Permanent life insurance policies build cash value over time. Here’s how to maximize the cash value feature:
- Policy Loans: You can borrow against your policy’s cash value, often at lower interest rates than traditional loans. Loans aren’t taxed as income but reduce the death benefit until repaid.
- Accelerated Cash Growth with Paid-Up Additions: Many whole life policies allow you to buy additional small amounts of coverage, increasing your cash value more quickly.
- Tax-Deferred Growth: Cash value grows tax-deferred, meaning you don’t pay taxes on gains until you withdraw them, making it an efficient savings vehicle.
- Dividends: Participating whole life policies pay dividends, which can be used to buy more coverage, increase cash value, or even pay premiums. Dividends aren’t guaranteed but can enhance cash growth.
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