Cash Surrender Value of Life Insurance-How Much You Get
We all want our family to be safe and sound, especially if something should happen to us. The right life insurance could be the best way of saving money, especially if you haven’t put some money aside.
However, we all have different needs and that makes the whole part of choosing a life insurance even more complicated. If you are looking for life insurance that allows you to “borrow” cash in a case of emergency, there are some things you need to know.
What is exactly a cash surrender value of life insurance?
The Cash surrender value of life insurance is the amount of money that you are allowed to take in case of emergency, and it grows with each monthly premium payment that you make. Sometimes it can even exceed the total value of the premiums that you’ve paid on the policy.
This way you can withdraw limited amounts of cash from a life insurance policy that differs based on the type of policy you own and the company issuing it.
The Cash surrender value of life insurance is also known as available partial surrender value. If you look at your policy statement, you will see it marked under this term. This amount indicates exactly how much you’re about to receive in case you decide to cash out your life insurance policy.
However, not all life insurance policies offer this kind of opportunity.
Advantages and disadvantages of cash surrender value of life insurance
In time of need, we all wish we could cover our unexpected expenses without some kind of a loan. However, many people don’t have that kind of money.
In that case, it is very important to have the opportunity to withdraw money when you need it. Money you borrow from your policy is usually tax free which is its main advantage.
However, if you want to get this kind of opportunity, you may have to purchase for whole life insurance. It is more expensive mostly because part of the money you pay goes into building cash value. Other types of policies usually do not offer this kind of possibility.
The bad news is you won’t be able to cash out your policy right away as available partial surrender value won’t grow as quickly as many other long-term investments. It usually takes a couple of years before the cash value starts to grow, depending on life insurance company you choose.
Cashing out could cause a reduction of your death benefit and it could even cause your premiums to increase in order to maintain the same death benefit.
All the things considered, what may be the perfect option for somebody doesn’t necessarily means that it will be good choice for you, and vice versa. The best thing that you can do is to inform yourself enough to understand how it all works.
Taking out cash surrender value of your life insurance may sometimes be the best choice you have, especially if you do not have a savings account. However, before you do anything, make sure you are aware of any consequences which may follow.