Life savings insurance, more commonly known as cash value insurance, refers to certain types of life insurance in the United States, which typically seek to cover all the years a person will live.
It works when you purchase permanent life insurance, either whole life or universal life, and part of the insurance premium is deposited into a savings account. Here’s everything you need to know.
Life savings insurance, also called cash value insurance, is a whole or permanent life policy that puts a small portion of what you pay monthly into a fixed or variable-rate savings account.
What determines the type of rate at which the cash value will earn interest is the type of life insurance you purchase. If it is a whole life insurance you will have a fixed rate, but if it is a universal life insurance or final expenses, the rate will vary.
What types of policies allow you to invest in insurance with savings?
There are three types of policies that will allow you to get life insurance with cash value, these are:
- Whole life insurance guarantees a fixed interest rate on the investment and customers with mutual companies can get additional dividends from this money.
- Guaranteed issuance: This type of life insurance does not need a prior medical examination and cannot be refused. Their rates are fixed, but usually, the amounts are extremely small.
- Indexed universal insurance policy, The growth or cash value rate is anchored to the value of an index of stocks or bonds, as with index funds, but as the index varies so will the interest rate.
- Variable universal life insurance is much more like opening an investment account, given that the money will go to various sub-accounts of mutual funds, stocks, and bonds. It provides greater benefits but carries more risks.
- Universal guaranteed: It also does not require prior examinations, the rates are fixed, and the total amount for death is canceled, but the cash value is quite low.
Warning: Term life policies do not generate any cash value, as they are limited to a time period of 10, 20, or 30 years. But you can turn term insurance into whole or universal life insurance.
How much does life and savings insurance cost?
The value of how much life insurance costs in the USA will vary depending on the type of policy you take out whether it is whole life, universal, or indexed universal. Age and gender can also increase or decrease your insurance amount.
Below, we will show you several tables with the average monthly price of each type of life insurance and how it varies according to the age and gender of the client.
Average monthly whole life insurance fee ($250,000 policy)
| Age | Man | Woman |
| 25 | $225 | $203 |
| 30 | $260 | $234 |
| 35 | $311 | $273 |
| 40 | $376 | $321 |
| 45 | $468 | $381 |
| 50 | $578 | $470 |
| 55 | $728 | $599 |
| 60 | $989 | $770 |
| 65 | $1,311 | $1,045 |
Important: We take the average rate as an example, There is a cheaper policy of $ 100,000 and a higher one of $ 500,000, but the characteristics are maintained making men pay more as well as older adults.
Average Universal Life Insurance Monthly Rates by Age
| Age | Average monthly rate |
| 20 | $36 |
| 30 | $42 |
| 40 | $63 |
| 50 | $90 |
Average monthly indexed universal insurance rate
| Age group | Men’s Insurance | Insurance for women |
| 25-35 | $96 – $122 | $71 – $96 |
| 35-45 | $122 – $171 | $96 – $148 |
| 45-55 | $171 – $303 | $148 – $238 |
| 55-65 | $303 – $491 | $238 – $445 |
What to do with life insurance savings?
It is possible to make use of your cash value while you are still alive, but you have to consider that it will always be treated as a loan and that if you use all the funds, you will lose your life insurance policy.
Here are the ways you can access or use that money:
- Make partial withdrawals: This will allow you to have cash for an emergency, but if you do not return the money this will reduce the death benefit your family will receive.
- Take out a loan against cash value: Perhaps it is one of the fastest ways to get funds and the APR of this loan will be much lower than that of a personal loan because the amount is already in the savings account.
- Withdraw all cash value and deliver the policy: Basically, you’ll be closing your life insurance account and it could lead to a penalty in the first few years, so you’ll have to pay a surrender fee for your money.
- Payment of premiums and insurance costs: The most suitable use for this type of savings, helps you to ignore the payment of premiums and allocate that money to other types of investment.
Important: You should take into account that it can take several years to accumulate enough money to make any use of your savings but if you manage to save all your coverage, the company can close your account and pay your policy.
Advantages and disadvantages of investing in life insurance with savings
| Advantages | Disadvantages |
| It’s a way to access your life policy money while you’re still alive. They usually last for a lifetime and in case of closing them you will recover your money and savings Loans against cash value have a lower rate than a bank would give you some mutual insurance allows you to earn a dividend on investments made with your life insurance savings. | Most permanent policies have a higher value than term insurance The management of procedures or items of your insurance will need a practical approach Any withdrawal of money from your policy will result in a decrease in benefits when you die unless you replace it. |
How long does it take to build cash value in life insurance?
It can take decades to accumulate a significant sum in cash value, although some policies allow you to earn a little more during the first three years.
Can I take the cash value of my life insurance?
You can make withdrawals or borrow against cash value, but then you must replenish that money if you do not want to reduce the benefit or close the policy. You may also have to pay taxes on dividends or interest.
Is life insurance with savings right for me?
Life insurance with savings is convenient if you want to use the money in life, but keep in mind that the cash value grows very slowly and does not go to the beneficiaries, but returns to the insurance company.