Is Life Insurance Worth It?

April 9, 2021

It’s true that life insurance is, first and foremost, an insurance policy. You pay premiums every month to cover the cost of keeping the policy in force, and in return, the insurance company pays a death benefit to your named beneficiary(ies) when you pass away. Death benefits are usually tax-free to the recipient and can be used by your beneficiaries to make up for the loss of your income, to pay your final expenses and debts, and to fund children's education costs.

Gain additional benefits with universal life insurance

When you purchase universal life insurance instead of term life insurance, your coverage becomes more than just an insurance policy. Your protection stays in force as long as you make premium payments and until the policy's maturity date. The premiums you pay not only cover the cost of insurance but also fund a cash value account within your policy, which may further be credited with a fixed interest rate.

Benefits and features of cash value life insurance

If you are considering buying a universal life or other permanent insurance policy and are intrigued by the savings component, it is important to understand how such policies work. Cash value life insurance is a type of whole life or universal life insurance that lasts as long as you’re alive and premiums are paid. Each month, an amount of your premium goes towards a savings account within your policy, and that cash value grows tax-deferred over the life of the policy.

Cash value life insurance policies have the following features:

  • Tax-free: The money set aside as cash value usually accumulates tax free.
  • Guaranteed interest rate: The policy cash value is credited with a pre-determined guaranteed minimum interest rate, so your cash value grows even larger. Not to mention, the minimum interest rate is typically higher than what you could get from savings accounts or other fixed-return investments.
  • Borrow from the cash value: You have the opportunity to tap into the cash value to take out loans or withdraw money with no tax consequences. However, taking withdrawals or taking loans without paying them back can impact the "health" of your policy, meaning larger premiums may be required in the future to keep the policy in force.
  • Death benefit for loved ones: When you pass away, the cash value can be added to the death benefit that is paid to your loved ones. There are different types of cash value policies with different options, so be sure to ask your insurance agent whether this benefit applies to any policy you are considering purchasing.
  • Shelter from creditors: Cash value may be protected from creditors (this protection is state-specific, so check with an attorney if this is a concern for you).

Is a cash value policy right for me?

You should never buy life insurance for the sole purpose of having a savings account, because the cost of insurance does go up over time, based on mortality risk and policy expenses. However, as an added bonus, knowing that your policy is accumulating cash on the side - funds that you can access during an emergency - can give you and your family peace of mind.

The type of life insurance policy that is best for your particular situation will depend on a variety of factors, including why you need insurance coverage, your attained age and health, your financial picture, and your ability to fund the policy.

Learn more about cash value life insurance on our blog.

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Get in touch with a Symmetry Financial Group insurance professional to review your insurance needs and goals and let us find policy options designed to meet your objectives - working within your budget. To get started, request a quote for life insurance today.


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