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At the most basic level, a life insurance policy can protect your beneficiaries from financial strain after your death. But, the right policy can offer more than just replacing your lost income potential—it’s also an investment in its own right. Here is a guide to this kind of policy.

Understanding Tax-Free Cash Value Accumulation

Depending on the type of life insurance you purchase, it can have three components — a death benefit, the insurer’s cost, and a cash value accumulation. The death benefit is the payout your loved one will receive after you pass. The insurer’s cost is a fee you pay for continued coverage. The cash value includes a portion of your insurance premium and the interest those payments accrue over time.

Three types of coverage accumulate cash value:

  • Whole Life Insurance: Generates low but steady returns based on a guaranteed rate that’s provided by the insurer.

  • Universal Life Insurance: Performs based on the current market interest rates, which can rise and fall.

  • Variable Life Insurance: Functions like a mutual fund based on investment sub-accounts.

Using Your Life Insurance Coverage as an Investment

life-insurance-Mebane-NCLife insurance policies help families accumulate wealth over generations. The return on this investment can be used in various ways, including paying for:

  • Real estate mortgages

  • College tuition

  • Business loans

  • Debt

  • Funeral and burial expenses

You can even borrow against the cash value on your policy while you’re still alive—but the amount you take out will be deducted from your beneficiary’s payout after you pass. This is a popular choice for people who want to supplement their income after retirement without increasing their tax liability. It can also be useful if you encounter unexpected financial hardship and want to draw from your savings without incurring a penalty.


When you’re selecting a life insurance policy, the coverage will help determine your family’s financial security—and the impact can last decades. Insurance might not be your first priority if you’re young and healthy, but it’s a crucial milestone. To learn more about getting the right coverage for your needs, call Craig Giovani State Farm® Insurance Agent in Mebane, NC, at (919) 300-5911 today; you can also visit him online.

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