Does your Life Insurance have Cash Value?
Whether or not you have cash value in your life insurance will depend on the type of life insurance policy you have.
If you have a Term Life Insurance policy it will not have cash value. If you have Whole life (WL) or a Universal Life (UL) policy it will carry a cash value balance. There are several different kinds of Universal Life policies but all of them will have a cash value.
But what is cash value?
Cash Value is a part of your premium that stays with the policy and earns returns. Depending on the policy you have, this return could be a set rate, or could also be tied to some kind of index. (such as the S&P 500)
What Can I Do With My Cash Value?
1. Take a Loan - you can take a loan from the cash value of your policy. You will take an amount from the cash value of the policy and are expected (but don't have to) pay back the balance plus interest to your policy over time. If the unpaid loan balance plus interest ever exceeds the cash value the policy will lapse. So make sure to keep an eye on it!
2. Make a Withdraw - You can also just make a withdraw from your cash value in the policy and you do not have to pay taxes as long as the amount is less than what you have paid into it. This does have potential of reducing death benefit, so, make sure you check your policy!
3 - Pay Premiums - Some policies with cash value allow you to pay some or all of your premiums.
4.Surrender Your Policy - If you decide you no longer need the life insurance policy, it can be surrendered and you would receive the cash value of the policy minus any fees or outstanding loans.
There are plenty of benefits to having a life insurance policy that accrues cash value. If you want to see if your policy offers cash value, give us a call today!
Gilles Smith Purdum Insurance Agency, LLC