Posted in Finance, Accounting and Economics Terms, Total Reads: 244
Definition: Cash-Value Life Insurance
It is a nothing but a life insurance policy which pays out upon the death of the policyholder but collects the money during the lifetime of the policyholder. The policyholder can use this cash value as a tax-sheltered investment which means the earnings and the interests on the policy are not taxable or as a fund from which they can borrow and as a means to pay the premiums of the policy at a later stage in the life, or they can pass it on to their next generations.
Cash-value insurance is also called as the permanent life insurance since it provides coverage for the entire life of the policyholder. The other major category of life insurance is known as the ‘term insurance’. It is not a part of the Cash-value insurance. It is generally in force for a specific period of about 10 years up to 30 years unless it is cancelled by the policyholder. Higher premiums need to be paid for the Cash-value insurance compared to the term insurance since some part of it goes to the death benefit coverage and other part goes toward its cash value.
Advantages - It is nothing but a simple life insurance policy which in addition not only provides a benefit upon the death of the policy holder but also accumulates the cash value of the money over the time which enables that the benefits could be paid out before the death of the policy-holder either.
Disadvantages - This type of life insurance is often criticized because investment options are generally limited and also they are not as par with what an investor can get on his or her own.