Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
No, term life insurance does not build cash value. The idea of term insurance is to get the most "bang for your buck" meaning your getting a lot of coverage for a low rate, because the premiums are only fixed and guaranteed for a specific number of years (e.g. 10, 15, 20, 25, or 30 years).
Only permanent insurance (universal life and whole life) programs build cash value. Please feel free to send me a private message if you would like assistance with your life insurance program.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
There are term policies that have cash value. The reason that these policies exist is to provide a measure of extra flexibility at the end of the contract. These policies generally renew at a lower premium than standard term policies and also can assist in the initial premium if the insured decides to convert the policy to whole life or some other form of permanent insurance.
One type of term policy that does build cash value is ROP (Return of Premium) Term. Most ROP Term policies will pay back part of the premium you pay in, if you keep the policy past the halfway mark. If you survive and keep the policy to the end of the term, you get back all the premium you paid in. These policies start out at a higher premium than regular term insurance, but when the premium is returned, it is not taxable. So return of premium term life insurance can be a good way of getting death protection and a form of savings at the same time.
That is a great question! There is a reason why term life policies are so cheap, and a reason why you should know exactly what these policies are best designed to do. There is no cash value in a term life policy, as your premium is designed to only cover the cost of the insurance. The policy reaches its term and ends, and you walk away, or pay dearly to renew. This can be a real issue when you learn that the policies advertised so heavily by companies like AARP and AAA are term policies that end when the policy holder turns 80. I hope that helps, thanks for asking!
Manager, Marindependent Insurance Services LLC, California
Typically term life insurance does not have a cash value. (As noted above ROP Term replaces your money at the end of the time frame.)
However Term life is around one eighth often of the cost of whole life and other cash valued plans. So if you take the extra money and put it in the bank... voila - you now have "cash" and it is not restricted to any of the rules regulations of whole life policies.
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Only permanent insurance (universal life and whole life) programs build cash value. Please feel free to send me a private message if you would like assistance with your life insurance program.
However Term life is around one eighth often of the cost of whole life and other cash valued plans. So if you take the extra money and put it in the bank... voila - you now have "cash" and it is not restricted to any of the rules regulations of whole life policies.