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Be Wise With Money

What Is Cash Value in Life Insurance?

Getting cash out of your life insurance may be easier than you think. Here are some tips to help you decide if it makes sense for you.

For some people, life insurance can be something of an afterthought. It's something you know you should have, but you don't always think too carefully about it. But you should.

The right strategy can provide both protection and flexibility for you and your family. Cash value life insurance gives you options.

First, however, you need to understand what cash value life insurance is.

In a nutshell, this type of insurance offers 2 very different benefits:

  1. The foundation of all life insurance is the death benefit. The death benefit pays an income tax-free amount to your beneficiaries when the insured passes away.
  2. The contract acts as a tax-deferred accumulation vehicle. Cash value life insurance credits the contract holder using a predetermined method (dividends, interest rate, index return or subaccount performance) on a tax-deferred basis, which the contract owner can access at any given point via loans or withdrawals. This cash value can be used as supplemental retirement income, a down payment on a house or as an emergency fund should the need arise.

Can I ever tap into my insurance?

Many contracts allow you to take a tax-free withdrawal up to your basis in the contract. (Your basis is the amount of premiums you have paid, minus any withdrawals or dividends paid. You already paid income tax on those dollars, so you won't be taxed again.) Withdrawing money may come in handy later in life, as you face, say, college tuition or a parent's health care needs.1

There are many different forms of cash value life insurance, each providing additional benefits that the contract owner can use during his or her lifetime.

It is important to understand those differences and how they can align with your goals so you can make an informed decision about what product best meets your needs.

As you look ahead at your family's financial needs, arm yourself with information on the many forms of cash value life insurance. It could be the vehicle you're looking for.

Your Thrivent Financial representative can help you work through different scenarios and understand the type of insurance that works best for you.

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