Cash Value: A Benefit of Whole Life Insurance
Life insurance is an indispensable way to give your family greater financial protection. Should something happen to you, the insurance policy’s payout could be used to help pay the mortgage or rent, monthly bills and other living expenses.
One of the benefits of whole life insurance policies — unlike term life policies — is that they have a “cash value” component, an amount that increases over time.
How Cash Value Works
After the initial policy years, each time that you pay the monthly premium for your whole life policy, the insurance company — such as Gerber Life — sets aside a small amount, which grows over time into the policy’s “cash value.” The longer you own the policy, the larger the cash value.
The cash value represents how much the policy would be worth at a given point in time were you to cash in the policy or take a loan against the policy.
“Should a need arise, you could borrow against the policy’s cash value.”
A whole life insurance policy not only provides financial protection for your family in case something happens to you. It also has a “rainy day” benefit. Should a need arise, you could borrow against the policy’s cash value, as long as all premiums are paid.
You’ll be charged interest on the loan, so it’s best to pay off the loan and accrued interest as quickly as possible to keep the policy’s payout money intact.
The dollar amount your beneficiaries would receive depends mainly on the coverage amount you select when buying the policy. That amount could be reduced, however, if there is any outstanding debt against the policy at the time of your death.
Cash Value and the Grow-Up® Plan
The Gerber Life Grow-Up® Plan is a children’s whole life policy with a cash value component that could come in handy when your child becomes the policy owner at age 21.
Whether they're finishing up school, looking for a job or simply in need of some extra cash, he or she could surrender the Grow-Up® policy and receive the available cash value. Or, your child could borrow against the cash value, while keeping the policy in force (as long as premiums are paid).*
*Policy loan interest rate is 8%. Loans may impact cash value and death benefit.
Cash Value and the Guaranteed Life Plan
Guaranteed life insurance is another type of whole life insurance policy that builds cash value. The Gerber Life Guaranteed Life Plan, designed for adults 50+ years old, builds cash value that you could borrow against to help pay for medical bills or another immediate need.*
*To be eligible for coverage you must be a U.S. citizen between 50 and 80 years old (New York residents, maximum age of 75) residing in the US or permanent legal resident. Total limit of all combined Gerber Life Guaranteed Life policies is $25,000. Gerber Life Insurance Company will not issue insurance for any proposed insured when a POA or Guardianship exists on the proposed insured, except legal guardians of children.
Other Ways to Use Cash Value
In the event that you temporarily couldn’t make some premium payments, you may be able to apply the policy’s cash value toward paying them.
If you choose to cancel the policy, you will receive the policy’s cash value minus any outstanding debt against the policy.
Cash Value and Cash Surrender Value May Differ
A common misconception about whole life insurance is that the terms “cash value” and “cash surrender value” have the same meaning. They don’t.
“Cash value,” as noted above, represents how much the policy would be worth at a given point in time if you were to cash in the policy or take a loan against the policy.
“Surrender value” is the actual sum of money you’d receive if you terminated your policy, and includes outstanding loans, interests, or premiums due. (Gerber Life never requires you to surrender your policy unless you want to.)
The important thing to remember is to pay back any policy loan and the interest due, or else when you surrender the policy you won’t get back as much money. Or if you die, your beneficiaries will receive a reduced payout.
