How Does Investable Cash Value Life Insurance Work?

A portion of your premium goes toward insuring your life, while the other portion goes toward accumulating cash value. You choose how to invest the cash value. Investment options include guaranteed investment accounts, indexed accounts, managed indexed accounts and manage accounts. The total cash value is an asset to the policy owner and can be used to help fund the policy premium, be withdrawn within your lifetime or used as collateral for a loan. Upon death, most investable cash value plan designs have the initial insurance benefit plus the cash value paid tax-free to the beneficiary.

Which is better – guaranteed cash value or investable cash value life insurance?

It depends on your goals and why you purchased the insurance in the first place. If the purpose of the insurance is to provide your estate with liquid cash to pay estate tax at your death, then it might not matter which policy you choose. Often the choice comes down to the ability to choose how to invest the cash value. Guaranteed cash value allows for a hands off policy with no ability to make investment adjustments. Investable cash value insurance provides the ability to manage the cash value like an investment account making changes as goals, objectives and markets change. Guaranteed cash value insurance offers increasing insurance benefits. Investable cash value insurance allows the cash value to be paid in addition to the insurance benefit. There is no right or wrong answer. However, if the purpose is to assign the policy as collateral to secure a loan, then a guaranteed cash value policy is the most ideal option.