And part of your premium is deposited into a cash value account
, which earns interest, with taxes deferred on the accumulated earnings.
Whole life insurance offers additional financial benefits including potential dividends, a cash value account
and tax-free borrowing.
Later in life when the death benefit is no longer as important, the cash value account
may provide supplemental retirement income through tax-free loans, or it can be transferred tax-free to a lifetime income annuity.
VL and VUL policies have two broad classes of fees--charges to the policy and charges to the cash value account
. Because of differences in the way premiums and face amounts are handled in VL and VUL policies, some of these fees and charges are treated differently in each type of policy.
The online quotation helps employees see how different levels of contributions to their cash value account
will grow over time.
Premium payments are credited to a cash value account
where the money earns tax-deferred interest at a rate set by the company, which may be higher than the minimum rate guaranteed in the policy.
As long as the policy stays in force, the borrowed funds do not need to be repaid, but interest may be charged to the cash value account
. Policy owners can adjust their premium payments.
Your other choice, "cash value" or "permanent" insurance, provides a cash value account
in addition to pure insurance.
The plan is fully secured with a cash value account
available to the business for emergencies or opportunities.
To counteract the fact that the annual risk of mortality increases with age, the insurance company collects extra premium in the early years of the policy and puts it into a cash value account
where it earns interest.
Indeed, cash value accounts
amount to more than 200 million in-force life insurance policies and total more than $3 trillion of unmanaged, invested assets.