TLDR: There are several ways you can manage your money, each involving different tax implications. Educating yourself on when and how different financial vehicles are taxed can help plan for future expenses – like college tuition or retirement. And, leveraging the tax advantages that are included with cash value life insurance can be key to your retirement planning. 

The Whole Story: 
Shop around - you may be able to find innovative, online universal life insurance policies that might be a good option to help reduce your tax responsibilities while simultaneously protecting your family.

Why Do Taxes Matter?
In short, taxes can reduce your earnings and savings. Understanding how taxes can impact your income, savings, investments, and insurance can be important as you set out on your journey toward retirement. In today’s uncertain economy and with rising inflation, many people are feeling less well-off, and they have serious concerns about market volatility, taxes, and future income. Understanding how various financial, savings, and insurance vehicles are taxed can help you on your financial journey and allow you to feel more empowered as you work toward your goals.

Tax Implications for Various Assets
We’re going to walk through a few kinds of assets and accounts and discuss the tax implications of each to help understand where universal life insurance that builds cash value may fit. There are three main categories, or buckets, to consider.

Bucket 1 is the ‘always taxable’ bucket. These are generally taxable every single year, are usually liquid (or accessible), and offer varying growth potential and risk. This is typically where you’d put money for an emergency fund, money earmarked for vacations, daily expenses, or anything else you need to access before retirement. These include assets like checking and savings accounts – and money used to fund these accounts has likely been taxed as income. Any interest earned in these accounts is also taxed. Also in this bucket (though not as liquid as a checking or savings account) are non-qualified accounts like brokerage accounts, mutual funds, and other investments. Earnings from dividends or growth from the sales of a security are taxed annually.

Bucket 2 is the ‘tax-deferred’ bucket. Here, your earnings are not taxed until withdrawn because they are funded with post-tax dollars. These are assets like 401(k)s, 403(b)s, traditional IRAs, or any other qualified retirement plan. These assets are intended for the long term and may provide more growth potential. However, they are subject to contribution limits, and both principal and earnings are taxable upon withdrawal. And, penalties can be incurred if withdrawals are taken prior to age 59 ½. 

Bucket 3 is the ‘tax-advantaged’ bucket. After you’ve taken care of funding your retirement, you might be looking for other tax-advantaged vehicles that can help with big expenses – like college tuition or health care. 

For example, 529 plans can be used to help save money for college. Typically, contributions are post-tax, but all the growth in those accounts grows tax-free – and that money isn’t taxed when you use it for educational purposes. In some states, even the contributions are tax-deductible. However, a 529 plan must be used for education, which can limit future use. 

Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) are also tax-advantaged, and also come with stringent rules on how they can be used. For instance, HSA plans are only available if you also have a high-deductible health plan. HSA plans can be funded with pre-tax dollars and employer contributions but must be used for health care or related items, like prescription medication. FSAs are funded by employees with pre-tax dollars but must be used for medical expenses, childcare, or work-related transportation expenses. And in many cases, FSAs are ‘use it or lose it,’ meaning if the employee doesn’t estimate her expenses correctly, she could lose money or run out of money at the end of the year.

Bucket 4: Cash Value Life Insurance
And now, we’re going to introduce a lesser-known bucket – Bucket 4. Permanent life insurance that builds cash value is an often-overlooked asset. By purchasing a policy, not only can people protect their families – they can gain valuable tax advantages.

Way back in 1789, Ben Franklin said the only two certainties in life were death and taxes. And, he’s still right! Currently, the top marginal tax bracket is just below 40%. However, with an increase in government spending and increasing national debt, there’s a chance the tax brackets may continue to go up. This means taxation could be an issue now and in the future, so planning for taxes can be a smart strategy. 

Life insurance is the only option that has fewer limitations on how much you can put into the policy, or at what age you can access your cash value. Cash value life insurance, like that offered in universal life insurance, is funded with post-tax premium payments and offers tax-deferred growth and tax-free distributions. (Note: you can save money within your cash value life insurance policy provided the policy doesn’t turn into a Modified Endowment Contract, known as a MEC. A MEC is a tax qualification of a life insurance policy whose funding exceeds federal law tax limits. In other words, if too much cash is put inside of the policy, it loses its status as ‘insurance’ and becomes an investment vehicle instead.)

If you plan for retirement with the idea that tax rates will stay where they are or go higher – how will you manage those taxes? Unfortunately, there isn’t an easy way to do that. We already know everything in Bucket 1 is taxed yearly, and as you begin to take distributions from Bucket 2 they’re going to be taxed as well, and your tax bracket could change. 

In general, all the assets discussed here can be great options depending on your needs and goals. And at any age, most of us are concerned about market volatility and taxes. So, it makes sense that people might be looking for financial vehicles that offer stability with fewer tax implications. 

The ‘value’ of cash value life insurance
Permanent life insurance can be a smart financial choice for a few reasons. First, it’s stable and not invested in the market, so it removes some of the volatility concerns you may have. Second, it gives you tax-deferred growth and tax-free distributions, and potentially a higher rate of return. And last but not least – there are fewer contribution limits and no age limits on when you access money, or what you access it for. You have the potential to earn compounded interest (interest on your principal plus prior interest earnings), tax-deferred growth, and access to money that can be tax-free1. You can access the cash value in a life insurance policy in case of an emergency or if you just want to use it for something big, like a dream vacation or helping to pay for a wedding. 

Most importantly – people buy life insurance to help take care of their loved ones after they die. When the insured person dies, their beneficiary receives their death benefit2 as tax-free income. So as your loved ones are going through the worst time in their life, and potentially having to worry about settling estates and probate – they don’t have to worry about money. 

Simply put, that is the power of universal life insurance. It’s flexible in how you put money in, it’s flexible in how you take money out, and upon your death, your beneficiary receives a tax-free death benefit payment.

Tying it all together
At Everly™, we’re passionate about giving people information that helps make managing money more accessible and transparent, while providing some thoughts on how people can also grow money for future needs.

1. Policyowners may access their cash value via loans or withdrawals, tax-free, up to the amount they have paid into their policy via premium payments. Any loan or withdrawal amount above the total cumulative premiums paid can be subject to tax. 

