cash-value life insurance

cash-value life insurance

For many years this was a lousy investment pushed by excellent sales forces, often using deceptive practices to mask how poor it really was. In recent years the situation has changed, with the widespread offering by major companies of universal life and interest-sensitive whole life, both of which pay competitive interest rates on the cash-value portion of the policy. These policies can be an appropriate—even an excellent—investment because of the lack of federal taxation on the internal earnings of the policies. And if they are held until death, no tax is ever paid on these earnings. If the owner ever needs funds, he or she can borrow from the policy rather than cashing it in, thereby continuing to avoid taxation. TIP: Cash-value life insurance is an investment and should be treated as such. If you just need protection, buy term; 10- or 20-year level premium term policies are available.