When Does Burial Insurance Have Cash Value?
Cash value will accrue in any whole life burial insurance policy, regardless of which insurance company you buy from. However, if you purchase a term life policy from a company such as Globe Life, it will not have cash value.
All types of permanent life insurance (whole or universal life) have cash value. It’s like a behind-the-scenes equity account that you can access while living. A small portion of your premium payments is routed to this account, and it typically earns interest.
How much cash value accrues varies primarily based on your monthly payment and time. Also, there’s virtually no accumulation during the first two years (with any company).
How Can The Cash Value Be Used?
Below are all the various ways the policy owner The policy owner is the person or entity who controls a life insurance policy. Additionally, they are the owner of any cash value. Only the policy owner can make inquiries or changes to the policy. can use the cash value as it accrues. Not all companies offer these options, but most do. Insurance companies refer to these as the “nonforfeiture provisions.”
Policy loan
You can withdraw some or all of the cash value and spend it as you please. For example, you can use the money to pay your premiums or fix your car. There are no restrictions of any kind on how you use the money.
It’s essential to understand that whatever amount you withdraw will be a loan against the policy. If you die with an outstanding loan, the insurance company will deduct the loan amount from the death benefit.
For example, if you have a $10,000 whole life policy and a $1,000 loan, the beneficiary would only get $9,000 when you die. Outstanding loans will increase since they accrue interest, so you should aim to repay them at some point, or the loan will continue to grow.
Surrender the policy
If you cancel (surrender) the policy, the insurance company will refund you whatever cash value has accrued.
Automatic premium loan
Often referred to as the “APL” provision, this feature will automatically use the cash value to pay your premiums to prevent the policy from lapsing due to non-payment. It will continue to do so for as long as sufficient cash value exists. Once the money runs out, the policy will officially terminate.
Reduce paid-up
This option takes whatever cash value has accrued and executes a one-time purchase of a corresponding amount of paid-up life insurance A life insurance policy in a status where no additional premiums are required, and the coverage will stay in force indefinitely. . After this conversion, you’ll have a lower death benefit than the original amount; it lasts forever, and you will no longer need to make any premium payments.
For example, a 50-year-old male who bought a $25,000 whole life policy that costs roughly $75 monthly would have an estimated cash value of $3,500 after ten years. That $3,500 in cash value would translate into about $7,000-$9,000 in paid-up life insurance.
The policy owner can choose to exercise this provision whenever they want. At the same time, this option can sometimes automatically be triggered by some final expense insurance companies when your policy lapses due to non-payment.
Extended-term insurance
Before the policy lapses due to non-payment, this provision will continue to provide temporary insurance for as long as there is sufficient cash value to do so. For example, if you have $2,000 of cash value, it may buy you extended-term insurance for 12-18 months after the policy’s lapse date. You would be insured during this time, and your beneficiaries would receive the full claim if you died.
You Shouldn’t Buy A Whole Life Final Expense Policy Because Of The Cash Value
Cash value is a nice feature, but you should consider it the icing on the cake. You don’t buy a whole life policy to cover funeral costs because it accrues cash value. You’re buying a whole life burial policy because it’s the only type of policy guaranteed to last your entire life at a fixed cost.
The alternative is buying term insurance, a type of policy that will terminate after a specific number of years (usually around age 80). Once a term policy ends, you’re no longer insured and would have no means to pay for your funeral expenses.
If you need life insurance to cover your final expenses, opt for whole life because it’s permanent coverage guaranteed to be there no matter how long you live. The cash value is nice to have, should you need it, but it’s not at all the reason why you’re buying the policy.
- Nationally licensed life insurance agent with over 15 years of experience
- Personal annual production that puts him in the top .001% out of all life insurance agents in the nation.
Anthony Martin is a nationally licensed insurance expert with over 15 years of experience and has personally served over 10,000 clients with their life insurance needs. He frequently authors entrepreneurial and life insurance content for Forbes, Inc.com, Newsweek, Kiplinger, and Entreprenuer.com. Anthony has been consulted as an expert life insurance source for dozens of high-profile websites such as Forbes, Bankrate, Reuters, Fox Business, CNBC, Investopedia, Insurance.com, Yahoo Finance, and many more.
- Nationally licensed life insurance agent with over 19 years of experience
- Best selling Amazon author.
Jeff Root is a nationally licensed life insurance expert with over 19 years of experience. He has personally helped over 3000 clients with their life insurance needs. Jeff is a best-selling Amazon author and the managing partner of a highly successful insurance brokerage that manages over 2,500 licensed insurance agents across the USA. He has been a featured life insurance source for prestigious websites such as Forbes, Bloomberg, MarketWatch, Nerdwallet, and many more.
- Nationally licensed life insurance agent with over 14 years of experience
- Best selling Amazon author of five insurance sales books.
David Duford is a nationally licensed insurance expert with over 14 years of experience. He has personally helped more than 15,000 clients buy life insurance. David has been featured as an expert source for highly authoritative publications such as A.M. Best and Insurancenewsnet. He also runs one of the largest Youtube channels to help aspiring insurance agents serve their clients better.
- Nationally licensed life insurance agent with over 19 years of experience
- Best selling Amazon author.
Jeff Root is a nationally licensed life insurance expert with over 19 years of experience. He has personally helped over 3000 clients with their life insurance needs. Jeff is a best-selling Amazon author and the managing partner of a highly successful insurance brokerage that manages over 2,500 licensed insurance agents across the USA. He has been a featured life insurance source for prestigious websites such as Forbes, Bloomberg, MarketWatch, Nerdwallet, and many more.
- Nationally licensed life insurance agent with over 14 years of experience
- Best selling Amazon author of five insurance sales books.
David Duford is a nationally licensed insurance expert with over 14 years of experience. He has personally helped more than 15,000 clients buy life insurance. David has been featured as an expert source for highly authoritative publications such as A.M. Best and Insurancenewsnet. He also runs one of the largest Youtube channels to help aspiring insurance agents serve their clients better.
Choice Mutual often cites third-party websites to provide context and verification for specific claims made in our work. We only link to authoritative websites that provide accurate information. You can learn more about our editorial standards, which guide our mission of delivering factual and impartial content.
-
cash value. https://www.investopedia.com/terms/c/cash-value-life-insurance.asp