2. Life insurance proceeds paid to the beneficiary equal the death benefit, minus any withdrawals or minus any outstanding loans plus interest. 

3. The Current Interest Rate is guaranteed for the first policy year and subject to change on policy anniversaries. After 10 years, interest rates are subject to change on a quarterly basis.

The information provided is general in nature, is not tailored to your needs, and is not intended to be tax or investment advice. For legal, investment, accounting, or tax advice, consult the appropriate professional. This information does not reflect the availability of products or product features unless specifically stated, nor does it alter the terms, conditions, exclusions, or limitations of policies issued by Security Benefit Life Insurance Company.

Key takeaway: As you plan for the future, it's important to consider the impact taxes can have. Cash value life insurance can offer tax advantages and protection for your loved ones.

Cash value life insurance can offer tax advantages and protection for your loved ones.

As you plan for your future, it's important to consider the impact taxes can have. Read about how cash value life insurance can offer protection for your loved ones plus tax advantages for your financial future.

How to Help Stretch Your Dollar with a Tax-Advantaged Life Insurance Policy

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The information above is for educational use only and does not represent insurance, tax or legal advice. It is not a recommendation or solicitation to buy insurance. Please talk to your licensed insurance agent for more information about life insurance and your needs. Please consult with the appropriate professional for tax or legal advice. Guarantees are backed by the claims-paying ability of the issuing insurance company.

Article Author: Meredith Bell
Author Bio: Meredith joined Everly in 2022 and has 20+ years of experience in the life insurance industry. She has held various roles in advertising, marketing, communications, sales and distribution support, and product development. Outside of the office, Meredith lives with her daughter Kennedy and their dog Mavis. Meredith enjoys cooking, camping, gardening, hiking, and bourbon (though not always at the same time). She is a live music enthusiast and an avid reader. Her favorite quote is by Thomas Jefferson: "I cannot live without books." Meredith agrees, but would add cheese, movies, and dogs to that list.

Guaranteed acceptance life insurance is an option for most individuals aged 40 to 80, offering coverage without the need for medical exams or health inquiries. As the name suggests, approval is typically assured, regardless of your health history. These life insurance policies typically provide smaller death benefits, ranging from $2,000 to $25,000, and are commonly chosen to cover final expenses such as funeral costs. However, there are some drawbacks. There's usually a waiting period before the death benefit is available, and payouts may be limited in the initial years. Additionally, the cost of a guaranteed life insurance policy tends to be higher.

Guaranteed acceptance life insurance typically allows for insurance coverage without the need for medical exams or health inquiries. Learn more about the pros and cons of guaranteed acceptance life insurance.

Understanding Life insurance Solutions that are Guaranteed


Guaranteed acceptance life insurance is available to most people ages 40 to 80 years old. Purchasing this coverage does not require undergoing any medical exams or answering health questions.

As the name of this policy implies, acceptance for life insurance coverage is guaranteed—regardless of your health history—which is its main selling point. You won’t have to answer questions about prior medical issues or ongoing ones, and typically you won’t be turned down for a life insurance policy, though there may be certain exceptions. In most cases, you are guaranteed insurance approval. This kind of insurance coverage is ideal for some people’s life circumstances, and getting a quote for life insurance rates is typically easy. Because the insurance application process is simple, guaranteed insurance is also very convenient.



Is Guaranteed Acceptance Life Insurance the Right Plan for me? 


The right insurance coverage depends on your age and other factors. If you’re younger, for instance, this may not be the coverage that best fits your life circumstances. Younger people may be able to benefit more from the tax-advantaged growth potential of universal life insurance coverage or the lower costs of term life insurance. 


With guaranteed insurance, there’s usually a longer waiting period before your death benefit may be paid, and the insurance payouts can be limited in the first few years of coverage. Also, this coverage tends to have a higher cost of insurance.


Someone with a medical condition or other lifestyle factors that might make life insurance otherwise unattainable, or who doesn’t mind having a somewhat smaller amount of death benefit coverage, may find greater value in a this type of life insurance policy.



How Much Coverage is Available in Guaranteed Life Insurance? 


Guaranteed life insurance policies tend to have lower death benefit amounts, typically $2,000 to $25,000. Typically, guaranteed life insurance policies are purchased as a final expense policy to cover things like funeral costs. 

How the Death Benefit Works with Guaranteed Life Insurance


The death benefit for guaranteed insurance is reduced for the insurance policy’s first few years. If you die within that time period (for a reason other than an accident), your insurance beneficiary may receive a reduced amount—or in some cases, they will only receive a refund of the insurance premiums paid, plus any applicable interest. Although this type of insurance is guaranteed, the amount of insurance coverage may not always cover your final expenses, such as funeral costs.

The Pros of Guaranteed Acceptance Life Insurance


Having a guaranteed issue life coverage plan can help offer peace of mind, with several advantages:


●     The application process for guaranteed life insurance is straightforward, and you can apply with the assurance of receiving insurance coverage.

● 	Guaranteed issue life policies do not require a medical examination or complex declarations of your previous medical history.  



The Cons of Guaranteed Acceptance Life Insurance


Guaranteed issue life insurance does have potential downsides, which include the following:


● 	The maximum coverage values available may be lower when compared to other kinds of life insurance coverage.


● 	Insurance beneficiaries may not receive a payout or may be granted a lower benefit if you pass away within a short period after purchasing your guaranteed issue life insurance coverage.  


● 	Insurance premiums for guaranteed issue life coverage may not be cost-effective when compared to the death benefit.


● Most guaranteed issue life insurance products are only available up to a maximum age. If you need advice about choosing the life insurance coverage that is right for you, you should speak to a trusted financial advisor or licensed insurance agent.



Why Choose a Life Insurance Policy Offering Acceptance Guaranteed?

Why Choose Guaranteed Acceptance Life Insurance?


There are several scenarios where guaranteed issue life insurance can be a good solution because it is a life insurance policy you can't be turned down for, although the terms and premiums may depend on your coverage requirements.


For example, you may not qualify for whole life insurance coverage based on your age or health, or it may not be a cost-effective option for you. Typically, companies issue life insurance that is guaranteed to help individuals who may struggle to qualify for traditional life insurance. While a guaranteed life product might offer a lower final payment, it is much easier to qualify for life insurance without any health examinations.


