Is life insurance considered an asset?
Jeffrey Manola is an experienced life insurance agent and the founder of Top Quote Life Insurance. His mission when he created Top Quote Life Insurance was to provide online consumers searching for life insurance with the absolute best quotes for term life insurance, permanent life insurance, no medical exam life insurance, and burial insurance.
Not only does he strive to provide you with the …
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Written by
Jeffrey Manola
Founder & Licensed Agent
Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs.
She has since used that knowledge in her more than ten years as a writer, largely in the insur…
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Reviewed by
Leslie Kasperowicz
Farmers CSR for 4 Years
UPDATED: Nov 24, 2021
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Facts You Should Know
Assets are anything you own that translates to a cash value and usually represent an investment
Term life policies are not considered an asset because you cannot access the money in your death benefit
Any policy that accumulates a cash value is considered an asset and counts as part of your net worth
What is considered an asset? When you invest in something you hope will give you a return on, it’s regarded as an asset. Assets fall into two main categories: tangible and liquid.
Tangible assets are material items you’ve purchased, like your home, equipment, and even luxury items like jewelry. Liquid assets include things like a 401K, a savings account, or stocks.
While it’s easy to see why some investments are considered assets, one trickier area is life insurance.
Is life insurance an investment? It depends on the type of insurance you have. While term life is not an asset, whole life and other policies with a cash value aspect are assets since you can access the accumulated value while you’re alive.
So, is life insurance considered an asset? Shopping around for quotes is the best way to find the cheapest rates for a policy you can count as an asset. If you’re ready to see what quotes might look like for you, enter your ZIP code into our free tool today.
Is life insurance considered an asset?
You can count a whole, universal, or variable life policy as an asset because they have a cash value. That cash value can be used in emergencies, finance projects, supplement retirement plans, or anything else you like.
While you may never choose to use your plan’s cash value, it will be looked at as an asset if you get divorced. Whole life insurance is an asset in divorce — the accumulated cash value will be evenly split between the two parties.
Your life insurance is considered an asset for mortgage underwriting, as well. On the other hand, while life insurance is considered an asset for Medicaid eligibility, Medicaid law prevents small cash value from counting against you.
If the policy has accumulated less than $1,500, Medicaid won’t count it as an asset.
Is term life considered an asset?
While whole, universal, or variable life insurance is an asset, term life is not. That’s because a term life policy doesn’t have a cash value aspect — there’s no money you can access.
However, term life can supplement your investments for your beneficiaries. Some investments take a long time to mature into something valuable. If you die before your investments mature, a term life policy provides invaluable financial help to your beneficiaries.
Is life insurance part of your net worth?
Your net worth is the total sum of everything you have: your bank accounts, assets, and anything else that adds value to your household. Subtract your debts and liabilities from your assets, and you’ll have your net worth.
A term life policy is not counted in the total of your net worth. The cash value of your whole life, on the other hand, is counted towards your total net worth. However, the actual amount of your death benefit has no bearing on your net worth.
If you are a beneficiary and receive a death benefit, that payout adds to your total net worth.
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Asset Protection With Life Insurance
You can use your whole life policy to protect other assets. The main way life insurance protects your assets is by providing your beneficiary with enough money to keep paying the bills. As long as the bills are still paid, the people you left behind won’t lose the assets you spent your life building.
If you have a substantial estate, a death benefit can help your heirs pay estate taxes.
Additionally, having a life insurance policy can help you transfer wealth to the next generation. Death benefits are tax-free payments, so your beneficiary will receive the full amount you purchased.
With a whole life policy, you can also use the accumulated cash value to protect your assets while you’re alive. You can pull cash out of the policy to make payments in an emergency or make down payments on new investment opportunities.
Accumulate Cash Value With a Whole Life Policy
If you’re interested in gaining an asset in the form of a life insurance policy, you should consider buying a whole life policy. Whole life comes with a lot more benefits than just adding to your asset pool.
If you’ve been wondering, “Is life insurance considered an asset?” there’s never a better time than now to find the best policy for you. If you’re ready to see what quotes might look like for you, enter your ZIP code into our free tool today.
