Cash Value Life Insurance

There are many scenarios where it can be beneficial to have a life insurance policy that’s permanent but which allows you to take out some of the cash value while you’re still alive.

Many people take out life cover while they have a mortgage and children who depend on them. But once you’ve paid off your mortgage, and your family is able to stand on their own two feet, you may no longer require as large a payout upon your death as when you first took out the life policy.

Cash value life insurance can be useful in these situations as it gives you the flexibility to take out some of the value stashed away in your insurance; plus getting the right cash value life insurance can give you a policy that matches all your needs – in both the short and the long-term.

In this article, we’ll cover….

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What is cash value life insurance?

Cash-value life insurance is a type of permanent life insurance that offers a lump sum payout upon your death. However, it can also act as a money-saving vehicle – allowing you to withdraw funds at agreed intervals in your policy term.

In a cash value life insurance contract, you can also choose to cancel, or surrender your contract and take out a cash value payout instead of holding onto rights to receive the policy’s death benefit payment.

What is permanent life insurance cash value?

Permanent life insurance cash value is a type of life insurance that also features a savings component where you can access the cash value. It’s a flexible insurance option, enabling the policyholder to use some of the money invested to pay the policy premiums, use as a source of collateral for loans, or take out as cash.

Each life insurance product serves a different need.

Before you decide whether cash value life insurance is right for you, carefully consider what you want to get out of life insurance, both in the immediate and in the long-term future.

An experienced advisor, like the ones we work with, can help you gain clarity on which life cover product would be best for you. Call 0808 189 0463 or make an enquiry to speak to an expert.

Cash-value life insurance in the UK

In the UK there are good offers available on the market for getting a cash value along with whole life insurance or an endowment life insurance savings policy.

With your UK cash value life insurance, you’ll enjoy a flexible policy that offers both life insurance and a savings mechanism.

When you apply for your insurance policy, you can agree on the related cash value for each possible cancellation date.

We work with financial advisors who can take you directly to the cheapest and most suitable UK cash value life insurance policy. Get in touch if you’d like help with finding your best deal and saving money on premiums.

How will my life insurance build cash value?

If you’re wondering how your life insurance will build cash value, the cash value credited to your account will continue to grow throughout the tenure of your policy as you pay into your premiums and as interest accumulates.

The amount you can take out in cash value will be made up of the investments and premiums accumulated in your cash-value account at any given point in your policy, minus a fee known as the surrender charge.

Why do I need cash value as part of my life insurance?

Cash value in your life insurance is for people who want a combination of life cover as well as the equivalent of a savings account.

At the end of an agreed policy period, cash value could give you a lump sum payout. This could be useful for planning ahead for any major upcoming financial needs.

Here are a few examples of why you may want to get life insurance with cash in value.

  • Savings for your children’s or grandchildren’s education costs.
  • Money to purchase a property.
  • Funds to pay estate taxes.
  • A store of cash for your retirement.
  • Your children’s wedding.
  • If you’re in a tight spot financially, you can request to use regular withdrawals from the cash value to pay for premiums.

Make an enquiry to consult a financial advisor for help with calculating the future cash value of your life insurance policy and deciding on insurance types.

What is the cash value of a life insurance policy?

When you pay your premiums into a life insurance policy with cash value, some of the payment goes into the lump sum payout as a death benefit, and the rest goes into the cash value portion which the insurance company invests on your behalf.

The insurance provider will also use a small proportion of your monthly premium payments to cover administrative fees and fees for managing your investments.

How does it work in a life insurance policy?

Like an investment or savings account, the total amount of money in your cash value is reinvested by the insurance company and accumulates over time.

You can make a tax-free withdrawal from your cash value as long as the sum taken out is the same or less than the amount paid in. Anything more than this will be subject to taxation.

The cash value and life insurance can also be used as collateral for borrowing. You can borrow against it and choose to have the loan and interest repaid from your cash value or death benefit after you die.

Cash value life insurance for retirement

Getting life insurance with cash value can be a good tool to help you save for retirement. Life insurance policies with cash value can be used as part of your financial planning for retirement years.

When you take out an insurance policy with cash value, if you pass away, your family will only receive the death benefit, and not the cash value. With this in mind, taking out the cash value when you retire will ensure you are making full use of your insurance policy.

In this scenario life insurance with cash value serves a dual purpose of acting as a savings and investment account for retirement as well as life insurance cover.

What is life insurance net cash value?

The net cash value in your life insurance is also known as the surrender cash value. It’s the net value you’ll receive after the insurance company takes any fees, commissions, or salaries from your accumulated cash value.

What is life insurance guaranteed cash value?

A guaranteed cash value is a lump sum guaranteed to be paid out to beneficiaries if the policyholder dies.

When you take out life insurance with cash value, your policy could include what is known as ‘surrender dates’. These are dates within your policy term where you can choose to take out cash at a guaranteed value.

The amount you can take out from your cash value at different points in your term will vary according to the provider.

Do all life insurance policies have cash value?

