Does life insurance accumulate cash? (sometimes!)

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Does life insurance accumulate cash? (sometimes!)

Life insurance is not exactly a sexy or exciting purchase. You get to pay your premiums every month knowing full well that you will never live to see the benefit of it. Your family will, but you won’t. "What’s in it for me," the more selfish of us may ask. Well, if you purchase whole life, universal life or variable universal life insurance instead of term life insurance, there might just be a pot of gold before you reach the end of your life’s rainbow.

With universal life, variable universal life or whole life policies, part of your premiums go into an investment vehicle that builds cash value as you go along. "Great," you’re thinking, "More cash for my ungrateful survivors." That’s not the case. This money builds tax free and it’s technically your money. Most people will leave it in until it gets high enough that the interest will pay their premiums and they get essentially free life insurance for the rest of their lives, but others withdraw some of the cash, particularly in times of need. Probably the most popular option for people with these policies is to leave the cash in the investments, but borrow against it when they need money.

The bottom line is that if you want a life insurance policy that does more than, well, insure your life, they’re out there. You can get a variable universal life, whole life or universal life insurance policy that will accumulate cash for as long as you own the policy, as long as the premiums are paid.