Burial insurance has a cash value that can ultimately be borrowed

Do Burial Plans Have Cash Value?

By now you know the basics: Burial insurance is considered a type of whole life insurance where the policyholder must pay a premium to keep the policy active and allow the beneficiary to get paid money (a death benefit) upon their passing.

When determining what option may be best, some may be looking for something that they can borrow against if need be. When reviewing burial plans, it’s essential to understand if it will have a cash value, and if so, how this works. 

Will a Burial Plan Have a Cash Value?

The process of maintaining a burial insurance policy involves policyholders paying a premium — usually monthly — to retain the policy and ensure that their beneficiaries receive the death benefit when they pass. Paying premiums causes the value of the policy to increase because of the amounts being put into it, but does it have a cash value that can ultimately be borrowed? The answer is yes.

How Can This Work?

Burial insurance, like other whole life insurance policies, will typically gain in value within a few years of obtaining it. This is possible because the insurer will invest the money the policyholder pays (through premiums), which (hopefully) will involve gains that increase the face value of the policy and create a “cash value” that can act like a savings account.  

Just like similar financial products, the more that’s invested and the more it grows, the more it’s worth. The difference is that the amount could meet or exceed the death benefit outlined within the policy, which means that the excess is considered a cash value that can be borrowed against.

How Does Cash Value Affect The Death Benefit and Policy?

There are several things that could affect the death benefit and policy. Considering the cash value can impact the face value of the policy, as there could be an effect on the benefit that beneficiaries will get — considering the policy could be worth more than anticipated. In other words, the beneficiaries could reap the rewards.  

On the other hand, if the policyholder ends up borrowing against the cash value, the amount borrowed will be considered a loan that gains interest and will need to be repaid. The length of time and amount that needs to be paid can affect the benefit and may cause the insurer to cancel the plan if the owed amount exceeds the benefit amount. So, if the insurer determines that the amount owed is more than the amount eligible to receive they can cancel the policy.

Give Us a Call Today

Burial insurance is a type of whole life insurance, which involves paying premiums that are ultimately invested by the insurer. When doing so, the amounts could receive gains that create an opportunity to increase the policies value and create a cash value. People that think they may need to borrow money at some point may want to consider this when determining the amount of the burial insurance they purchase.  

If you need help determining what the best option might be or need more information about burial policies, give us a call at 800-548-3249.