Cash value is a savings or investment component built into permanent life insurance policies, including whole life, universal life, and variable life. A portion of each premium you pay goes into this cash value account, which grows tax-deferred over the life of the policy. You can access the cash value during your lifetime through loans, withdrawals, or by surrendering the policy.
The growth mechanism depends on the type of policy:
In all cases, growth is tax-deferred, meaning you do not pay taxes on the gains as long as they stay inside the policy.
This surprises many policyholders: with most policies, the cash value does not pass to your beneficiaries in addition to the death benefit. Your beneficiaries receive the death benefit, and the insurer keeps the cash value. Some policies offer a rider that adds the cash value to the death benefit, but it comes at an additional cost.
Cash value can be a useful financial tool, but it is important to understand how it actually works within your specific policy. Growth projections in illustrations are not guarantees. A Truscott coverage review will show you your policy's current cash value, how it is projected to grow under guaranteed versus non-guaranteed assumptions, and whether accessing it makes sense for your situation. Schedule a review for a clear picture.
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