A life insurance policy can provide instant cash when you need it. You just need the right policy and must be able to meet the terms. Not only will the plan provide benefits to your loved ones after your death, but it will also help make life easier for you as well. Here’s a look at how whole life and universal life insurance plans provide a cash component.
What Do You Mean by Cash Value of a Life Insurance Policy?
The net cash value of a life insurance plan refers to the amount you will receive if you cancel your policy. It reflects cash value after subtracting fees, surrender charges, and debt from loans. You can access the cash immediately at any time, but it will reduce your death benefit.
Types of Policies You Can Withdraw Cash From
The two types of life insurance policies that allow cash to be withdrawn are whole life and universal life, which are both permanent plans. A term life plan, by contrast, has a limited term and doesn’t offer cash value withdrawals. Whole life insurance is the most common plan with a cash component.
How Can Your Life Insurance Plan Be a Source of Cash?
With a whole or universal plan, you can either withdraw cash or borrow cash against it. There are numerous reasons you might want to use your life insurance account for emergency funds. You might need to pay medical bills or help out a family member. Borrowing against your own policy gives you more options and protects the net cash value of your account.
What Factors Typically Affect Your Policy’s Cash Value?
Part of your monthly insurance premium goes toward the cash value of your policy. So the longer you hold the policy, the more cash will accumulate in it. The amount you pay for premiums will be a key factor in the policy’s growing value over time. Another factor will be how underlying investments in the stock market perform. How much you withdraw or borrow will also affect your cash value.
Immediate Cash Payouts
Before withdrawing cash from your life insurance policy, you should have a clear understanding of how it impacts benefits. Talk with your insurance agent and find out how withdrawing and borrowing will affect your policy over time. There are plenty of legitimate reasons to use your policy as a source for immediate cash, so consider it a viable option among other options.
The more you let the policy grow and resist withdrawing or borrowing, the more options you will give yourself in the long run. Keep in mind that each life insurance policy is unique. Review your annual statement to learn more about factors that affect your policy’s net cash value. Ask your insurer to clarify any questions you have about it.
Tapping into cash is possible with a whole or universal life insurance plan. Not only can the plan help protect your existing assets, but it can also generate growing assets. Overall, a life insurance plan acts as a financial safety net for you and your family. Contact our insurance experts at East End Insurance Agency today to assist you with your life insurance needs.