Life Insurance Savings Account: What You Need To Know [2023]
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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Benjamin Carr
Former State Farm Insurance Agent
Benjamin Carr worked as a licensed insurance agent at State Farm and Tennant Special Risk. He sold various lines of coverage and informed his clients about their life, health, property/casualty insurance needs. Assessing risks and helping people find the best coverage to suit their needs is a passion of his. He appreciates that insurance was designed to protect people, particularly during times...
Former State Farm Insurance Agent
UPDATED: May 11, 2023
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Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.
UPDATED: May 11, 2023
It’s all about you. We want to help you make the right life insurance coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance company and cannot guarantee quotes from any single company.
Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
- 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 life insurance 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.
Flexible premium life insurance has a changing premium. Some permanent life insurance policies have 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:
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 |
Now, let’s look at the average rates for universal life insurance:
Policyholder Age | Average Monthly Universal Life Insurance Rates |
---|---|
20 years old | $36 |
30 years old | $42 |
40 years old | $63 |
50 years old | $90 |
Next, here are the average rates for indexed universal life insurance:
Age Group | Indexed Universal Average Life Insurance Rates Per Month for Male Policyholders | Indexed 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 |
Finally, below are the average rates for guaranteed universal life insurance, which sometimes includes a cash value component:
Policyholder Age | Monthly Rate |
---|---|
25 | $46 |
35 | $54 |
45 | $65 |
55 | $95 |
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.
You can also choose between cash value vs. surrender value options. Rather than a loan, you can 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. Try getting a few term life insurance quotes to better understand your options and compare prices.
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.
Your life insurance quotes are always free.
Secured with SHA-256 Encryption
Benjamin Carr
Former State Farm Insurance Agent
Benjamin Carr worked as a licensed insurance agent at State Farm and Tennant Special Risk. He sold various lines of coverage and informed his clients about their life, health, property/casualty insurance needs. Assessing risks and helping people find the best coverage to suit their needs is a passion of his. He appreciates that insurance was designed to protect people, particularly during times...
Former State Farm Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.