All cash value life insurance policies have the potential to accumulate equity. But policy expense loads, loan interest cost and surrender charges can reduce the net cash values in any one year. It’s important to understand the cost associated with a cash value policy that is designed to generate income for retirement income purposes. If designed to maximize cash accumulation, it can be an alternative to supplement retirement income. If designed incorrectly, it can be one of the worst savings vehicles.
The permanent polices that have the potential to accumulate cash values and distribute tax advantaged income are participating whole life and current assumption universal life. Both use crediting methods based on interest rates. Current assumption universal life also offers crediting methods using domestic and foreign indices (indexed universal life) and equity/ bond subaccounts (variable universal life.)
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The cash equity may also include any dividends accumulated under a participating policy.
You may borrow against your accumulated equity or surrender the policy and receive a payout from the insurance carrier.
The permanent polices that have the potential to accumulate cash values and distribute tax advantaged income are participating whole life and current assumption universal life. Both use crediting methods based on interest rates. Current assumption universal life also offers crediting methods using domestic and foreign indices (indexed universal life) and equity/ bond subaccounts (variable universal life.)