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Choosing a cash value life insurance policy means deciding on coverage that is designed to last a lifetime while also allowing you to build savings within the policy. ... a guaranteed death ...
The determination of the cash value, both the base amount and the applicable surrender charge, in the contract can be explicit by determining the value for each surrender date (guaranteed cash values), by referring to the value of specific investments or subject to the discretion of the insurance company, which is often executed to bring cash values in line with values of the investments of ...
Permanent: Lifetime coverage with cash value, offering long-term protection. ... showing the projected cash value, death benefit and premium payments over time based on actual values. By reviewing ...
Universal life insurance is a type of permanent life insurance that offers both a death benefit and a cash value component – the latter of which can grow over time.
As the cash value increases, the death benefit will also increase and this growth is also non-taxable. The only way tax is ever due on the policy is (1) if the premiums were paid with pre-tax dollars, (2) if cash value is "withdrawn" past basis rather than "borrowed", or (3) if the policy is surrendered.
The death benefit coverage is paid for by mortality charges (also called cost of insurance). As long as these charges can be deducted from the cash value, the death benefit is active. The "no lapse" guarantee is a safety net that provides for coverage in the event that the cash value isn't large enough to cover the charges.
Some pros of universal life insurance include flexible premiums, changeable death benefits and cash value growth. However, it's also important to consider the potential drawbacks.
Option A is often referred to as a "level death benefit"; death benefits remain level for the life of the insured, and premiums are lower than policies with Option B death benefits, which pay the policy's cash value—i.e., a face amount plus earnings/interest. If the cash value grows over time, the death benefits do too.