This article will discuss whether burial insurance policies have cash value.
What is cash value in an insurance policy?
As the name implies, cash value represents funds in the “savings account” portion of an insurance policy. This amount may be taken out of the policy when a claim is made.
The cash value earns interest, but at a low rate, as it is meant for use if there’s a claim on your life or health. That said, for some policies, the policy’s cash value can be used to build wealth or a retirement nest egg through investments in the equity markets.
Note that a policy’s cash value is invested in a separate account, so it carries its own rate of return, different from the insurance company’s general investment portfolio.
Do burial insurance policies have cash value?
Burial insurance policies have cash value, and the cash value amounts to a percentage of death claims.
The cash value (as opposed to the policy’s death benefit) is used to pay funeral costs and other final expenses. Depending on your policy type and coverage amount, your burial insurance policy’s cash value can grow to 2-10% of the policy’s face amount.
You can make investments with cash values at high rates that range from 5%-7%. Again, it’s ultimately up to you to decide whether or not these extra returns are worth foregoing the cash values.