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What if your life insurance could do more than just provide a death benefit?
Cash value life insurance goes beyond basic protection; it gives you a way to grow savings, create financial flexibility, and build long-term wealth you can actually access while you’re alive.
Unlike term policies that expire after a fixed period, cash value life insurance sticks with you for life. It includes a savings component that grows over time, money you can borrow from, use to pay future premiums, or tap into during retirement.
At BetterWealth, we talk a lot about how these policies can be designed for growth and intention. When structured well, cash value life insurance becomes more than a safety net—it becomes a powerful financial asset.
In this blog, we will talk about:
Let’s unpack how this policy works and why it might be a smart tool for your financial future.
Cash value life insurance isn’t just about protecting your loved ones. It also helps you set aside money you can tap into while you're still around. Figuring out how this money grows and what policies exist can help determine if it fits your financial plans.
Cash value life insurance is a type of permanent life insurance.
It lasts your whole life as long as you pay your premiums. Unlike term insurance, it has a built-in savings component—the cash value.
That cash value grows over time, and you can use it in various ways, like paying premiums or borrowing money. It’s flexible, and many people like that it combines insurance with savings.
Every time you pay a premium, some money covers the insurance, and the rest goes toward your cash value. That amount grows at your policy's rate, often with a guarantee.
The growth is tax-deferred, so you don’t pay taxes while it builds up. You can borrow against the cash value or withdraw some during your life. Remember, loans or withdrawals will lower the death benefit if you don’t pay them back.
There are three main types:
Each one fits different needs. Whole life is steady and straightforward, while variable life lets you take investment risks for a shot at bigger gains.
Cash value life insurance isn’t just about leaving money behind. It gives you lifelong protection, tax perks, and a way to grow your money that you can actually use. These features make it a flexible tool for building financial security.
Your coverage lasts your whole life as long as you pay the premiums.
Unlike term insurance, which runs out after a set time, this type guarantees your family gets a death benefit no matter when you pass.
That kind of lifetime coverage brings peace of mind. No need to stress about renewing or losing your policy. Some plans even let you lock in fixed premiums, so your costs don’t surprise you later.
Our team helps folks find policies with lifetime coverage that fit their long-term plans, especially for families and entrepreneurs who want absolute security.
One standout benefit: the cash value grows tax-deferred.
So you’re not paying taxes on the growth as long as it stays in the policy. If you take out a loan against the cash value, that usually isn’t taxed either.
The death benefit your beneficiaries receive is generally tax-free. That tax treatment can mean you and your loved ones ultimately keep more money.
These tax perks can really help you plan smarter and keep more of what you’ve built.
Part of your premiums goes into a savings account inside the policy. This cash value grows steadily, and usually it’s more stable than what you’d get in the market. Some policies even let you invest in stocks or bonds for higher returns.
You can use this growth later for emergencies, retirement, or other goals. Since it’s part of your policy, you get access without the usual penalties or restrictions for different savings accounts.
Using cash value life insurance as a growth tool means building resources for yourself, not just your heirs.
The cash value in your policy isn’t just a number on a statement; it’s something you can actually use. You can borrow against it, take out money, or even use it to pay your premiums. Knowing how to access and use this value helps you get the most out of your policy.
You can take a policy loan against your cash value anytime, usually at a low interest rate.
You don't have to repay it immediately, but the unpaid balance will lower your death benefit if you don't. Withdrawals let you take out cash without a formal loan, but they’ll cut into your cash value and reduce your death benefit more directly.
Both loans and withdrawals are tax-free as long as the policy stays in force and doesn’t become a Modified Endowment Contract (MEC). Still, you’ll want to manage loans carefully to avoid tax surprises or letting your policy lapse.
You can tap into your cash value for extra money in retirement. Withdrawals or policy loans can help cover living expenses, medical bills, or sudden needs.
Since the cash value grows tax-deferred, you get flexibility without triggering income taxes like you would with traditional retirement accounts. It’s handy to keep your retirement income steady and leave a death benefit for your heirs.
BetterWealth often suggests this as part of a long-term plan, especially for people who want more control and stability after they stop working.
Some policies let you use your cash value to pay all or part of your premiums. That can come in clutch if cash flow gets tight.
Using accrued value to cover premiums keeps your policy active without dipping into your wallet. But doing this too often might slow your cash value growth and shrink the death benefit.
It’s a bit of a safety net—good to have if you hit a rough patch. Not a bad option to keep your coverage going when money’s a little tight.
Trying to choose between cash value and term life insurance? It helps to look at cost differences and how each fits your bigger money plans. These two types work in different ways, and each can uniquely affect your financial goals.
Cash value life insurance usually costs more than term life.
That’s because part of your premium builds cash value, which grows over time. These premiums are mostly fixed, so you know what you’re in for.
