What is Non-Cash Value Life Insurance?
Non-cash value life insurance is a life insurance policy that provides continuity of wealth through death benefits to your loved ones if something happens to you within a period of time. If your income is relied upon or you have financial obligations within a known timeframe, such as a mortgage or a child’s college tuition, then getting non-cash value life insurance can provide you short-term coverage and a financial safety net for you and your family.
What are the Benefits of Non-Cash Value Life Insurance?
Non-cash value life insurance is great if you’re looking for simple, inexpensive life insurance coverage over a specific, limited period of time without any additional cash value features. A non-cash value life insurance policy has the flexibility of converting to a cash value life insurance policy once the term period for the non-cash value life insurance policy ends.
How Does Non-Cash Value Life Insurance Work?
Non-cash value life insurance comes in a variety of forms, which includes 10-, 15-, and 20-year term, pick a term, term to 65, term to 75, and term to 100. Once insurance amount and duration are chosen, premiums must be paid. Upon death, the beneficiary will receive the stated death benefit.
Non-Cash Value Life Insurance 101
Can I withdraw money from my life insurance policy?
You can withdraw money from your life insurance policy if the policy you purchased has a cash value. A cash value life insurance policy allows you to allocate a portion of your premium into a tax-deferred investment account that’s accessible throughout your lifetime. Not all insurance policies have a cash value component, so it’s important to buy the right kind of life insurance that will fits your needs.
Which is better – cash value or non-cash value life insurance?
It depends on why you purchased the insurance in the first place. If the purpose is to pay off a debt in the event of your death, such as a mortgage, then a non-cash value policy might be the best option for you – it offers the lowest short-term cost and can easily satisfy all your needs. If the purpose of the insurance is to provide your estate with liquid cash to pay estate tax at your death, then a cash value policy might be the better option. It offers increasing death benefits, can be paid up, and may be more economical over the long term. If the purpose is to assign the policy as collateral to secure a loan, then a cash value policy is the only option.
What happens at the end of a non-cash value life insurance policy’s term?
Some non-cash value policies can be set up to expire at a certain age or after a certain number of years while others can be kept for your whole life and expire at death when death benefit is paid out. If your policy expires, you can re-apply again or transfer to a cash value life insurance plan.