Both universal life and variable universal life policies have a cash value feature. Whole life policies are credited a guaranteed cash value after the second policy anniversary, unless there are paid-up additions purchased with the whole life policy, in which case there may be an immediate cash value.
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Whole life insurance with cash value.
Build and protect your assets with life insurance from New York Life. As your policy accumulates cash value, you can borrow against the cash value to cover significant expenses, like a down payment on a home.
Cash value life insurance is a type of permanent life insurance that includes a cash value feature. Cash value is the portion of your policy that accumulates1 over time and may be available for you to withdraw or borrow against for long-term savings needs such as retirement, paying down a mortgage, covering an unforeseen emergency, or a significant expense, like sending your child to college. Accessing the cash value in the policy will reduce the available cash surrender value and the death benefit. Cash value life insurance policies provide both a death benefit and cash value accumulation during the policy owner’s lifetime.
Whole life is permanent life insurance, designed for the long-term, with steady cash value growth. Your policy builds cash value that is guaranteed to grow over time. Whole life can be a versatile tool to help meet several needs, like assuring (via the death benefit) that your family will be provided for should something happen to you or helping you (via cash value accumulation) achieve your retirement goals. When you keep the policy in force by paying premiums, whole life can contribute to your overall financial security, and it can supplement your retirement income.
Cash value whole life insurance can enhance your retirement income, because it accrues guaranteed cash value that you can access later in life as your insurance needs decrease2. You will owe taxes on 401(k) distributions, but you can generally access your insurance policy’s cash value federal income tax free. The cash value isn’t just available in retirement; you can access it at any time via policy loans if the policy is structured properly3.
Life insurance that builds cash value4
Whole life insurance builds cash value, an asset you can use to help pay for a child’s college, use to cover a medical emergency, or use as an additional source of retirement income. Other life insurance solutions that build cash value include:
Universal life insurance
Universal life offers a smart way to give your family the long-term financial security they deserve. Depending on your needs, you can choose a universal life insurance policy that grows cash value, offers guaranteed protection, or even addresses the specific interests of business owners. In some universal life policies, the cash value accumulation potential is minimal. In those policies the death benefit protection is the main feature. For many Universal Life policies, a main feature is flexibility regarding the amount and timing of premium payments.
Variable universal life insurance
With variable universal life, you will enjoy long-term coverage that protects your family’s future and gives you an opportunity to grow tax-advantaged assets. With this product, you can invest your cash value in investment options whose underlying investments are stocks, bonds or other securities, which enables you to capitalize on potential market growth. The cash value will fluctuate according to the market performance of the investment options. Similar to Universal Life policies, premium flexibility is also a feature of VUL.
Cash value accumulation
Cash value can be as important as the death benefit. Generally, you will see your cash value start to accumulate after the first year of the policy. The Option to Purchase Paid-Up Additions Rider allows you to buy more life insurance coverage and increase the cash value in the policy.
This option will allow cash value to accumulate faster, which will increase the amount available for any need you may have. Policies can be structured to let you choose how quickly your cash value grows, so you can access it when you need to.
Mix of death benefit and cash value
Consider what's important to you. Each of our products has a different balance of cash value accumulation and death benefit protection.
Cashing out your life insurance prematurely
Typically, when the policy owner dies, the policy owner’s beneficiaries receive the death benefit. However, in certain instances, if there is no longer a need to pass the death benefit on to beneficiaries, the policy owner can choose to access the accumulated cash value while still alive, either by surrendering the policy entirely or by making smaller withdrawals or taking out policy loans. (The cash value of permanent life insurance generally grows federal income tax-free.) Accessing the cash value through policy loans or partial surrenders will reduce the total cash value and total death benefit.
The death benefit provides cash to your beneficiaries when you pass away, plus you get potentially tax-free access to your cash value while you’re alive. This is cash that can be used to help fund your children’s college education, to assist with a down payment for a home, to supplement retirement income, or to help pay for anything else you need.
Borrowing against life insurance
You can also borrow against the cash value to buy a house or pay for your children's college costs, tax free. Of course, accessing the cash value will reduce the available cash surrender value, and possibly the life insurance benefit, but it’s comforting to know that this resource is there if you need it.
Cash value vs. surrender value
The cash surrender value (cash value minus any fees and charges) is the sum of money an insurance company pays to a policy owner or an annuity contract owner if the policy is voluntarily terminated before its maturity or before an insured event occurs. Cash value is the amount of equity in a policy against which a loan can be made3.
