Term insurance is limited in what it can do for you; it can only pay out death benefits to your beneficiaries when you die. Cash value life insurance provides more financial flexibility. Because cash values have the potential to grow inside the policy, you may be able to access the cash value while you are living.
There are two general kinds of life insurance. Term insurance provides death protection for a specific length of time. It pays death benefits to policy beneficiaries if you die before the time period ends.
Cash value life insurance, on the other hand, is designed to pay a death benefit whenever you die (assuming the policy is in force at your death). It doesn’t end after a specific number of years. It also provides more financial flexibility. Because cash value can grow income tax free inside the policy, and can be accessed tax-free2 by using a combination of loans and withdrawals, it has the ability to provide more financial options and greater financial flexibility during your lifetime.
The Voya® family of companies offer these popular types:
- Universal Life
- Indexed Universal Life
- Variable Universal Life
- Survivorship Life
A few of the advantages of cash value life insurance.
Cash Value Life Insurance is all about the flexibility to meet your financial needs today, tomorrow, and after you are gone.
- You don’t have to be concerned that your policy will end after a set number of years. As long as your policy stays in force, it will pay the death benefit whenever you die.
Federal Tax Benefits
- Death beneﬁts are generally paid to beneﬁciaries free of federal income taxes.1
- Policy cash values grow income tax free.
- Cash values can be accessed income tax free as long as the policy remains in force.2
- Distributions2 are not considered in calculating Affordable Care Act taxes on investment income, income taxes on Social Security benefits, or in calculating Medicare premiums.
State Law Protections
- Some states allow life insurance policy owners another valuable benefit: creditor protection. Because life insurance death benefits are often used to maintain the financial security of spouses and children, many states give life insurance cash values and death benefits significant protection from the claims of creditors. The amount of protection varies from state to state, but the bottom line is that life insurance cash values and death benefits may be reserved for family members even when creditors are owed substantial sums of money.
Other Interesting Facts
- Life insurance is not considered an asset when it comes to college financial aid forms.
- Most policies do not require annual premium payments; coverage continues as long as the policy is properly funded, the policy has cash value and the policy terms have been satisfied.
- If you become disabled and your policy has a waiver of premium rider, all or part of the policy premium will be paid by the insurance company.
Look at cash value life insurance as a flexible financial tool that can be customized to benefit you, your heirs, and even your business. To make sure you get the policy with the features that benefit you the most, always work with an insurance professional.
Don’t delay. The cost of life insurance coverage increases each year as you get older. Insurance companies consider your age, health and finances during the underwriting process to determine whether to issue you a policy and the premium amount. Your ability to purchase life insurance and its cost may never be more favorable than it is today. Today is a good time to review your life insurance situation and implement a strategy to protect yourself and your family.
|Coverage||Cash Value||Flexible Premium Payments||Control of Allocations of Cash Value||Guaranteed Return on Allocations of Cash Value|
|Term||fixed amount of time||no||no||no cash value||no cash value|
|Indexed Universal Life||lifelong*||yes||yes||yes||yes|
|Variable Universal Life||lifelong*||yes||yes||yes||depends if the policy offers a fixed account|
* provided policy is not allowed to lapse or mature/expire.
Variable insurance products are subject to investment risk, are not guaranteed and will fluctuate in value. In addition, there is no guarantee that any variable investment option will meet its stated objective.
These materials are not intended to and cannot be used to avoid tax penalties and they were prepared to support the promotion or marketing of the matters addressed in this document. Each taxpayer should seek advice from an independent tax advisor.
Neither Voya nor its affiliated companies provide tax or legal advice. Please consult with your tax and legal advisors regarding your individual situation.
1Proceeds from an insurance policy are generally income tax free and if properly structured, may also be free from estate tax.
2Income tax free distributions are achieved by withdrawing to the cost basis (premiums paid) then using policy loans. Loans and withdrawals may generate an income tax liability, reduce available cash value and reduce the death benefit or cause the policy to lapse.