Term life insurance is cheaper up front since it only covers you for a set period—like 10 to 30 years. You’re buying pure protection, no savings. If you outlive the term, your coverage ends, and the money you paid doesn’t return.
If you want lower upfront costs and temporary protection, term life might better fit your budget. If you want a policy that builds savings and lasts for life, expect to pay more for cash value insurance.
Cash value life insurance can play a role in your long-term wealth plan.
The cash value grows at a guaranteed rate or based on your investments. You can borrow against it or use it in retirement, giving you more options than just a death benefit.
Term life is simpler—no cash value, no investment growth. It’s best if you just want to protect your family during key years, like while raising kids or paying off a mortgage. After that, the coverage ends, and you’d need a new policy if you want more insurance.
Our team helps clients see how cash value policies, like overfunded whole life, can act as insurance and a financial asset. That dual role gives you more flexibility with your money over time.
Cash value life insurance comes with costs and responsibilities. Some fees can eat into your cash value if you bail out early. Borrowing from the policy also affects your future benefits and growth.
If you cancel your policy early, you could get hit with surrender charges.
Insurers use these fees to cover their costs. Depending on the policy, surrender charges usually apply in the first 7 to 15 years. These charges shrink the payout if you cash out. For instance, if your cash value is $20,000 and there’s an 8% surrender charge, you’d lose $1,600.
That’s not nothing.
Surrender charges make early cancellation expensive. To dodge these penalties, try to stick with your policy for the long haul and use its cash value.
You can borrow money from your policy’s cash value, but the loan isn’t free.
When you take a loan, interest accumulates. If you don’t pay it back, your death benefit is lowered, and future cash value growth is slowed.
Say you take out $10,000 and never repay it. Your beneficiaries will get less—the loan balance and interest are off the top. That means less protection for your family.
Unpaid loans can also slow your cash value growth since the insurer uses your cash value to cover the loan. If you let loans get too big, the policy could even lapse, and you’d lose coverage.
It’s important to understand these impacts.
Are you thinking about cash value life insurance?
It’s not just about the death benefit—this type of policy is for folks who want lifelong coverage with a side of growing savings.
Entrepreneurs and investors seem to gravitate toward cash value policies. Why? The tax perks and the ability to tap into cash value without dumping investments can be a real win when opportunities arise or unexpected expenses occur.
Families looking for extra financial security might appreciate how these policies double as insurance and a savings tool. Part of your premium actually grows as cash value, so you’re not just paying for protection, you’re building a resource you can use.
But let’s be real: cash value policies usually cost more than term life. You'll probably want to look elsewhere if you’re mainly after affordable, short-term coverage.
You might be a good fit if you:
Picking the right cash value life insurance starts with some honest self-reflection.
What do you really want—lifelong protection, steady cash growth, or the freedom to access funds as needed?
Your answer narrows the field. Check out the policy type first. Whole life insurance offers guaranteed cash value growth and predictable premiums. Universal life is more flexible but carries a bit more risk.
Budget matters too. Some policies need higher premiums if you want cash value to build quickly. Overfunded whole life—like BetterWealth’s The And Asset®—tries to ramp up early cash value while keeping substantial death benefits.
Look closely at how the cash value grows and how easily you can access it. Can you borrow from your policy without a hassle? Are there any sneaky fees or limits? The best policy for you balances growth, access, and cost.
Don’t skip the tools—cash value charts and calculators can help you see how different policies stack up over the years. Compare things like:
Your situation definitely matters. Entrepreneurs might want a policy for overfunding, while families could lean toward predictable premiums and steady growth. Book your free Clarity Call to see how BetterWealth could help you build wealth with intention.
Still unsure if cash value life insurance is the right fit for your long-term plan? These common questions dive into the real-world details that don’t always make it into standard explanations. Let’s clear up what actually matters when choosing or using these policies.
You can usually borrow once the policy has built up enough value, which may take a few years. Some policies designed for early growth, like BetterWealth’s The And Asset®, allow you to access cash value sooner than standard options.
No, policy loans don’t appear on your credit report and won’t impact your credit score. Your own cash value secures the loan, so there's no credit check or reporting involved. Just remember, unpaid loans reduce your death benefit.
Yes. Overfunding means paying more than the minimum premium to grow your cash value faster. It’s a common strategy among BetterWealth clients using The And Asset®, but you need to stay within IRS limits to avoid tax penalties.
If there’s enough cash value, your policy may stay active using that balance to cover premiums. But if the cash value runs out, the policy could lapse. Always monitor your policy status and speak with your advisor before making changes.
In many states, yes, life insurance cash value has legal protection from creditors, especially in bankruptcy cases. Rules vary by state, so it’s smart to check local laws or speak with a BetterWealth advisor for specifics based on your location.
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