Most permanent life insurance policies offer the option of including cash value, but not all life insurance policies automatically include cash value.

For example, variable life, universal life, and whole life policies generally offer built-in cash value. However, a term life insurance policy won’t offer a cash value option.

What are the pros and cons?

Here are some of the advantages of getting cash value as part of your life insurance:

  • Versatile life insurance can serve as a savings tool.
  • Once the cash value is large enough it can be used to cover the cost of your life insurance premiums.
  • Cash value can be used to save money for retirement.
  • Taxes are deferred on cash value investment earnings.
  • Enjoy the benefits of permanent life insurance with a flexible cash withdrawal option.
  • Cash value accumulates over time and earns interest.

Reasons why life insurance with cash value may not be right for you:

  • The rate of return you get in a cash value is often lower than what other investment vehicles offer.
  • You’ll initially pay more for premiums if you include cash value in your life insurance.
  • You can’t withdraw from your cash value immediately, it takes time to accumulate and you’ll likely have to wait several years into the policy before you can get access to any significant amount.

Getting life insurance with cash value has significant benefits, but if you’re interested in using it solely as a savings mechanism, it may not be the most profitable option.

Speak to an expert financial advisor who can help you clarify your financial goals and decide if and how much cash value would be best for your situation.

Make an enquiry or give us a call on 0808 189 0463 and we’ll match you with one of the expert advisors we work with.

How much will my life insurance cash value be worth?

The accumulation of your cash value will vary depending on the type of insurance policy you take out and how much money you choose to put in.

There are different types of life insurance with cash value, and each has a different set of rules for how cash is accumulated:

  • Whole life policies – these offer cash value accounts that are ‘guaranteed’. They grow according to an investment formula determined by the insurance company.
  • Variable life policies – invests money into sub-accounts which work like mutual funds; your cash value will grow or fall depending on how well these accounts perform.
  • Universal life policies – accumulate cash value according to current interest rates.

Consult an insurance advisor who can help you with setting targets for your cash value earnings, understand your investment risk appetite, and ensure your life insurance and cash value is the right match for your long-term financial needs.

Make an enquiry and we’ll put you through to the right advisor for your situation.

What can I use the cash value for?

Once you’re several years into your policy and have allowed cash value to accumulate, you can withdraw from the funds and use them to:

  • Get a loan at a lower rate than what many banks offer.
  • Enable withdrawals from cash value to pay your entire policy premium.
  • Add to your retirement income.
  • Add to an investment portfolio to further accumulate wealth.

How is the cash value calculated?

It takes time to build the cash value in your life insurance policy. The longer you allow the money to accumulate with regular premium payments into your cash value, the more your money will grow and be worth.

The exact cash surrender value of your life policy will vary according to provider and policy type. In some cases, it will also depend on how well your investments perform.

Comparing how your cash value will be calculated, and which insurance policy would offer you the best deal, can be complex and time-consuming. That’s why experts recommend working with an insurance advisor before taking out any such far-reaching policies.

A financial advisor can help you calculate how the potential cash value accumulation of your life insurance policy may vary according to policy type and term length. Give us a call on 0808 189 0463 or make an enquiry and we’ll connect you to one of the expert independent financial advisors we work with.

Surrendering a life insurance policy for the cash value

Surrendering your life insurance policy is the term used for making a request to cancel life insurance in exchange for taking out your accumulated cash value.

However, there are often fees charged by the insurer for cancelling life insurance. These fees are subtracted from the cash value before you receive your payout.

Most policies will include what’s called a ‘surrender period’. This is the time that you have to wait before your policy is eligible for a surrender cash value.

However, choosing to surrender your life insurance policy is a major consideration, it will cancel your life policy and your beneficiaries won’t receive any death benefit. With this in mind, it’s best to consult with a financial planner before making any such decisions to ensure it’s worth cashing out your financial assets.

How to determine cash value of life insurance

How much your life insurance policy cash value is worth will be determined by…

  • How long you’ve held your policy and how much you pay in premiums.
  • How well the markets perform for your investments.
  • How the insurer has invested your money.
  • How much the insurer will charge for withdrawing money from your cash value, cancelling your life insurance policy, or cancelling the investment portion of your policy.

Speak to an expert advisor about cash value life insurance

Permanent life insurance policies with cash value offer many benefits that can give you peace of mind and the assurance that whatever life brings you’ll have your back covered. Whether you’re looking for a tool to take care of your mortgage, debts, or dependants should you pass away, or you want to know you’ll have extra funds you can access in your retirement. The best way to ensure your life insurance policy will be the right match for current and future financial needs are to solicit help from an insurance advisor.

An expert advisor will understand the details of your situation and goals and take you to your ideal policy type and provider.

Make an enquiry or give us a call on 0808 189 0463, then sit back and relax while we put you through to the right insurance expert for your needs.

We'll match you with your perfect financial advisor

Save time and money with an expert who specialises in cases like yours

We'll match you with your perfect financial advisor

Save time & money with an expert who specialises in cases like yours.

We’ll match you with your perfect financial advisor – for free.