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Does Term Life Insurance Have Cash a Value?

Cash value is a savings component that comes with some life insurance policies. It serves as an added benefit to life insurance and can help you build wealth over time. If you’re interested in term life insurance, you may be wondering whether it includes cash value. Keep reading to find out what term life insurance is and whether it offers this component.

What is term life insurance?

Term life insurance is a temporary contract between you and a life insurance company. It typically lasts for a specific time period, such as 10, 20, or 30 years. As long as you continue to make your premium payments, the insurer will pay out a death benefit if you pass away before the policy ends.

Unlike permanent life insurance, term life insurance has an expiration date. Once it expires, you can renew your coverage, convert it to permanent life insurance, or apply for another policy.1

Do term life insurance policies have cash value?

Now that you know what term life insurance is, you may be wondering if it has a cash value component. While term life insurance can be a useful policy for many people, it doesn’t build cash value. With this type of policy, you pay for a potential death benefit payout that your beneficiaries will receive if you pass away before the end of its term. Since there is no cash value, term life insurance is cheaper than whole life insurance.1 It typically has one of the lowest premium costs compared to other types of life insurance policies.

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What is cash value life insurance?

Life insurance with cash value is a type of permanent policy, such as whole life, universal life, and indexed universal life insurance. If you purchase one of these, a portion of your premium payments will go toward the policy’s cash value component, which will earn interest over time.

You can typically access this cash value while you’re still living by withdrawing funds, getting a life insurance loan, or surrendering the policy. Keep in mind that just like term life insurance, life insurance with cash value will also pay out a death benefit to your beneficiaries upon your death.2

Types of life insurance policies with cash value

There are several types of life polices that have cash value, such as:

Whole life insurance

With whole life insurance, you receive coverage for your entire life. This type of policy typically offers fixed premium payments, the death benefit is guaranteed, and the cash value can still grow with potential tax savings. You may tap into the cash value component while you’re still alive.

Universal life insurance

Universal life insurance is a flexible type of policy that provides a death benefit and cash value account. It allows you to raise or lower your premiums or death benefit amount as needed2. If you choose to pay higher premiums for at least the first few years, you may accumulate a larger cash value.

Indexed universal life insurance

Indexed universal life insurance is a universal life policy with a cash value component and death benefit. Its cash value is based on the performance of various market indexes, such as the S&P 500.3 While returns are usually capped, you can expect a guaranteed minimum interest rate.

Variable universal life insurance

Variable universal life insurance pairs a death benefit with investment sub-accounts.3 You can use these sub-accounts to invest in your policy’s cash value. If the market performs well, your cash value will grow. On the flip side, poor performance can cause your policy to lose value.

Although, Aflac does not offer universal, indexed universal or variable universal life insurance, you can talk with an agent to see what can work for you.

Final expense life insurance is designed to help protect your family from hefty final expenses, such as funeral costs and medical bills. It also includes a cash value component that you can possibly take advantage of during your lifetime.

Should I get life insurance with cash value?

There are several reasons why life insurance with cash value may make sense. It can be worthwhile if you need help saving money or plan to leave an inheritance to your heirs. You might also consider it if you don’t mind paying more for a policy in exchange for the freedom to utilize your cash value to help meet various financial goals.

Aflac offers whole life insurance with cash value and term life insurance.

While term life insurance doesn’t build cash value, getting this type of policy can be a great way to help protect your loved ones financially. But if you want cash value life insurance, there are plenty of options at your disposal, from whole life insurance to final expense insurance.

Aflac offers both term and whole life insurance plans that come with easier application processes and reasonable premiums. Our whole life insurance plan has cash value that grows over time as you make premium payments. Chat with an agent today to discuss your options and find out what type of coverage can best meet your needs.

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