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Definitions for the word “asset” vary. In terms of financial accounting, an asset is something you own that you can convert into cash.
Under that definition, not every life insurance policy is considered an asset. And knowing how to capitalize on the policies that are can help you determine whether to stay the course or find a better way to invest the money.
A traditional term life insurance isn’t considered an asset, because its only value is the death benefit paid to your family if you die within the specified term.
However, most permanent life insurance policies have a cash component and accumulate cash value over time. While it can take years — or even decades — to build up enough cash value to start borrowing against your policy, permanent policies are considered a cash asset.
Yes. Whole life has a savings component, where a portion of your premium is invested to earn cash value over time. Your cash value can be withdrawn for use while you’re still alive, so it’s considered an asset.
The following life insurance policies build cash value and are therefore considered assets:
Life insurance is an important way to protect your loved ones after you die, and your policy can also be an investment that grows wealth while you’re still alive. Here are some positives of a life insurance investment:
The cash value of your policy can legally be considered an asset, but the law doesn’t consider your cash value an asset in these key situations.
A financial planner takes a holistic view of your finances and tailors their advice to meet the financial goals you’ve set for your future. Not everyone has financial assets that require expert help, but if you’re considering hiring one, make sure they’re qualified.
A quality financial planner will have one of three certifications: a Certified Financial Planner, a Chartered Financial Analyst or Personal Financial Specialist certification. If you’re unsure about what kind of financial professional you need, take a little time to compare your options.
Your life insurance policy isn’t automatically considered a marital asset. But the savings component on your permanent policy can be subject to a divorce agreement as an investment asset.
Some spouses ask for control over the life insurance policy, even if they are not the insured, as a way to protect their alimony and child support payments from lapsing. But if you retain control of your life insurance after a divorce, your ex-spouse will remain the beneficiary until you remove them.
While the savings component of your permanent life insurance policy won’t offer your highest investment returns, it can be an important asset to your financial portfolio. And if it’s important to you that your investment get the highest possible returns, be sure to shop around your life insurance options to find a policy that matches your expectations.
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