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Advantages and disadvantages of cash value insurance

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Advantages
  • Policies generally guarantee* level premium payments for life.
  • Policies allow you to accumulate cash value over time.
  • Cash value insurance can provide life-long protection. Because it doesn't need to be renewed, you no longer have to worry that declining health will affect your insurability (unless you decide to buy more insurance).
  • You may borrow against your cash value funds at any time, for any reason, although doing so may reduce the death benefit available to your survivors if the loan is not repaid before your death.
  • You can make withdrawals from the cash value account of some policies, although this will reduce your level of life insurance benefit.

*Guarantees are subject to the claims-paying ability of the policy issuer.

Disadvantages
  • During the early years of a cash value policy, the premium will usually be significantly higher than for term insurance.
  • If you need coverage only for a short period of time, your net costs will be significantly higher than if you purchase term insurance.
  • The internal costs and expenses associated with a cash value policy can be difficult to understand.
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