Most see life insurance as an expense they will never benefit from. However, the opposite is actually the honest case. Owning quality life insurance can be one of the biggest unexpected advantages to an individual in today’s society. I am Nevin Shennett and I have been in the insurance industry for four years. For three of those years I have owned my own insurance agency. I have acquired life insurance for countless clients and shed lots of light onto why life insurance is not only a good idea, but the benefits of having quality life insurance to many clients that had never contemplated the benefits of the product. The advantages of life insurance are endless.
One of the key advantages of having quality life insurance is the build up of cash value. Cash value is the actual amount of money that a life insurance policy is worth if the funds in said life insurance policy are requested. Usually this amount is less than the face amount on the policy is worth and slightly less than has actually been paid into the policy. For example, if a whole life insurance policy is worth $50,000 and has been paid into for 10 years, there may have been $5,000 paid into the policy at that point. In this scenario there could be $3,500 worth of cash value that has accumulated within the policy itself. Now why is this important?
Whole life insurance policies work in the same way savings accounts do with some differences. The funds that are paid to the company are invested by the company. They insure the life of the insured for the agreed upon value and determine how much money they as a company require to be financially obligated to the amount necessary to pay off the policy when the insured passes away. The money that is taken by the company to insure the insure is invested in full, however the company has already determined how much money the invested funds will make in the long term and how much money will be made in profit to them and to the insured as cash value.
How much cash value that’s built up in a policy relates directly to advantages of quality life insurance because it allows the policy owner to withdraw money that is being held within the policy. An insured can go through a process called “cashing out” a life insurance policy where all the cash value that has accumulated within a life insurance policy is paid out to the insured and the policy is effectively canceled at that time. Another opportunity for an insured is to borrow some of the money from a policy, leaving the policy intact. In this case the insured has the opportunity to pay back any money that is borrowed from the policy or simply allow the policy to continue on and upon death of the insured and the face amount is payed out, the amount paid will be the full amount, minus the money that was borrowed against the policy.
This can be a massive advantage to the policy owner in a multitude of ways! Some individuals use the life policy once cashed out to pay for a child’s college education. Some individuals take out life insurance for this very purpose and for that purpose it is a great tool. If the insured passes away, the money is payed out as a death benefit to the child. If the insured does not pass away before the child reaches college age, the insured cashes out the policy and simply pays for the child’s college education in full. Many other insureds borrow money from their life insurance policies to make renovations on homes, to supplement income later in life, or to use in an emergency situation once funds begin to run low or an unexpected amount of money is needed.
All of the situations listed can be great advantages to owning quality life insurance. There are many more that can be taken advantage of simply by taking the time to purchase a policy, understand how it works, and keeping it in force for the majority of one’s life span. The benefits outway the cost of carrying life insurance as well, as long as the policy is taken out earlier than age 40 as long as the insured is in good health.