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What Is Cash Value in Life Insurance?
August 19, 2016
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:
- 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.
- 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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Insurance products issued or offered by Thrivent Financial, the marketing name for Thrivent Financial for Lutherans, Appleton, WI. Not all products are available in all states. Securities and investment advisory services are offered through Thrivent Investment Management Inc., 625 Fourth Ave. S., Minneapolis, MN 55415, a FINRA and SIPC member and a wholly owned subsidiary of Thrivent. Thrivent Financial representatives are registered representatives of Thrivent Investment Management Inc. They are also licensed insurance agents/producers of Thrivent.
This contract has exclusions, limitations, reductions of benefits and terms under which the contract may be continued in force or discontinued. For costs and complete details of coverage, contact your Thrivent Financial representative.
This is a solicitation for insurance. A Thrivent Financial representative may contact you.
THRIVENT FINANCIAL IS THE MARKETING NAME FOR THRIVENT FINANCIAL FOR LUTHERANS.
1Loans and surrenders will decrease the death proceeds and the value available to pay insurance costs which may cause the contract to terminate without value. Surrenders may generate an income tax liability and charges may apply. A significant taxable event can occur if a contract terminates with outstanding debt. Contact your tax advisor for further details. Loaned values may accumulate at a lower rate than unloaned values.