WHAT IS CASH VALUE IN LIFE INSURANCE?

It's not uncommon for life insurance to be something of an afterthought. Yes, you know you should have it. You might even have a good sense of why you should. But for some people at least, getting a policy in place can seem like another task you'll eventually get around to.

Here's why you might want to think again. The right life insurance strategy can help provide protection and flexibility for you and your family. In particular, cash value life insurance can provide you with a range of options.

CASH VALUE LIFE INSURANCE EXPLAINED

In a nutshell, cash value life insurance is a type of permanent life insurance with a cash value savings component. It also offers a pair of different benefits.

1. The foundation of all life insurance is the death benefit, which pays an income tax-free amount to your beneficiaries when the insured person passes away.¹
   
   
2. The life insurance also acts as a tax-deferred accumulation vehicle. Cash value life insurance credits the contract holder using a predetermined method – dependent on dividends, interest rate, index return or subaccount performance – on a tax-deferred basis.^2,3 The contract owner can access that at any given point via loans or withdrawals. For example, the cash value can be used as supplemental retirement income, a down payment on a house or an emergency fund.

CAN I EVER TAP INTO MY INSURANCE?

Many contracts allow you to take a tax-free withdrawal up to what's known as your basis in the contract.⁴ What's your basis? It's the amount of premiums you have paid, minus any withdrawals or paid dividends. You already paid income tax on those dollars, so you won't be taxed again. Withdrawing money may come in handy later in life when you face expenses like college tuition or a parent's health care needs.⁴

LET'S TALK!

Here's another key point to note: There are numerous different forms of cash value life insurance, and each provides additional benefits the contract owner can use during his or her lifetime. To make an informed buying decision, it's critical to understand those differences and how they may align with your goals and needs.

That's not always an easy process, particularly if you're not up to speed on the nuances of each. But that's also where a Thrivent Financial professional can help you work through different scenarios and understand the type of insurance that works best for you.