Applicants may choose to purchase a guaranteed issue life insurance product because they would like coverage in place as soon as possible, with minimal inconvenience. In many cases, the payout associated with a guaranteed issue life coverage product might be intended to cover funeral costs or to repay certain debts, loans, and credit cards.


Other situations where this type of guaranteed issue life insurance may be beneficial is if you have a medical condition that potentially could make you ineligible for other coverage solutions, if you have a limited budget to purchase life insurance, or if you only need modest insurance coverage.



Cash Value Life Insurance Policies: What Is a Cash Value Life Insurance Policy?

Guaranteed acceptance life insurance is available to most people ages 40 to 80 years old, provided they qualify for coverage.

What is “Guaranteed Acceptance Life Insurance”?


Basically, cash value life insurance is a form of permanent life insurance that includes both a protection component in the form of a death benefit and a savings component in the form of accumulated cash value. When you purchase this type of insurance policy, a portion of the premium payment is allocated to a cash value component. This cash value has the potential to grow over time, and can be accessed by the insurance policyholder during their lifetime, or the funds could potentially serve as an additional death benefit to be distributed after the insurance policyholder’s passing (provided the company offers this feature–be sure to carefully explore death benefit options for each product you are considering). In this guide, we'll help you understand more about life insurance cash value so you can determine which plan is right for your insurance needs.

The information above is for educational use only and does not represent insurance, tax or legal advice. It is not a recommendation or solicitation to buy insurance. Please talk to your licensed insurance agent for more information about life insurance and your needs. Please consult with the appropriate professional for tax or legal advice. Guarantees are backed by the claims-paying ability of the issuing insurance company. 

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Article Author: Meredith Bell
Author Bio: Meredith joined Everly in 2022 and has 20+ years of experience in the life insurance industry. She has held various roles in advertising, marketing, communications, sales and distribution support, and product development. Outside of the office, Meredith lives with her daughter Kennedy and their dog Mavis. Meredith enjoys cooking, camping, gardening, hiking, and bourbon (though not always at the same time). She is a live music enthusiast and an avid reader. Her favorite quote is by Thomas Jefferson: "I cannot live without books." Meredith agrees, but would add cheese, movies, and dogs to that list.

Cash value life insurance policies are policies that offer the potential to grow cash value apart from the protection component of the insurance policy. The cash value component is usually found in permanent life insurance policies. Term life insurance policies don't typically offer cover cash value components. It is important to always check with insurance providers on which policies they offer that include cash value accounts. This cash value has the potential to grow over time. There are several types of cash value insurance policies and ways to access the money, including through a withdrawal or a loan. Whether you'll be able to access the cash tax-free is dependent on the type of insurance policy you have and how much money you have paid into the policy versus how much you’d like to take out. Before choosing a cash value insurance product, you should thoroughly review the policy details and speak with a trusted advisor or life insurance agent as to whether or not this type of policy may be a good fit for you.

Many different types of life insurance qualify as cash value life insurance policies. But what does ‘cash value life insurance’ mean? A product that can build  cash value.

Types of Cash Value Life Insurance Coverage


A cash value life insurance policy can offer several options to the policyholder, because there are multiple ways policies can accrue cash value. However, it’s important to note that a life insurance product that builds cash value may not suit your unique needs and life goals. A policy's cash value can have certain criteria around it that can impact your ability to take out loans from the cash value account, how you can access those funds, and interest rates around cash borrowed from the account. It’s important to discuss all your insurance policy options with a trusted financial advisor.

Universal life insurance policies generally allow policyholders the ability to adjust the value of their premium insurance payments, but this may impact policy coverage and the insurance rate. One benefit of universal life insurance is that if your life hits unpredictable circumstances or your needs change, you can usually adjust your insurance premium while still maintaining some amount of policy coverage and any accumulated cash value.


Life insurance that builds cash value can come in handy, as you may use the cash value of your policy to make your insurance premium payments, or pay other expenses if needed such as a home mortgage or to pay off loans. Some policyholders may use the policy's accrued cash value to fund other auto loans, business loans, and home expenses.

This type of cash value life insurance is permanent, lasting the entire lifetime of the policyholder–as long as the insurance premiums are being paid regularly. In this type of insurance policy, the cash value can increase over time. Additionally, the death benefit remains guaranteed (based on the claims-paying ability of the insurer). Unlike with universal life insurance, the premiums for these coverage plans are fixed.

Indexed Universal Life Insurance Policies



When you purchase an indexed universal life insurance (IUL) policy, your cash value accumulation potential is tied, in part, to a particular stock market index. How the index performs will help determine the growth of your cash value and the amount of index interest credited. However, it is possible that the index will be negative in a period resulting in no index interest earned on your cash value accounts. Because it is a fixed insurance product and not an investment, policyholders do not experience a loss as a result of negative index performance. It is important to note that this policy is not an investment and it is not possible for customers to invest directly into an index. Life insurance companies manage the index, which is why customers can't invest directly into the fund.


While greater risks can result in greater potential rewards, it’s still advisable to understand whether or not a policy  you are considering offers a guaranteed minimum interest rate. Again, you should speak with a financial advisor or an insurance agent to fully understand how an IUL product might work.

Variable Universal Life Insurance Policies

In a variable universal life insurance (VUL) policy, your cash value is directly invested in mutual fund-like subaccounts. These insurance policies tend to include higher risk because the cash value will increase or decrease depending on how the chosen subaccounts are performing.


This coverage may be a good fit for life insurance policyholders who are experienced in investing, have room to take risk, and have more time to grow their account’s cash value.




Term life insurance is not included in the list of cash value policies for life insurance. A term insurance policy does not accumulate cash value. A term insurance policy only provides a death benefit if the insured person passes away while the policy is in effect. Term Life Insurance is generally less expensive than universal life insurance due to its fixed term and inability to accumulate cash value.



How Cash Value Life Insurance Policies and Premiums Work

How Cash Value Life Insurance Policies Work


A cash value insurance policy can provide lifelong coverage, just like other forms of life insurance coverage. When the insured person eventually passes, the death benefit is paid out to the beneficiaries, provided the policy is in good standing and premiums are up-to-date. The policyholder’s cash value is usually paid out as part of the death benefit to the beneficiaries. 

