Life insurance is often seen as just a death benefit. But for many clients, it can serve a much broader role. Cash value life insurance not only protects loved ones—it also builds a financial asset over time.

As clients’ goals evolve, they often seek options that provide both security and long-term value. That’s where cash value life insurance stands out. It offers protection, growth potential, and tax advantages.

Term vs. Permanent Life Insurance

Understanding the two main types of life insurance lays the groundwork:

Term Life Insurance

• Provides coverage for a fixed term—10, 20, or 30 years.
• Pays out only if the insured passes during the covered period.
• No savings or cash value.
• Lower cost, simple protection.

Permanent Life Insurance

• Offers lifelong coverage and includes a cash value component.
• Typically more expensive than term but provides added value through cash accumulation.
• Every policy builds cash value differently, depending on the type and carrier.

Types of Permanent Life Insurance

• Whole Life
• Universal Life 
• Indexed Universal Life 
• Variable Life

What Is Cash Value and Why It Matters

The cash value is the savings or investment component built within a permanent policy. A portion of each premium goes toward this value, which:

• Grows tax-deferred
• Can be borrowed against tax-free
• Can be used to pay premiums or even withdrawn, depending on the policy

Over time, your life insurance becomes more than just protection. It evolves into a non-correlated asset that can support long-term goals like retirement or legacy planning.

Comparing the Options: Advantages and Tradeoffs

1. Whole Life Insurance

Advantages

• Guaranteed growth and level premiums: TheGuaranteed growth and level premiums: The cash value grows at a guaranteed rate, death benefit is guaranteed, and premiums stay the same for life.
• Lower risk: It’s one of the most stable permanent insurance types. Clients looking for predictability appreciate its reliability.
• Potential dividends: If issued by a mutual insurance company, the policy may receive dividends when the company performs well. These can be used to purchase additional coverage, reduce premiums, or be taken as cash. Dividends are not guaranteed.

Disadvantages

• Higher cost: Whole life premiums are generally higher than other permanent policies due to the guaranteed benefits.
• Limited growth options: The insurer controls the investment, and returns may be lower compared to market-based options.
• Less flexible: Premiums are fixed and typically can’t be adjusted to match changing financial situations.

2. Universal Life (UL)

Advantages

• Flexible premiums: Clients can adjust payments (within limits), making it more adaptable to financial ups and downs.
• Cash value interest crediting: The policy earns interest, which may vary but typically includes a minimum guaranteed rate.
• Adjustable death benefit: Coverage can be increased or decreased over time, subject to underwriting.

Disadvantages

• Modest growth potential: The returns are tied to interest rates, which may not keep pace with inflation.
• Requires attention: UL policies need regular monitoring to ensure they're properly funded and not at risk of lapsing.

3. Indexed Universal Life (IUL)

Advantages

• Market-linked growth potential: IUL policies tie cash value growth to a market index (like the S&P 500), giving higher upside potential compared to traditional UL.
• Downside protection: Even if the index performs poorly, a floor rate helps preserve value.
• Premium flexibility: Clients can adjust payments based on their financial situation.

Disadvantages

• More complex: Understanding participation rates, caps, and spreads can be challenging.
• Returns are capped: Clients won’t capture the full upside of the market due to caps and limits.
• Fees can erode growth: Administrative and insurance charges may reduce performance.
• Still subject to market conditions: While there’s downside protection, extended poor performance can slow growth.

4. Variable Universal Life (VUL)

Advantages

• Premium flexibility: Like UL and IUL, clients can adapt premium payments over time.
• Higher return potential: With access to a range of investment options, VUL can outperform other policy types when markets perform well.
• Investment control: Clients have more say in how cash value is invested.
• Adjustable coverage: The death benefit can be modified to meet changing needs.

Disadvantages

• Market risk exposure: There’s no downside protection. Poor investment performance directly impacts cash value and can reduce the death benefit.
• Higher complexity: Requires investment knowledge and active monitoring.
• Costs and fees: These policies often come with higher internal expenses.
• Heavier regulations: More paperwork and disclosures are required compared to other policy types.

How a Brokerage Can Help

Working with a brokerage director like Milo can help financial professionals find the most appropriate cash value policy for each client’s unique needs.

Here’s what that support looks like:

• Carrier access: Brokerage agencies work with multiple insurance companies to offer advisors a broad set of options—not just one product line.
• Product insight: Experienced brokerage teams understand the subtle differences between policies and can guide advisors toward the right fit.
• Underwriting advocacy: From case design to application, a brokerage helps ensure that clients are well-positioned to get approved at the best available rate.
• Tailored strategies: Whether it’s for non-correlated asset retirement strategy, business planning, or legacy goals, brokerage agencies help customize the insurance strategy.
• Ongoing education: From training to industry updates, brokerage agencies help advisors stay up to date in an evolving insurance marketplace.
• Technology and tools: Milo’s system makes it easy to quote, apply, and track policies. Allowing advisors to focus more on client relationships and less on administrative work.

If you're looking for permanent life insurance solutions for your clients, contact Milo by filling out the form below.