Cash value life insurance, defined

The savings grow tax-deferred, can be borrowed against or withdrawn, and can be surrendered for cash if the policy is given up; in some designs they can also pay the premiums in later years. The trade-off is price: a permanent policy costs several times what the same death benefit costs on a term policy at the same age, because it is funding the savings and is designed to stay in force for life. Loans reduce the death benefit until repaid and accrue interest, and a policy that lapses with a loan outstanding can produce a tax bill. Early surrender returns less than was paid in, since surrender charges and acquisition costs come first. It suits people who have already funded retirement accounts, who need coverage that will not expire, or who have an estate or business purpose for a permanent benefit. For most families with a temporary need, the analysis says so and recommends term, which is the point of doing the analysis.