Cash value insurance is known by a variety of names, including whole life, universal life, variable life, single premium life, and variable adjustable life. It is usually purchased for an individual’s lifetime and, as more and more premiums are paid, the policy builds a cash value.
Interest is earned on the cash value, just like money invested in a bank. Many times the policy also will pay dividends (cash returns), which can be used to offset the cost of insurance.
The most basic type of cash value insurance is whole life. A young person buying whole life, or some other type of cash value insurance, would pay higher premiums than for term insurance. However, the benefit of some cash value policies is that the premium never changes.
In the previous section on term insurance, it was noted that decreasing term premiums also do not change. But as a consequence the value of the benefit drops.
In contrast, no benefits are sacrificed in cash value policies with steady premiums.
For young families on a tight budget, cash value insurance can be a major expense. At worst, it can be so costly that these families don’t buy enough coverage at a time when their need is greatest.
Interest is earned on the cash value, just like money invested in a bank. Many times the policy also will pay dividends (cash returns), which can be used to offset the cost of insurance.
The most basic type of cash value insurance is whole life. A young person buying whole life, or some other type of cash value insurance, would pay higher premiums than for term insurance. However, the benefit of some cash value policies is that the premium never changes.
In the previous section on term insurance, it was noted that decreasing term premiums also do not change. But as a consequence the value of the benefit drops.
In contrast, no benefits are sacrificed in cash value policies with steady premiums.
For young families on a tight budget, cash value insurance can be a major expense. At worst, it can be so costly that these families don’t buy enough coverage at a time when their need is greatest.
0 comments:
Post a Comment