Before the insured person passes, it’s important to understand why paying life insurance premiums matters. When the policyholder pays their life insurance premium, the payment goes towards the protection component (the death benefit), the savings component (the cash value), and towards the life insurance company’s policy charges and fees. This means only a certain portion of the insurance payment goes into that cash value component. 

The Four Ways to Access Your Life Insurance Policy’s Cash Value


If the insurance policyholder needs to access their cash value before their death, they can do so provided they meet the life insurance company’s criteria. For example, policyholders may take a loan on the cash value to help pay a mortgage on their first house or help pay expenses on their first business. In many cases, withdrawing cash from cash value may be a better option than taking out new lines of credit or applying for new loans. You should carefully evaluate the terms of your insurance policy when considering taking a loan or withdrawal from your policy.


There are four main ways you can access the cash value of your insurance policy:

Pay Your Life Insurance Premiums Using Cash Value


If you’re experiencing financial hardship but don’t want to sacrifice your life insurance by missing payments or lapsing your life insurance policy coverage, you may be able to use the cash value of your policy to pay your monthly insurance premiums. 


This can create some financial relief for you if you are in a pinch, but do not fully deplete the funds in your cash value account. If your cash value account hits zero, your policy may lapse depending on the details of your insurance policy.

Surrender Your Cash Value Life Insurance Policy


In dire situations, policyholders can sometimes cancel or ‘surrender’ their life insurance policies. By doing so, policyholders may be able to receive the cash value of the insurance product, minus any outstanding loans, the surrender charge and other fees or expenses. It’s important to know that surrender insurance charges vary widely from business to business, so understanding the surrender charge before you purchase a policy is important. It is also important to understand any potential tax consequences when canceling a policy by discussing with your tax advisor.



Make a Cash Withdrawal from Your Life Insurance Policy


Policyholders may be able to make a tax-free withdrawal from their life insurance policy as long as the withdrawal amount does not exceed the amount they’ve paid into the cash-value portion of the insurance policy. If the life insurance withdrawal exceeds the cash values of the account, it may be taxed as income and may also lessen the benefit amount that is paid out in the event the insured passes away.




A life insurance loan can include the portion of your paid premiums that go towards your cash value account, as well as the accrued interest from those funds. You can use this cash for anything you want, but the insurance loan will accrue interest until you have paid it back in full.



Can You Access the Cash from Your Life Insurance Policy Tax-Free?


If you have a universal life policy, you can typically take cash withdrawals from your policy’s cash value. You can take cash withdrawals up to the premiums you pay tax-free without impacting the policy’s death benefit. Bear in mind–if you exceed the amount you’ve paid into the account, the cash could be taxed as income. It’s important to discuss this process with a tax professional before you decide to withdraw money from an existing life insurance policy.



Will Withdrawing Cash Value Impact the Life Insurance Policy's Death Benefit?

Will Withdrawing Cash Impact the Life Insurance Death Benefit?


When you withdraw cash from your life insurance policy, it can reduce the protection for your loved ones or beneficiaries. Depending on the policy & the insurer, cash value withdrawals may or may not have an impact on the policy's death benefit. In some cases, cash withdrawals can result in ending your policy, depending on the amount of cash you’ve withdrawn.


If you want to avoid negatively impacting the death benefit, be sure to consult with your insurer about the terms of your policy and withdrawing from the cash value account. Also, keep in mind that some insurance policies include penalties for withdrawing from the cash account, which may also impact how much you can actually access upon withdrawal.

What is Guaranteed Acceptance Life Insurance?

What is Index Universal Life Insurance? IUL


Many different types of life insurance qualify as cash value life insurance policies. But what does ‘cash value life insurance’ really mean? Read more...

Unlike term life insurance, whole life insurance coverage products normally include a cash value component to the policy. This is typical for many forms of permanent life insurance policies, including universal life insurance. Accumulating or building cash value can potentially increase the value of your insurance policy over time, with the potential to borrow funds from the cash value within your personal policy.


Many insurance policyholders may consider a loan to help cover a large personal expense, such as a down payment on a new car, a home mortgage, or other financial needs. Some insurance policyholders may prefer to take out loans from their cash value rather than pay for larger personal expenses with credit cards or auto loans. Still, it’s important to understand the amount available to borrow may depend on several factors such as the insurance policy's maturity date, how long you have held your insurance policy, and the amount of cash value that the policy has accumulated


While term life insurance does not generally have cash value to draw from, many whole life insurance and other permanent insurance products, such as universal life insurance, allow policyholders to take a loan against the cash value of their policy–but understanding the terms, costs, and long-term impacts of a life insurance loan is essential. In this guide on life insurance loans, you'll learn more about borrowing from your life insurance policy.

The information above is for educational use only and does not represent insurance, tax or legal advice. It is not a recommendation or solicitation to buy insurance. Please talk to your licensed insurance agent for more information about life insurance and your needs. Please consult with the appropriate professional for tax or legal advice. Guarantees are backed by the claims-paying ability of the issuing insurance company. 

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Article Author: Meredith Bell
Author Bio: Meredith joined Everly in 2022 and has 20+ years of experience in the life insurance industry. She has held various roles in advertising, marketing, communications, sales and distribution support, and product development. Outside of the office, Meredith lives with her daughter Kennedy and their dog Mavis. Meredith enjoys cooking, camping, gardening, hiking, and bourbon (though not always at the same time). She is a live music enthusiast and an avid reader. Her favorite quote is by Thomas Jefferson: "I cannot live without books." Meredith agrees, but would add cheese, movies, and dogs to that list.

Whole life insurance policies often allow policyholders to withdraw a loan from the cash value that may have accumulated in their policy, and the type and amount of the available loan is dependent on that cash value. There are several scenarios in which borrowing against your life insurance policy is an attractive solution to personal financial difficulties. But insurance loans can also negatively impact the value of your life insurance policy. That is why you should seek advice from a licensed financial advisor or a tax professional before making any decisions regarding taking out a personal loan from your life insurance policy.

Whole life insurance policies often allow policyholders to withdraw a loan from their account value with certain limitations. Learn more.

