Participating whole life insurance is one of the few products that can’t be disassembled in to parts, but that being said, most participating whole life policies build cash value by receiving the policy owners premiums, deducting policy expenses and fees and then applying the portfolio net returns to the policy in a form of dividends. The cash value account accumulates tax deferred.
Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
Whole life insurance builds cash value through the payment of premiums. With permanent insurance programs (universal life included), the carrier has a cost of insurance charge (a.k.a. mortality and expense charges) that is taken out of the premium. The net amount remaining gets added to the cash value total (if the premium is less than the cost of insurance charge, then the cash value total would decrease).
You can borrow from the cash value, but it would create a loan against the policy and, like a bank loan, features an interest rate while the loan is outstanding - the funds are expected to be paid back.
When a claim is made on the policy (the insured dies), the carrier takes back the cash value and pays out the death benefit (less any outstanding loans and interest against the policy).
Make sure to discuss what will happen to the policy before doing anything with the cash value including borrowing from it and terminating the policy to get the cash value.
I hope the information is helpful - please feel free to contact me for help with your program and if you have any questions. Thanks very much.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
A permanent life insurance policy is designed to last a lifetime. In order to face the increasing costs of insuring in the later years, the company accumulates money which it calls “cash value.” As the cash value accumulates it means that the company has a smaller increment of life insurance to purchase each year until the policy ultimately endows or the cash value equals the face amount. It is really a simple idea but it is all math!
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You can borrow from the cash value, but it would create a loan against the policy and, like a bank loan, features an interest rate while the loan is outstanding - the funds are expected to be paid back.
When a claim is made on the policy (the insured dies), the carrier takes back the cash value and pays out the death benefit (less any outstanding loans and interest against the policy).
Make sure to discuss what will happen to the policy before doing anything with the cash value including borrowing from it and terminating the policy to get the cash value.
I hope the information is helpful - please feel free to contact me for help with your program and if you have any questions. Thanks very much.