Cash Value Life Insurance

With cash value life insurance, premiums remain level over the course of the insured's life, building up cash reserves on a tax-deferred basis. You can borrow against this cash value at a competitive rate or withdraw from it to supplement college costs or retirement income. (Note that loans and withdrawals reduce the cash value and death benefit.)

The non-forfeiture options in a cash value insurance contract also make it more flexible. If you no longer want to pay the premium, you may be able to exercise one of several options:

• converting the policy to paid-up status, which reduces coverage but requires no further premium payments
• getting extended term coverage
• surrendering the policy for its cash value
• obtaining an annuity to produce an income for life

A waiver-of-premium rider ensures that you no longer have to pay premiums on your policy if you suffer a total disability; the insurance company is obligated to pay the premiums for as long as you are totally disabled and unable to earn an income. This disability waiver ensures protection for your family and guarantees that the value of your account will continue to grow.

Cash value life insurance is like owning a home in that it provides current protection, the potential for cash accumulation, and future appreciation in value. Purchasing an insurance policy is a major decision, and you need to be sure that the amount of cash value insurance you purchase fits your budget while meeting your financial objectives.