Borrow From a Whole Life Insurance Policy


Provided your whole life insurance policy has sufficient cash value, you may be able to borrow an amount that is usually tax-free, yet which includes an interest charge on the policy loan. When you borrow from permanent life insurance policies, you should always check with your insurer to make sure you have sufficient funding in the cash value account, that your policy permits life insurance loans, and that you understand the terms around these personal loans. 


Depending on your life insurance policy, you may have two loan options:

Not repaying your loan, which might result in reduced insurance benefits



While the loan specifics will depend on policy to policy, there are rules and limitations on the amount and potentially the frequency that you may be able to borrow from your life insurance policy's cash value, and you will often find that your whole life policy must have reached a certain level before you can borrow funds against it, usually with a percentage cap. The cash value in life insurance policies increases at different rates based on factors such as the permanent life insurance product type and how cash value accumulates, so the amount of time you may need to wait before becoming eligible for borrowing from the policy will vary.

If you require a loan to cover financial emergencies such as medical bills, payments on credit cards, or urgent home improvements, and you comply with the relevant loan eligibility criteria, you could potentially borrow money from your life insurance policy without any credit checks required. Additionally, you may find a permanent life insurance policy that grants you the flexibility to pay for student costs, such as college expenses or student loans. Borrowing criteria will vary depending on the life insurance policy loan.

Policyholders who cannot access a conventional bank loan or require cost-effective borrowing as quickly as possible may find that taking out a loan against their whole life insurance policy could be a viable alternative. Insured individuals may also be able to borrow against their life coverage policy while waiting for loan approval on another borrowing solution.

Taking Out a Cash Value Loan From a Whole Life Insurance Policy

We mentioned that some life insurance policies accrue cash value at different rates, and depending on the amount of the premiums paid into their policy, many policyholders may need to wait for several years before their insurance policy has sufficient cash value to borrow from. While this time period may vary, an insurance provider can only grant a personal loan request once the policy has sufficient cash value to fund the loan, using the insurance policy value as loan security.

Deciding whether or not to repay the life insurance loan may depend on the terms offered, but most insurance companies do not require a formal loan repayment schedule to be followed, and some insurance companies don’t require the loan to be repaid at all. However, not repaying the loan may negatively impact your policy, or could result in an increasing interest charge.


Loan interest may be payable annually and can be either variable or fixed, so it is important to evaluate the conditions of your insurance policy and plan for repayments accordingly. It's also a good idea to discuss your loan contract and terms with a trusted financial advisor.

Interest Rates on Your Life Insurance Loan


Loan interest payments may be directly payable, accumulate over time, or be deducted from the cash value of your insurance policy. Repaying the loan slowly or not repaying it at all could negatively impact your policy, including the death benefit and insurance premiums.


Taking out a loan against the account value could impact the death benefit if the loan is not repaid, since the insurance company will typically deduct the loan and accumulated interest from your death benefit and therefore reduce the death benefit that is ultimately payable to your policy beneficiaries.

Advantages When You Borrow Against a Whole Life Insurance Policy


There are several scenarios in which borrowing from your life insurance policy is an attractive solution to financial difficulties, including the following:

Securing funds when you are ineligible or otherwise cannot access a loan from your bank or credit union

Competitive interest rates, which may be lower than those available through personal loan products 

Choosing a borrowing option that does not require you to use your home mortgage as collateral 


Having the flexibility to structure your loan repayments in a way that suits your personal circumstances (In other cases, a whole life policyholder may be concerned about missing loan payments and the potential for their insurance policy to lapse. However, if there is sufficient cash value remaining in the policy even after the loan is taken, the insurance policy will likely remain in effect.)

Considerations to Be Aware of When Borrowing Against Life Insurance Policies


As with any loan borrowing, it is important to be conscious of the terms and potential drawbacks and to think about these before you intend to repay the insurance loan. It is important that cash value borrowers take the time to consider their options before they take out a loan against their policy for personal expenses, such as a mortgage or medical expenses. Most whole life insurance policies will charge an interest fee on policy loans.


Interest may accrue on the life insurance loan rather than being immediately payable. However, if you do not repay the insurance loan, the balance owed on the loan will typically be deducted from the death benefit should the policyholder die before the loan is repaid.


Depending on the amount borrowed from the policy and any threshold limits on the percentage of available cash value, the interest owed on the loan could potentially accrue to a higher value than the payable death benefit. In this loan scenario, there is the possibility that your whole life insurance coverage will lapse, which may have further tax implications if your insurance loan is subsequently considered a source of income. This may be a crucial factor if you intend to use your life insurance coverage to leave an inheritance or financial support for your family members or partner.


Whether you hope to take out a personal loan against your whole life or universal life insurance policy, it's important to weigh all of your options first and ensure you understand the conditions of your policy loan. Irrespective of the reason for the loan, we advise you to seek advice and guidance from a trusted financial professional before making any decisions about a policy loan.

Whole life insurance policies often allow policyholders to withdraw a loan from their account value with certain limitations. Read more...

Life Insurance Loans: Personal  Loans From Whole Life Insurance Policies

A universal life insurance company provides flexible life insurance coverage, where the policyholder is responsible for managing their contributions and adjusting their payments according to their circumstances and financial position (as long as the required minimum payment is met). 

Is universal life insurance the same as whole life insurance? No–whole life coverage is sold with a fixed monthly premium payable with a potential to grow cash value and a death benefit payable to beneficiaries when the insured person dies. However, some consumers may find that premiums can become unaffordable at certain points in their lives, and there is no scope to increase the policy value in the future (however, you can apply for additional coverage). 

Like whole life coverage, universal life insurance policies are designed as long-term protection against premature death, and can potentially accumulate cash value over time. The difference is that the end value of the policy will depend on how much the policyholder chooses to pay into the savings portion of their policy. Universal life offers the ability to grow cash value with more flexibility than whole life, since the policy holder can decide how much or how little they want to contribute to their cash value once the minimum payment is met to keep coverage in place (the cost of insurance includes any underwriting fees and expenses).

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The information above is for educational use only and does not represent insurance, tax or legal advice. It is not a recommendation or solicitation to buy insurance. Please talk to your licensed insurance agent for more information about life insurance and your needs. Please consult with the appropriate professional for tax or legal advice. Guarantees are backed by the claims-paying ability of the issuing insurance company.

