Is Life Insurance Counted in Net Worth?
The Advantages of Cash Value
Is life insurance counted in net worth? Cash value is – and now you know why. But what can you do with it? And how do you access it?
The good news? You can do anything you want with your cash value. If you want to spend it on an investment, you can. If you want to spend it on your grandkids, you can. You’ve probably heard of the concept of “other people’s money” – as in, whenever possible, leverage your assets to secure capital from other funding sources and use that money for your investments and business ventures. Cash value is one of those assets. When you use the policy loan method described below, you can essentially use your insurer’s money while leaving your cash right where it is.
Here’s how you can access your cash value:
Policy loan. You can borrow against your cash value with a private loan from your insurer. You can borrow up to 90% of your total cash value, in return for a small amount of interest. That amount will be offset by the interest your cash value continues to earn. Although this is structured as a loan, it’s not technically one that you must repay. If you do not, you’ll continue to accrue interest charges on it. And the total you owe will be deducted from the death benefit before it’s paid out to your loved ones. That’s a trade-off you have to keep in mind. Balance your need for cash value with the future needs of your loved ones.
Partial withdrawal. If you don’t want to pay interest on a loan, you can simply make a withdrawal. There will be a fee, but it’s going to be less than ongoing interest payments. Keep in mind that the more you pull out, the less cash there will be to earn interest, so your overall account balance will replenish more slowly than it grew. Again, it’s a trade-off you have to consider.
Automated premium payments. Many insurers will let you use your cash value to make your premium payments. If you anticipate having less income in the future (during retirement, on a fixed income), you may want to turn on this feature and take a break from those premium payments.
Surrender value. If you no longer need your policy and want to cancel it, you are entitled to the policy’s cash value, minus any surrender fees. The catch? You have to cancel the policy through your insurer. You can’t simply stop making payments, or the policy will be considered lapsed (rather than surrendered). We don’t recommend canceling your policy unless your loved ones no longer need the death benefit.
Is life insurance counted in net worth? Cash value is, yes! To learn more, call us at (800) 521-7873 or click the button below to start comparison shopping with a free term life quote.
