
Depending on the type of policy, cash value can be accrued in different ways – including at a guaranteed interest rate, market rate, or through another method. Knowing this information before applying can help you understand the projected returns over time and enable you to compare that against other long-term savings options.
3. How can I access the policy’s cash value?
Common ways of accessing a permanent life insurance policy’s cash value include policy loans, withdrawals, and surrenders. As each of these strategies has different tax implications and potential fees, it’s important to understand the details of your policy.
For example, if you surrender a life insurance policy, you’ll have access to the cash value, but you’ll lose the financial protection the death benefit provides. For this reason, planning for life insurance protection through an affordable term life policy can be helpful before you surrender the permanent one.
4. Who is eligible for cash value life insurance?
Eligibility requirements may differ depending on the type of policy and insurer you’re considering. Some policies may have age requirements or require you to submit to a medical exam. However, other policies, like guaranteed issue final expense, have no medical exam requirements at all, so everyone is eligible as long as they meet age requirements.
It’s important to ask this question when researching policies, so you can focus on the ones you’re eligible for.
Find the right cash value life insurance company for you
Getting the right cash value life insurance policy can be a complex process. With so many companies offering different types of coverage, it can be hard to know where to start looking.
Luckily, eFinancial has simplified the process by connecting you with highly rated insurers and licensed agents ready to help you find the best coverage at an affordable rate. Get a quote today.