Article Author: Meredith Bell
Author Bio: Meredith joined Everly in 2022 and has 20+ years of experience in the life insurance industry. She has held various roles in advertising, marketing, communications, sales and distribution support, and product development. Outside of the office, Meredith lives with her daughter Kennedy and their dog Mavis. Meredith enjoys cooking, camping, gardening, hiking, and bourbon (though not always at the same time). She is a live music enthusiast and an avid reader. Her favorite quote is by Thomas Jefferson: "I cannot live without books." Meredith agrees, but would add cheese, movies, and dogs to that list.

A universal life coverage product is a type of life insurance structured around your needs. It can feature adjustable premiums, the ability to grow cash value, and a death benefit payable to the beneficiary of your choice. 

Universal life insurance: adjustable premiums, possible cash value growth, death benefit to chosen beneficiary.

Why Universal Life Insurance Coverage May Be a Good Option

There are multiple scenarios where the flexibility of universal life coverage can be more appealing than the fixed premiums in a whole life product. Examples might include: 

Needing a policy that allows flexible payments. All products have minimum contribution thresholds that must be maintained, but universal life can offer flexible payments as long as minimum payments are met. 

Wanting a more accessible financial entry-point into life insurance. Depending on your circumstances, whole life coverage can be more expensive than universal life coverage, and may be outside of your budget.   

Anticipating a higher income in the future. When you apply for whole life coverage, the cash value growth potential is defined. Those who expect to earn more later on can decide whether to make larger deposits within a universal life plan, but whole life values are fixed. 


When you make a payment into your universal life policy that is above the minimum required payment, the insurance provider will deduct any administrative charges linked to the cost of the coverage and deposit the balance into your policy’s cash value. 


Over time, that cash value can grow and earn interest, which you may be able to take out a loan or withdrawal from if you encounter unexpected expenses.  

What Are the Potential Drawbacks of Universal Life Insurance Plans?


The primary issue associated with the flexibility of universal life coverage is that the policy must be adequately funded to remain valid, so there are always minimum payments that need to be met. Underfunded policies may lapse, or the policy holder may need to pay a substantial amount to make sure the policy stays in force.  

Likewise, the cash value is not guaranteed, and it is worth comparing the interest rates offered to ensure a particular product meets your financial needs. Choosing a product with a competitive minimum interest rate may be a good option.

How Does a Universal Life Coverage Death Benefit Work?


Most universal life insurance products allow you to adjust your premium payments, as long as minimum premiums are met.  

You can select universal life insurance coverage that offers a level death benefit, whereby the death benefit is fixed for the duration of the policy, and any additional funds are channeled into your policy’s cash value. However, this type of policy does not increase the overall death benefit. If the cash value hasn’t been accessed at the policy holder’s death, or hasn’t been used to help pay premiums, any remaining cash value would revert to the insurance company. 

An alternative is to have an increasing death benefit (although not every company offers an increasing death benefit). In this case, any accumulated cash value is added to the amount payable to your beneficiaries, provided no loans or withdrawals have been made against the cash value. This product feature often commands higher premiums than a level death benefit. 

You may also apply for increased coverage at a later date. However, this may require a medical exam. Most insurance companies also require policyholders to have maintained their policy for a minimum period before they can make changes to their policy.

A universal life coverage product is a type of life insurance structured around your needs. It can feature adjustable premiums, the ability to grow cash value, and a death benefit payable to the beneficiary of your choice. Read more.

Insuring yourself and your family against the unexpected is important. Having life insurance in place can help provide assurance that you’ll have a financial safety net should something unexpected happen to the primary breadwinner of a family.  For instance, universal life (UL) insurance coverage can help you take care of your family, even when you’re no longer living. In addition to providing lifetime protection, a UL policy can also help you save money because of the built-in savings component this type of product typically offers. Before purchasing UL coverage, it’s a good idea to familiarize yourself with the characteristics of Universal Life products, how they work, and the benefits they offer.  

The information above is for educational use only and does not represent insurance, tax or legal advice. It is not a recommendation or solicitation to buy insurance. Please talk to your licensed insurance agent for more information about life insurance and your needs. Please consult with the appropriate professional for tax or legal advice. Guarantees are backed by the claims-paying ability of the issuing insurance company. 

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Article Author: Meredith Bell
Author Bio: Meredith joined Everly in 2022 and has 20+ years of experience in the life insurance industry. She has held various roles in advertising, marketing, communications, sales and distribution support, and product development. Outside of the office, Meredith lives with her daughter Kennedy and their dog Mavis. Meredith enjoys cooking, camping, gardening, hiking, and bourbon (though not always at the same time). She is a live music enthusiast and an avid reader. Her favorite quote is by Thomas Jefferson: "I cannot live without books." Meredith agrees, but would add cheese, movies, and dogs to that list.

Universal life insurance is a permanent life insurance policy that offers flexibility along with an opportunity to grow cash value.

Learn the basics of universal life insurance: flexibility, growing cash value, & permanent protection. A simple way to help protect your family.

Universal Life Insurance Policies Explained

Universal life insurance is a type of permanent coverage that stays in effect for the lifetime of the policy owner. To keep it current, you need to make your regular premium payments promptly and make sure that if you take a loan or a withdrawal from the policy, enough cash value remains to keep the policy in effect.  

When you apply for a life insurance policy, you will need to provide some medical information. This is often collected online via the health questions on the application, although in some cases this will require an in-person visit with a health professional. You’ll also need to choose your beneficiaries. Providing your beneficiary information is important so you can ensure the right people receive the death benefit when you pass away. Apart from protecting the welfare of your family and loved ones after you’re gone, a UL product can usually build cash value. Simply put, cash value is the portion of your policy that earns interest. 

This way, you can earn some extra money within your insurance policy, which can help you take care of yourself and your family while you’re still alive. Unlike other types of insurance policies, a UL policy is quite flexible in terms of adjusting premium payments – as long as you continue to meet the required minimum payment outlined in your particular policy. 

For example, if you were to lose your job or have another type of financial emergency and you couldn’t afford your current premium, you might be able to use your existing cash value to pay your premiums until you’re back on your feet. However, it’s important to note that it usually takes some time for a product to accumulate cash value. The longer you save, the more money you can accumulate. 

