Yes, you can have cash value with a final expense policy. But, there are some important things to keep in mind if you use it.
What is Cash Value?
Cash value is money you can access during your life insurance policy. The main point of life insurance is the death benefit—or, the sum of money issued when you, the policyholder, pass away. But, you can get more from your policy while you’re still living as well.
You can use your policy’s cash value on anything you’d like, and it is counted as untaxed income. This should not be considered a reliable source of income like something such as Social Security, but rather extra funds to help you make premium payments, cover day-to-day expenses, or anything else you’d like.
Cash value works differently depending on the policy. With whole life insurance, cash value accumulates slowly. If you don’t use it while living, it will not be added or subtracted from your death benefit—it just disappears, so don’t be afraid to use it.
With a universal life insurance policy, accruing cash value is one of the main goals. Part of your premium payment (and extra if you contribute it) will go into stock market indexes on your behalf. The risk of the investment (and potential return) depends on the type of universal policy you get.
Term life insurance simply doesn’t have a cash value.
Cash Value and Final Expense
How do these policies and their cash values compare to final expense? First, unlike term life, final expense once again does, in fact, have a cash value option. However, unlike whole or universal life, it doesn’t accrue by default.
That’s not the case with final expense. It technically does not have a built-in cash value, but rather an option in case you need it. When you use your final expense policy’s cash value, you’re either surrendering part of your death benefit, or taking out a policy loan.
The first option takes out money from your death benefit. This will reduce the amount that goes towards your beneficiaries to use on your behalf, but it may be more helpful to you depending on your situation. You will also likely have to make premium payments for around 10 years before you can do this.
The second option is similar to any other loan, it’s just taken with your policy as it’s backup. It’s not unreasonable, but expect a fairly high interest payment up to 8% or more.
Call Expense Mutual Today
No matter your questions, needs, or goals, Expense Mutual works hard to make sure you’re heard. Get a quote or call today at 888-280-2825 to learn more about your final expense options.