What You Should Know
- Many life insurance companies offer policies that carry a cash value
- Coverage that builds cash value is often a feature of a permanent life insurance policy
- Cash value policies are more expensive than a term life policy
If you are searching for a life insurance policy, you may be curious about life insurance companies that build equity.
There are plenty of life insurance companies that offer policies that build equity. This is typically referred to as life insurance cash value. The cash value of a life insurance policy can be extremely beneficial, depending on your needs.
When you search for life insurance, you may want to know more about policies that build cash value. A cash value life insurance policy, while being quite common, is not the best choice for everyone.
The policies that carry a cash value component are often permanent life insurance. Permanent or whole life insurance coverage is life insurance you purchase that will remain in effect until your death.
This is in contrast to a term life insurance policy that lasts a specific term length, such as 10 or 20 years. It might not be difficult for you to find affordable life insurance that builds equity, but you'll want to search specifically for whole life insurance quotes when doing so.
When looking online, it's a good idea to search for the best and cheapest life insurance in your state rather than comparing rates in your state to those of other states in the U.S.
You can search online to find quotes for life insurance that builds equity. This will allow you to compare multiple companies at once to see what might work best for you and your loved ones.
Before you buy life insurance that builds equity, be sure to use our freeq quote tool above to compare several different policies and find your perfect fit.
What are the best cash value life insurance companies?
When you search for the best life insurance companies that offer permanent insurance with a cash value component, you will find that a lot of companies offer this type of policy.
The best whole life insurance companies in 2020 and the best whole life insurance companies in 2021 include:
- Northwestern Mutual
- New York Life
- State Farm
If any of the companies above interest you when it comes to life insurance coverage, you can speak to an agent and ask more about your options when it comes to a policy.
Keep in mind that you should always compare rates from multiple companies before you make any final decisions when it comes to life insurance.
How does a cash value life insurance policy work?
When you purchase a cash value life insurance policy, your monthly payments go to the cash value of that policy, the cost of insuring you, and the cost of policy fees and changes to your policy.
If you are looking specifically for a life insurance policy that accrues cash value, you can choose from the following options:
- Whole life insurance
- Universal life insurance
- Guaranteed issue life insurance
All of the life insurance types listed above are permanent insurance options. Each type has several subtypes that you may find an interest in.
For example, universal life insurance policies contain a subtype called indexed universal life, or IUL, policies. IUL policies offer specific advantages and disadvantages, and you may want to consult a "best IUL companies 2021" chart for more information on how the cash benefit for this type of policy would work for you.
With a life insurance policy that has a cash value component, you can borrow from the cash value on the policy to pay for medical bills, supplemental income, or anything else you need.
In order to receive money from your policy, you can take out a loan or withdraw funds.
If you take out a loan against the cash value of your policy, you essentially borrow against the cash value of your policy. Insurance companies will charge interest on these transactions.
With a loan, if you don't pay back the loan with interest before you pass away, the outstanding balance of the loan and interest will be taken from the insurance payout your beneficiaries receive.
Withdrawing funds from your policy is simple but might be taxable if you include investment gains in your withdrawal. Similar to a loan, this will mean your beneficiaries ultimately receive less of a payout.
What are the pros and cons of a cash value policy?
There are a lot of benefits to a cash value life insurance policy. These benefits include:
- A death benefit
- A fixed premium payment
- The asset of the cash value itself
- A potential dividend
- The money is tax-deferred
But a cash value life insurance policy is not for everyone. Some of the drawbacks to a standard permanent life insurance policy with a cash value component include:
- Premiums are higher than with a term policy
- Policy fees are often extremely high
- Some of the policies are complex and confusing
Should I get a life insurance policy with a cash benefit?
Depending on your needs and the needs of your loved ones, a life insurance policy that holds cash value may be quite beneficial. If you can handle the monthly rates for coverage and are sure you understand the stipulations of the policy, it could represent a smart opportunity.
But not everyone needs their life insurance policy to hold cash value. If you are young and want added assurance when starting your career or building your family, a term life insurance policy would be a lot cheaper and would still offer a death benefit.
If you are not sure whether you want to look for term or whole life insurance, you should shop around for different options and compare prices for both types of policies.
You can find great rates for life insurance that builds equity today by entering your ZIP code into our free tool below to see what your options are.