Cash Value
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| Cash Value Insurance in the United States
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| Cash Value Insurance or Permanent Life is an umbrella term for a variety of plans that combine a death benefit similar to a term life plan with tax-sheltered savings arrangements.
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| Permanent life policies, as their name implies, are meant to be held and paid into for the duration of the insured's life. Because of this, there are significant fees associated with setting up the policy.
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| Despite these fees, the tax advantages can make permanent life a valuable investment over a long period of time. The policy is always renewable and premiums are fixed and calculated based on the age of the insured when the policy is initiated.
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| If the death benefit is paid early in the policy, the money will come mostly from the insurance policy, and, if the death benefit is paid late in the policy most of the money will come from the savings account. As the savings become more and more significant, less insurance is needed to hold down the cost of insurance as the holder ages.
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| The cash value portion of the policy is invested in a savings account. Accordingly, value accrues in the policy over time. This portion of the money paid by the insured was originally intended to pay insurance premiums in retirement. Because the account is an asset belonging to the policy holder, however, it is assignable, meaning that it can be transferred to another person or used as collateral for a loan. Policies may even be converted to an annuity to provide income during retirement. Any balance remaining in the account when a settlement is paid is passed on to the beneficiary of the policy. Removing money from the account before settlement for expenses other than the insurance premium is not recommended because taxes and fees will be incurred.
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| Despite potential benefits, cash value plans must be carefully investigated because their value to insurance companies exceeds term life, and unscrupulous agents may attempt to push them on customers more suited to term life.
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