All life insurance policies are not the same. Some of the policies build up cash value and others are only for a short time. Life insurance companies offer two basic policies: term life insurance and cash value life insurance. Term life insurance rates start out low. Cash value insurance rates start out higher at the start of your policy. However, building cash value in your insurance policy does come with advantages. You can:
• Borrow against the policy (take out a loan). You can repay the amount. If you don’t, the loan will be deducted from the benefits.
• Use the cash value to buy more insurance
• Increase your retirement income (with the additional cash value)
• Use the cash value to buy more insurance
• Increase your retirement income (with the additional cash value)
Within the two basic types of life insurance are different policy options.
Term life insurance is for a limited time such as 10, 15 or 20 years. The premiums are guaranteed for that time. After that the temporary insurance ends or may continue. If it continues, you may have a higher rate.
Universal life insurance, permanent insurance, is flexible and allows you to lower or increase your coverage and/ or premium over time.
Whole life insurance is permanent insurance and provides lifetime coverage. The premiums are fixed and builds cash value. The value functions as a savings account that maybe tax-deferred.