What You Need to Know About Life Insurance Savings Accounts

A life insurance savings account, also known as cash value, is included in most permanent life insurance policies. It helps policyholders save money in an account that they can access for emergency expenses, large purchases, and more.

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Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Benjamin Carr was a licensed insurance agent in Georgia and has two years' experience in life, health, property and casualty coverage. He has worked with State Farm and other risk management firms. He is also a strategic writer and editor with a background in branding, marketing, and quality assurance. He has been in military newsrooms — literally on the frontline of journalism.

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Reviewed by Benji Carr
Former Licensed Life Insurance Agent Benji Carr

UPDATED: May 12, 2022

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Quick Facts

  • A life insurance savings account, also referred to as cash value, is the savings component of a permanent life insurance policy
  • Life insurance policies that include a savings account, or cash value, are typically more expensive than a basic term life insurance policy
  • You can use a life insurance savings account to pay for your policy premiums, emergency expenses, large purchases, and more

If you’re looking for an additional way to save some money, a life insurance savings account may be able to provide you with a financial opportunity. Also known as cash value, a life insurance savings account is included in most permanent life insurance policies.

A life insurance savings account can be beneficial during stressful times, as it provides a way to invest in growing your wealth. Read more below about life insurance savings accounts, how much they cost, and how you can use them.

What is a life insurance savings account?

A life insurance savings account is also known as cash value. Cash value is typically included as savings in permanent life insurance policies. When you pay the premium for a cash value life insurance policy, a portion of it covers the insurance and associated fees. At the same time, the other segment is invested into your policy’s cash value.

In addition, some life insurance policies will include dividend payments which can be reinvested into the cash value portion of your account. However, each type of permanent life insurance will contribute to the life insurance savings account in different ways.

Whole life insurance has a fixed premium that doesn’t change over the policy’s lifetime. Part of the premium is disbursed toward the policy’s cash value, and you may earn dividends that you can reinvest. In contrast, universal life insurance allows you to connect your policy to an index or to select investments that determine the interest rate for the policy’s cash value.

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How much does a life insurance savings account cost?

Permanent life insurance is more expensive than term life insurance. However, term life insurance cash value is not typically an option. Let’s examine the average rates for permanent life insurance policies, starting with a whole life insurance cash value chart:

Average Monthly Whole Life Insurance Rates by Age & Gender
Policyholder Age$100,000: Male Average Monthly Rates$100,000: Female Average Monthly Rates$250,000: Male Average Monthly Rates$250,000: Female Average Monthly Rates$500,000: Male Average Monthly Rates$500,000: Female Average Monthly Rates
25$93.70$84.91$225.12$203.14$444.14$400.19
30$107.71$97.35$260.14$234.24$514.19$462.39
35$128.24$112.93$311.47$273.19$616.84$540.29
40$153.90$132.15$375.62$321.24$745.14$636.39
45$190.79$156.17$467.84$381.29$929.59$756.49
50$234.90$191.66$578.12$470.02$1,150.14$933.94
55$294.84$243.17$727.97$598.79$1,449.84$1,191.49
60$399.24$311.63$988.97$769.94$1,971.84$1,533.79
65$528.00$421.69$1,310.87$1,045.09$2,615.64$2,084.09
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Now, let’s look at the average rates for universal life insurance:

Average Monthly Universal Life Insurance Rates by Age
Policyholder AgeAverage Monthly Universal Life Insurance Rates
20-Year-Old Policyholder$36
30-Year-Old Policyholder$42
40-Year-Old Policyholder$63
50-Year-Old Policyholder$90
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Next, here are the average rates for indexed universal life insurance:

Indexed Universal Life Insurance Rates by Age and Gender
Age GroupIndexed Universal Average Life Insurance Rates Per Month for Male PolicyholdersIndexed Universal Average Life Insurance Rates Per Month for Female Policyholders
25 - 35$96 - $122$71 - $96
35 - 45$122 - $171$96 - $148
45 - 55$171 - $303$148 - $238
55 - 65$303 - $491$238 - $445
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Finally, below are the average rates for guaranteed universal life insurance, which sometimes includes a cash value component:

Average Monthly Guaranteed Universal Life Insurance Rates
Policyholder AgeAverage Monthly Rate
25$45.70
35$54.00
45$65.17
55$94.58
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Compared to term life insurance, permanent life insurance policies with a life insurance savings account are more expensive. However, you can still find reasonable rates if you are in relatively good health and take some time to compare companies. Significant factors affecting your life insurance rates include your coverage amount, health, age, policy details, and riders.

How do I use the cash value of my life insurance policy?

You can use the funds in your life insurance savings account for anything, including emergency costs, large purchases, retirement income, and more. There are a couple of ways that you can gain access to the money.

The most common way to access your cash value is to take out a loan against your policy. You will be responsible for paying back any loans you receive, and your loan will grow at an interest rate determined by your insurer, state laws, and current market rates. For example, Washington state limits fixed rates to 6% a year, while variable rates must be between 4% and 8% a year.

Suppose you don’t repay the loan before your death. In that case, your insurance company will deduct the loan amount and interest from the death benefit before paying your beneficiaries, which is sometimes the policyholder’s intention. In addition, policy loans can be taken out more easily than regular loans since you don’t need to endure the credit check process.

Rather than a loan, you can also use the cash value account to pay your premiums. If you’re having difficulty paying your premiums, you can use the cash value portion to ensure that your policy doesn’t lapse. However, this payment strategy will likely count as a loan, and you may need to repay it to ensure that it isn’t deducted from your death benefit.

Another option for accessing your life insurance savings account is surrendering your policy. However, this option cancels your coverage, so don’t do this unless you’re certain that you don’t want your death benefit. You will receive the cash value minus a surrender charge, outstanding loans, and outstanding premiums if you surrender your policy.

Is a life insurance savings account right for me?

Term life insurance is generally sufficient coverage for most people. However, if you’re looking for a life insurance policy with a savings and growth feature, then finding a permanent policy with a life insurance savings account is essential. However, it would be best to keep in mind that these policies are more expensive than term life insurance.

Suppose that you’re debating between life insurance versus a savings account. In that case, you may want to consider choosing a combination of both with a permanent life insurance policy that includes a cash value component. Cash value is beneficial for people who have maxed out their retirement account contributions.

Why is cash value life insurance unfavourable? While it isn’t necessarily advantageous, it may have its disadvantages. For example, the cash value account could grow slowly, making it years before there is a usable amount. In addition, the cash value of your life insurance does not get paid to your beneficiaries. Instead, it reverts to the life insurance company.

If you’re looking for the best cash value life insurance with a life insurance savings account to help increase your wealth, it’s a good idea to start comparison shopping.

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