Cash value insurance policies come with a higher premium than other life insurance policies and this is due to the fact that part of your premium is put into an interest-bearing account for you—tax free—which becomes available to you after a certain period of time. These insurance policies are generally lifetime policies rather than term life insurance which is coverage planned only for a certain period of time (5, 10, 15, 20 years).

The Cash Value Insurance Account
All life insurance policies are somewhat different so you will want to check the specifics of a cash value insurance plan before you sign any paperwork. A cash value insurance policy pays part of your premium into an account for you where your money makes interest and grows for you until a certain amount is reached (again, check your policy). Once that amount is reached, you have the option of stopping premium payments altogether and keeping your insurance policy, or you can continue to pay into it to grow the cash value of the account. Technically this money is used in the same way a bank uses the money you put there in savings. The insurance company invests with it to their own ends while keeping your principal safe for you. This cash value insurance account also has the advantage of helping to pay the higher costs of insuring you as you grow older, so your premiums do not increase.

Features of Cash Value Insurance

Some of the important features of cash value insurance policy are as follows

Credit Facilities

This policy also helps you in availing credit facilities. You can borrow a part of your cash value. The insurer allows grants you finance in the form of loans and cash withdrawals if you desire. The cash value insurance policy is treated as security for this purpose. You are required to repay these loans at an agreed rate of interest and most of these are loans are exempt from income tax.

These loans affect the amount paid to dependents in case of your death. The insurer will deduct the money due from the total amount refunded to your survivors. Similarly if the unpaid interest and loan amount exceeds the actual policy value your policy will be automatically terminated. Under such circumstances the policy become a discount life insurance whereby the insurer will recover the outstanding amount from the accumulated cash value insurance policy.

Withdrawal

The insurer also allows you to withdraw money from your policy. The values of such withdrawals are based on your cash value. If you have held the policy for a long time you may as well be eligible to obtain a partial surrender value. Withdrawals need not be repaid. You can as well claim income tax exemptions for the same if they don't exceed your premiums.

Age and Premium Factors

There is no upper or lower age limit, as far as term life insurance or cash value insurance policy is concerned. However there are lots of formalities to be completed with regards to health proof as the policy is usually for a very long period and so the risks are naturally higher. However the amount of premiums that you pay is likely to increase as your age increases.