Yet policy owners should also understand that using your cash value to help pay premiums will reduce the overall cash value. And, it’s important to understand how much cash value you have to access – if you are relying on your cash value to pay your premiums and deplete the cash value, there is a danger your policy might lapse. It’s important to be proactive and understand how your policy works. You should consult with your insurance agent on the parameters of the policy and ensure you understand how to access cash value and any restrictions or limitations. In most cases, if you have exhausted your cash value and you still can’t pay premiums, your policy will lapse and your coverage will end. 



How Are Universal Life Insurance Premiums Calculated?

Here are the main considerations your insurer will take into account when calculating how much someone pays for their policy:


The death benefit is what the insurance company pays to your beneficiaries when you die. This is usually paid in a lump sum, and is tax-free in most cases. Typically, the larger your death benefit, the more you will pay for your policy. For example, a policy that offers a $100,000 death benefit would be less expensive than a policy that offers a $500,000 death benefit. Death benefits (also called face amounts) are generally limited based on income. 

Some insurance companies offer two different kinds of death benefits – level and increasing. A level death benefit, as you might expect, stays the same throughout the life of the policy. An increasing death benefit means that the death benefit could increase based on any cash value that accumulates over the course of the policy. (Of course, this assumes the policy owner hasn’t taken any loans or withdrawals from the policy that might impact the death benefit.)  


Your insurer will consider your current health condition and age to determine how much you should pay in UL premiums. If you have a chronic medical condition or have a lifestyle that puts your life at greater risk or if you’re in your twilight years, your premium will be higher than that of a young, healthy policyholder with no risky habits or hobbies. And in some cases, a specific medical condition could make someone ineligible for coverage. Each product offered by an insurance company has specific issue ages (for example, if issue ages are 18-50, a 55-year-old would not qualify). Insurance companies also have specific underwriting requirements when considering the individual health status of an applicant. 


Simply put, universal life insurance is a permanent life insurance policy that offers flexible premiums and benefits. With this policy, you can adjust your premiums (provided the minimum payments are made), grow cash value, and withdraw or borrow cash from your policy. However, it’s always a good idea to seek advice from an experienced life insurance agent or financial advisor before taking any of these steps to avoid creating issues that may be detrimental to your future plans.


What Is Universal Life Insurance in Simple Words?


If you’re a financially-savvy individual looking for a life insurance policy that offers you flexibility and the potential for growth of your cash value, an indexed universal life insurance policy may be a good option. Here's a guide to help you understand more about IUL policy options.


The information above is for educational use only and does not represent insurance, tax or legal advice. It is not a recommendation or solicitation to buy insurance. Please talk to your licensed insurance agent for more information about life insurance and your needs. Please consult with the appropriate professional for tax or legal advice. Guarantees are backed by the claims-paying ability of the issuing insurance company. 

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Article Author: Meredith Bell
Author Bio: Meredith joined Everly in 2022 and has 20+ years of experience in the life insurance industry. She has held various roles in advertising, marketing, communications, sales and distribution support, and product development. Outside of the office, Meredith lives with her daughter Kennedy and their dog Mavis. Meredith enjoys cooking, camping, gardening, hiking, and bourbon (though not always at the same time). She is a live music enthusiast and an avid reader. Her favorite quote is by Thomas Jefferson: "I cannot live without books." Meredith agrees, but would add cheese, movies, and dogs to that list.

Indexed universal life insurance (IUL) is a type of permanent life insurance that can offer flexibility to policyholders. Indexed universal life insurance protects your family and also accrues cash value. IUL policies offer  flexibility, the potential to accumulate cash value, and protection for your family with a benefit that is payable upon the death of the insured. But some downsides to IUL policies are potential caps on accumulation and additional costs or fees. It's crucial to keep all these factors in-mind when deciding if an indexed universal life insurance policy is right for you.

For financially savvy people seeking flexible life insurance with cash value potential, consider indexed universal life policies.


Indexed universal life insurance (IUL) is a type of permanent life insurance that is often praised for its flexibility for policyholders. An index universal life insurance policy can last your entire life while also building cash value within its accounts. However, these insurance policies can be a little complicated to understand. Indexed universal life policies typically place a portion of the premium payments from the policyholder into an account that has the potential to earn interest that is based, in part, on the performance of a market index - but money isn’t directly invested in the market. So index universal life insurance policies aren't like traditional investing. Some IUL policies also offer a fixed account option that can earn interest at a set rate.


Indexed universal life insurance policies usually function similarly to fixed universal life insurance policies, with the primary difference being in how they accrue their cash value.  


The cash value in an indexed universal life insurance policy is  tied to a market index, whereas in a typical fixed universal life insurance policy, the cash value may accrue using fixed interest rates that are set by the insurer.  


An index universal life insurance policy will usually grow cash value by setting aside a portion of the policyholder’s premium payments and providing the opportunity to earn interest on that amount based in part on the performance of a specified market index. The insurance policyholder’s cash value can grow when the index performance is positive, though, it’s important to note that index interest may be subject to limitations such as a cap or participation rate. However, because this type of insurance policy is not an investment, the cash value is not reduced due to negative index performance.  It is important to note that cash value can be reduced due to the insurance policy’s fees and expenses. 


Many index universal life insurance policies’ cash values will earn a minimum interest rate no matter how the market performs, but some insurance policies will have an interest rate cap. These financial interest rates will usually cap between 8% and 12%, but can vary from insurance policy to insurance policy. It is important to note that it is still possible to experience negative performance in these types of policies due to the effects of insurance policy fees and expenses. 

Fixed Universal Life Insurance Versus Indexed Universal Life Insurance

Essentially, index universal life insurance is not very different from a fixed universal life insurance policy. Both fixed universal life insurance and IUL policies can offer insurance policyholders a great deal of flexibility. Both have a cash value component and a protection  component to the plan, and you may be able to adjust your monthly insurance premiums based on the funds in your cash value. However, IUL policies may offer more growth potential than a universal life policy.

