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What Is Cash Value Life Insurance?


Understanding different types of life insurance policies and their unique benefits will help you choose the right option for you and your family. Term life insurance provides coverage for a limited amount of time and/or amount of benefit. Term insurance has no cash value.

In contrast, whole life insurance1 is coverage that is in place your entire life, and it offers unique benefits, including the ability to accumulate cash value, which can be used to your advantage in a variety of financial scenarios.2

Let’s look at the features of cash value whole life policies, explore loan options and consider how term life insurance conversion may help you secure lower rates on a whole life policy. 

The Benefits of Cash Value Whole Life Policies

Cash value whole life insurance is a type of permanent life insurance that not only provides a death benefit but also allows you to build cash value over time. This cash value component offers several advantages:

  • Flexible access to cash with tax-deferred growth. The cash value of a whole life policy grows tax-deferred, meaning you won’t have to pay taxes on the growth unless you make a withdrawal from the funds.3
  • Guaranteed cash value. Some whole life policies offer the opportunity to earn dividends, which can be used to increase the policy’s cash value or death benefit.
  • Potential for future reduced premium payments. Through the use of Reduced Paid-Up or Extended Term Non-Forfeiture options, you can use  the cash value to pay for coverage reducing your overall out-of-pocket expenses.4

Use Life Insurance While Alive

Whole life insurance policies offer the opportunity to take out loans against the cash value, providing a flexible source of funds for various purposes. Some examples of how you might use a whole life policy loan include:4

  • Paying off high-interest debt. You can use a loan from your whole life policy to pay off credit card balances or other high-interest loans, potentially saving money on interest payments.
  • Funding a child’s education. The cash value of a whole life policy can be used to help cover tuition costs or other educational expenses.
  • Investing in a business. A loan can be used to invest in a current business or to start a new venture.
  • Supplementing retirement income. The cash value can be used to add to retirement income, providing a source of funds during the golden years.

Loans can be taken against the cash value of the policy, not the policy’s death benefit. Cash value is not paid to beneficiaries; rather, beneficiaries receive the policy’s death benefit amount minus any loans and withdrawals you’ve made against the cash value.

Term Conversion: Lock in Lower Rates Now

Term life insurance is a popular and affordable option for many people, particularly people in their 20s to 40s. However, as you age, the cost of term life insurance increases. By converting a term life policy to whole life insurance, you can lock in your lower rates — based on your current age and the assigned risk class on your term policy — and take advantage of the cash value benefits whole life policies provide.5

Term-to-whole-life conversion can be particularly beneficial for those who anticipate needing life insurance for the long term and want to secure lower premiums. The conversion process is easy, especially if you already have a term insurance policy with us. No need for a medical exam; one of our agents can help you make the jump.

Yes, your premiums will increase. Whole life policies are more expensive than term policies as a result of the cash value whole life policies accrue. That’s why it is important to talk to an agent to ensure the policy you select matches your lifestyle, age and financial needs.

Boost Your Cash Value Policy

Whole life insurance can be customized. At our agency, in addition to selecting a policy limit, you have the option of choosing Whole Life Protector and Whole Life Accumulator coverage. Both policies offer a guaranteed rate of cash value growth, meaning you can predict the minimum cash value your policy will have over time.

Whole Life Protector, a cash value policy, offers guaranteed coverage for the life of your policy and includes coverage that can cover final expenses, unpaid debt and supplemental retirement income or leave an inheritance to loved ones.

Whole Life Accumulator expands on the benefits of Whole Life Protector and builds higher cash value over time.

These policies offer a range of benefits and features designed to help you secure your financial future and provide peace of mind for you and your family.

How much life insurance do I need?

Most people know they need life insurance, but it can be confusing to know how much is “enough.” If you are ready to see what we can do for you, give us a call to start a conversation with one of our insurance agents today.

Whole life insurance offers a multitude of benefits and financial flexibility through its cash value component. By understanding the various loan options, term conversion and specific products offered through our agency, you can make informed decisions and secure your financial future.

ERIE® insurance products and services are provided by one or more of the following insurers: Erie Insurance Exchange, Erie Insurance Company, Erie Insurance Property & Casualty Company, Flagship City Insurance Company and Erie Family Life Insurance Company (home offices: Erie, Pennsylvania) or Erie Insurance Company of New York (home office: Rochester, New York).  The companies within the Erie Insurance Group are not licensed to operate in all states. Refer to the company licensure and states of operation information.

The insurance products and rates, if applicable, described in this blog are in effect as of January 2024 and may be changed at any time. 

Insurance products are subject to terms, conditions and exclusions not described in this blog. The policy contains the specific details of the coverages, terms, conditions and exclusions. 

The insurance products and services described in this blog are not offered in all states.  ERIE life insurance and annuity products are not available in New York.  ERIE Medicare supplement products are not available in the District of Columbia or New York.  ERIE long term care products are not available in the District of Columbia and New York. 

Eligibility will be determined at the time of application based upon applicable underwriting guidelines and rules in effect at that time.

Your ERIE agent can offer you practical guidance and answer questions you may have before you buy.

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