Benefits of cash value life insurance
Cash value growth
The cash value growth in a whole life policy is guaranteed4, and it grows tax deferred. Dividends, if declared, may increase the cash value growth even more. You can pay higher premiums for fewer years or you can pay lower premiums for more years5.
Life insurance you can borrow from
The policy’s cash value can be accessed during your lifetime through loans or surrendering any paid-up additional insurance. You can borrow up to the maximum loan value from your policy’s cash value through policy loans, generally on a tax-free basis3.
You can receive your cash value on an annual or monthly basis through an automatic deposit into your bank account or in the form of a check. Loans or surrenders will reduce the cash value and death benefit. Loans incur interest. Please keep in mind that accessing the cash value presupposes that you’ve made a long-term commitment to keeping the policy inforce and therefore that sufficient cash value has accumulated.
Tax-free loans and withdrawals
A whole life policy provides living benefits as well. If your death benefit needs change, you can take a loan or withdraw a portion of the cash value to supplement various financial needs such as helping pay college tuition7. You can borrow or withdraw money from your cash value whenever you like. There’s no approval process, and any money you take out is usually income tax free.3
Whole life insurance cash value FAQs
Some cash value surrenders are subject to taxes. When you surrender a life insurance policy for its cash value and the amount of cash value taken out is larger than the amount of premiums paid into the policy (also known as the cost basis), that is called a gain. The gains in the policy are subject to taxes. Also, if a life insurance contract is over-funded, it is deemed a modified endowment contract, and distributions are taxed in that scenario, too. Our agents work carefully with clients to understand their needs and avoid these scenarios7. Please consult your own tax or legal advisor for advice pertaining to your specific situation.
You can borrow at any time if the policy loans accrue interest.
Yes, cash can be accessed via loans or surrenders 2,3.
No, term life insurance does not have any cash value.
When a policy is surrendered, it means that the life insurance benefit no longer exists, and that New York Life will no longer pay a life insurance benefit when the insured dies. New York Life pays the client the cash surrender value of the policy. This payment may be subject to taxes and charges, as explained earlier.
The calculation depends on the type of policy. For whole life policies, the guaranteed cash value will equal the face amount at age 100; this is called policy endowment. The guaranteed cash value is discounted using specific interest rates and assumptions to arrive at the cash value in any given year. If a dividend is paid on a policy and the dividend is used to purchase paid-up additions, those additions also have a cash value. We call that cash value the non-guaranteed cash value. If a policy is surrendered for its cash value, the outstanding loans and interest are subtracted from the cash value.
Cash value accumulates tax-deferred, and it can serve as a readily available source of funds for any number of life’s significant events. You can borrow from your policy’s accumulated cash value by taking a loan at a competitive interest rate. You can use these funds any way you wish — to make a down payment on a home, to finance a new car, or even to start a business.
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1Cash value is guaranteed to accumulate at a given minimum rate; there is also a nonguaranteed rate that is higher—but not guaranteed.
2 Any guarantees of the policy are based on the claims-paying ability of the issuer.
3The total outstanding loan balance (which includes accrued loan interest) reduces your policy’s available cash surrender value and life insurance benefit. The amount you borrow will accrue interest daily. Any loan interest that you do not pay when due will be added to the policy's outstanding loan principal and will also accrue interest daily.
If your policy lapses, or if you surrender it while you have an outstanding policy loan, you may be liable for federal or state income taxes if the value of the outstanding loan plus your cash surrender value is more than the total amount of premiums you have paid into your policy (less certain non-taxable distributions). New York Life will report any taxable gain to you, the Internal Revenue Service (IRS), and any applicable state taxing authorities. Please be sure to discuss this with your tax advisor.
4Accessing the cash value will reduce the available cash surrender value and the death benefit.
5The guarantees of a whole life policy are based on the claims-paying ability of the issuer.
6Dividends are not guaranteed.
7Accessing the cash value through policy loans or partial surrenders will reduce the total cash value and total death benefit. Loans also involve interest payments.
8Certain tax advantages are no longer applicable to a life insurance policy if too much money is put into the policy during its first seven years, or during the seven-year period after a “material change” to the policy. If the cumulative premiums paid.
Guarantees of the policy are based on the claims-paying ability of the issuer. Accessing the cash value of the policy will reduce the available cash surrender value and total death benefit.
Oregon Policy Form Numbers for New York Life Whole Life: New York Life Insurance Company is the issuer of New York Life Whole Life. In Oregon, the Whole Life policy form number is ICC18217-50P (4/18). SMRU # 1891275 (10-27-2023).