An Indexed Universal Life Insurance Policy Versus Whole Life Insurance

Indexed Universal Life Insurance Vs. Whole Life Insurance


When searching for permanent life insurance policies, ‘whole life insurance’ and ‘indexed universal life insurance’ are two terms you’ll commonly see. Both of these insurance policies aim to provide you with lifelong coverage, but the key distinction between the two is how the cash value grows and the cost of IUL coverage. 


In index universal life, your cash value is tied (in part) to a market index’s financial performance. With whole life insurance policies, it’s more straightforward–it’s life insurance where the cash value earns a set interest rate. You pay your insurance premiums, your policy premiums remain at a fixed rate, and your beneficiaries receive a death benefit after your passing. With whole life insurance, the primary focus is permanent coverage with limited potential to grow cash value, so premiums are typically lower than IUL policy premiums. 


Some insurance policyholders may prefer an index universal life policy over a whole life insurance policy because IUL policies can offer them increased flexibility with greater potential cash value accumulation. Index UL policies may allow insurance policyholders to adjust their premium rates and/or access their cash value while living. 


Who May Benefit From an Indexed Universal Life Insurance Policy?

Families with dual incomes and individuals with higher net worth who are interested in tax-advantaged savings may find index universal life policies appealing, especially if they are seeking flexibility with their life insurance policies.  For these potential buyers, indexed universal life insurance may be a good fit for their objectives. It may be helpful to have strong financial literacy, or to work closely with a professional insurance agent to ensure this type of insurance policy best suits your needs and objectives. It’s important to understand the potential downside of an IUL policy should the underlying financial index not perform well.



Just like with other permanent life insurance policies, index universal life insurance comes with a death benefit. This death benefit is typically not subject to income tax or estate tax, and may not be required to undergo the probate process. The insurance death benefit will be paid out to the named beneficiary(ies) upon the passing of the insured person. This death benefit from the universal policy that helps provide for your family after your death is the primary reason people purchase life insurance. 


From flexible insurance premiums to accessing your cash value when you need it, indexed universal insurance can allow you to take the reins when it comes to your IUL policy. Index universal life insurance  policyholders can increase or lower their insurance premiums (provided their policy values are adequate to sustain the policy) and control the amount they contribute toward their cash value.  


There are insurance policies that can offer a range of optional riders, allowing someone who is shopping for life insurance the ability to find a policy that is best for them and their family. An insurance rider is an addition to an existing insurance policy, which allows you to add features that can help meet your specific life insurance needs. It’s always best to speak with a financial professional or licensed insurance agent for education on these policies and how they may be beneficial to you and your family. 


With an indexed universal life insurance policy, the amounts credited to the policy’s cash value can grow tax-deferred. Index universal life insurance  policyholders may be able to pay their insurance premiums by using their cash value,  allowing them to stop paying premiums, or to pay smaller premium payments. Some index universal life insurance policies may offer a rider that will allow the cash value to be added to the death benefit upon the passing of the insured.



Certain insurance companies will limit the amount of cash value that can be accumulated within the policy either through a cap, or other mechanism such as a participation rate. 


Because the interest earned on the cash value is tied to a market index, this can have both positive and negative effects on your accounts depending on how that index performs. For example, if the financial index goes down, the insurance policy may not credit any interest to the cash value of the accounts. Check that your insurance policy offers a ‘floor’ on financial losses. A ‘floor’ means there is a minimum interest rate on the indexed account, so in times of negative financial returns, the growth rate credited to the policy will not go below a certain interest rate threshold. While having a floor can help protect against market losses, it is still possible to experience a loss when insurance policy fees and expenses are factored in. Conversely, many IUL policies have a cap – meaning that even if the market performs very well, the cash value you receive may be limited based on your insurance company’s maximum financial cap.


Some insurance policies may charge additional financial fees, which can potentially drain your account’s cash value. Talking to your insurance provider can help you understand the rates and costs of different policies.

Cash Value Life Insurance Policies: What is Cash Value Life Insurance?

For financially savvy people seeking flexible life insurance with cash value potential, consider indexed universal life policies. Read more...

IUL Insurance: What is Index Universal Life Insurance?


Purchasing life insurance post-retirement or in older age may feel complex, with many seniors finding it difficult to qualify with policy eligibility conditions or understand which insurance coverage solutions best align with their priorities. 


Seniors may also believe they cannot buy life insurance protection past a certain age, even if they are healthy. While this may apply to some types of life insurance policies, most seniors can usually find a policy that offers insurance protection for you and your loved ones. 


Guaranteed universal life (GUL) insurance policies may provide the answer, whether they are used as a safeguard for income replacement or to ensure family members are provided for when the insured person passes away. GUL is a form of permanent insurance that does not provide much cash value accumulation potential, making it less expensive than other forms of universal life policies.  


The information above is for educational use only and does not represent insurance, tax or legal advice. It is not a recommendation or solicitation to buy insurance. Please talk to your licensed insurance agent for more information about life insurance and your needs. Please consult with the appropriate professional for tax or legal advice. Guarantees are backed by the claims-paying ability of the issuing insurance company. 

EL01603f (2-24)

Article Author: Meredith Bell
Author Bio: Meredith joined Everly in 2022 and has 20+ years of experience in the life insurance industry. She has held various roles in advertising, marketing, communications, sales and distribution support, and product development. Outside of the office, Meredith lives with her daughter Kennedy and their dog Mavis. Meredith enjoys cooking, camping, gardening, hiking, and bourbon (though not always at the same time). She is a live music enthusiast and an avid reader. Her favorite quote is by Thomas Jefferson: "I cannot live without books." Meredith agrees, but would add cheese, movies, and dogs to that list.

Guaranteed universal life insurance  coverage can be a cost-effective life insurance product with a primary focus on a payable death benefit. Purchasing life insurance protection as a senior person can provide the peace of mind knowing that your family will be taken care of upon your death. The right life insurance policy will always depend on your existing resources and assets, so be sure to carefully evaluate your policy options and speak with a trusted advisor or life insurance agent before making a decision.

Guaranteed universal life coverage can be a cost-effective life insurance product, focused primarily on a payable death benefit.

Why Purchase Whole Life Insurance Coverage as a Senior?

Life insurance products cover a broad scope and can provide a blanket of assurance that should you pass away, you have insurance protection in place to settle certain debts, help prevent a family member from losing property, or pay other expenses such as medical and funeral costs. 
