A variety of life insurance types are available. Each one works to provide the same basic goal. They pay a death benefit to your named beneficiary if you should die during the policy. Yet, some policies offer more protection. Some allow you to borrow from them during your lifetime. Should you do this? Is it worth the cost? Here are a few key things to keep in mind.
Whole Life Insurance Provides Cash Value Protection
If you insure your life on a term policy, and you die while the policy is active, then the policy will pay a death benefit to those you name your beneficiaries. Whole life insurance, sometimes known as permanent life insurance, provides coverage that is a bit different.
There are several types of permanent life insurance policies. These policies provide the same death benefit face value on death. Yet, most also offer the opportunity to allow the policy to accumulate cash value. A portion of your premium becomes an investment, and over time, that investment can accumulate value within the policy’s framework.
In many whole life insurance setups, you can borrow funds from the policy’s cash value. This allows you to access the funds you need for a variety of needs during your lifetime.
Why Does It Matter?
Imagine facing a life-threatening illness. You cannot work. You need medical care. You also may need long-term rehab. In situations like this, being able to borrow from a life insurance policy’s cash value account can be very valuable.
It can also be important towards the end of life. Some policies allow your family to access the funds to provide you with end of life care. Doing so can reduce some of the financial strain on the family.
If you borrow from your life insurance policy, make sure you know what your requirements are. Sometimes, you cannot simply take the money as free income.
- If you borrow through a loan on your whole life policy, you will pay it back. Most of the time, there is interest to pay back as well as fees.
- If you have a universal whole-life policy, your policy may build cash value over your lifetime. In these policies, you may not have to pay back the funds you take out.
- Any time you do take money out of your life insurance policy, you are borrowing against your future. It may reduce how much the company pays out for your beneficiary if you die. The death benefit usually won’t drop. However, by reducing the cash value, you won’t be able to leave this behind on your death.
Learn as much as you can about your Florida whole life insurance options. If you have features like this, consider the advantages it offers including having a backup plan to help reduce your financial risks.