If you are starting to look into obtaining a life insurance policy then you probably realize how important it can be in providing financial security for your family if you should happen to pass away prematurely. There is quite a bit of debate as to what type of policy is better, a term policy or a cash value life insurance policy. In this article we are going to define what a cash value policy is, some of the different types of cash value policies available, and how this type of insurance compares to a term life policy.
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A cash value life insurance policy is also known as permanent life insurance because unlike a term policy there is no expiration date. You will be covered for life as long as you make your premium payments. This type of policy builds cash value by investing a portion of your premium payments in various funds that will pay interest or dividends that will grow in value over time.
A term life insurance policy does not build any cash value and it will expire at the end of its term, leaving you without life insurance at that time. However, a term life insurance policy can cost just a tiny fraction of what you would pay for a cash value life insurance policy. Many people will argue that you are much better off going with a term policy and taking the substantial savings off of a permanent life policy and investing the difference yourself at better interest rates and without all of the associated fees of a permanent life policy.
Proponents of a cash value type of policy will argue that although the premium payments are considerably higher in the beginning, as the policy builds cash value you will be paying less in premium payments as you get older and with a term life policy the premium payments would be more expensive as you get older. Some other advantages of a permanent life insurance policy are that you’ll never be without coverage as long as you make your premium payments, the money is invested for you which is great for people that don’t have the knowledge or the discipline to make their own investments, the value grows tax-deferred and can even be borrowed against if you needed money in the future.
There are a number of different cash value life insurance options available. There are traditional whole life policies, universal, variable, and even hybrids of universal and variable life insurance policies. Some of these will offer more flexibility with the coverage options and others will offer more control over the investments that you can make with your policy. There are so many options available that you would really need to do some research to find the perfect policy for you and your family.
Whichever type of policy you decide to go with its a good idea to shop around a bit to find the best deal. The amount you pay in monthly premiums can vary greatly from one company to another and doing a little comparison shopping is a great way to find the best coverage at the most affordable price. You can get multiple quotes from a number of different insurance providers online and it only takes a few minutes to find the best price.