Frequently Asked Questions

How does cash value life insurance work?: Cash value life insurance is a policy that contains an account that builds value (“cash value”) over time. It works by taking a part of your premium payment and transferring it into to the account. Depending on the policy type, the cash value can make investment gains based on a fixed percentage increase, on stock market gains or other methods. You can make withdrawals or loans against the cash value. You can use the money for anything, such as bills, college tuition or supplemental income. Get a FREE Life Insurance Quote from the top Life insurance companies in Denver, Aurora, Colorado Springs and Boulder, Colorado areas with Quote Genius.

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Can you cash out a life insurance policy?: If you have a life insurance policy with cash value, you can “cash it out.” Cashing out terminates the policy. However, cashing out your life insurance doesn’t mean you’ll receive 100% of the cash value. You will typically receive the cash minus a surrender charge, if there is one, you will receive what’s known as the “surrender value.” Cash value life insurance in Denver, Aurora, Colorado Springs, Boulder, CO and surrounding areas often has a “surrender period,” such as 10 years. After that there will be zero surrender charge for cashing out. 

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What are the consequences of cashing in a life insurance policy?: If you cash out your life insurance policy, any investment gains you receive will be taxed as ordinary income. The portion you receive that is based on premiums you paid in is not taxable, only the investment gain portion. If the cash value stays in the policy and doesn’t ever pass into your hands, it’s not taxable.

How much can I borrow against my life insurance policy?: You can typically borrow whatever amount is in the cash value account of a life insurance policy. You can repay the loan any time. If you repay it, the insurance company will also charge you interest. If you don’t pay the loan back before you die, the loan amount and interest is deducted from the death benefit, and your beneficiaries will then receive a lesser payout.

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How do I calculate how much life insurance I need?:

STEP 1: you will need to add up the financial obligations you want to be covered by your life insurance. This often includes:

• Amount of Income you Want to Replace: Calculate this by multiplying your salary by the number of years you want to replace it. For example, if you make $70,000 and want your family to have the same income for 10 years, that would be $700,000.

• Mortgage: Add the balance of your mortgage.

• Debts: Add any large debts others would have to pay, such as large credit card debt.

• College Tuition/Expenses: Add anticipated college expenses for children.

• End of Life Costs: Add the cost of a funeral.

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STEP 2: Then subtract the existing assets your family could use for these expenses, such as savings, life insurance you already have, and 529 college-savings plans. (Some life insurance formulas include retirement savings among the assets to subtract. However, that could mean a spouse has to gut retirement savings to pay for daily living expenses, so we're not including it.)

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STEP 3:The total is your estimated life insurance need.

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Where do I get life insurance quotes?: The answer is simple. You can get a FREE Life Insurance Quote from multiple providers through Quote Genius. Simply fill out the insurance quote form below to get started!