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Health Insurance California >> Life Insurance >> Permanent Life Insurance Cash-Value Life Insurance or Permanent Life Insurance Cash-Value Life Insurance combines death benefits with an accrual feature. The buyer of a cash value life insurance policy pays more in the early years than for term life insurance policy, but the money not needed to pay for the cost of the death benefit accumulates with the interest. If the life insurance policy is surrendered before the insured dies, there might be a cash value paid to the specified owner. Make sure the agent/broker provides you with the proper method by which the cash value is calculated and that they obtain this information based on the life insurance policy guaranteed value. As a general rule, it is not a wise idea to purchase cash value life insurance if you plan to surrender early. If all insurance premiums are paid, cash value life insurance policy usually lasts for the whole life of a person, and pays death benefits to the specified beneficiaries named in the life insurance policy. The cash value could be used as loan security for borrowing funds at the interest rate precise in the life insurance policy. Any outstanding loans are deducted from life insurance policy proceeds at death or could be a matter of surrender. Some of these products might enjoy tax advantages. A life insurance policy lapse or surrender might create an assessable event and might also generate a Form 1099. Be sure to check with your tax advisor. Some of the major popular types of cash value life insurance are described below: Whole Life Insurance (also known as straight life, ordinary life and traditional permanent life insurance policy) has guaranteed insurance premiums and death benefits, and a minimum interest rate that would be credited to the funds accumulated in the life insurance policy. On some whole life insurance policies higher interest rates might be credited to those funds depending on the future act of the life insurance company's investments. Universal Life Insurance differs from whole life insurance policy in which it allows the policy owner to vary, with limitations, the amount and timing of premium payments and also the death benefit. Cash values are accrued by crediting insurance premium payments and the interest to a fund from which deductions are made for expenses and cost of life insurance. The rates at which the interest is credited are declared by the insurance company or even might be specified in the contract. Like term life insurance policy, universal life insurance policies generally have two sets of insurance premiums - guaranteed maximum insurance premiums, and "current premiums", which might be lower, but which could be changed by the company, up to the maximum. They also carry a minimum interest guarantee. Because of its flexibility, a universal life insurance policy could also be structured to operate like term life insurance policy. Variable Life Insurance differs from whole life insurance policy and universal life insurance policy in which the policy owners direct the distribution of their premium payments between several different accounts or even funds rather than of the company's choose. Typical account choices are: common stock, bond, mortgage, and the money-market accounts. With this type of life insurance policy, the death benefit and cash value benefits differ in relation to the value of the investments underlying the variable life insurance policy. If the value of the accounts increases, so would the life insurance benefits; if the value of the account decreases, so would the life insurance benefits, subject to the minimum guarantee. Variable life insurance policy is more risky to the policy owner than the other forms of cash value life insurance policy, but there is a possibility of greater returns. Variable Universal Life Insurance combines the flexibility
of universal life insurance policy with the investment account features
of variable life insurance.
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