Key Points

• Certain life insurance plans can function as financial assets you can access while alive, similar to retirement accounts or investment funds.
• Whole life and universal life insurance are the two primary permanent insurance types that build asset value.
• Policy owners may have options to borrow money, use coverage as loan security, make withdrawals, access early benefits, or cancel for cash value.

Around 50% of Americans had life insurance coverage in 2024.1 Most people associate life insurance with providing for family members after death, but certain policies actually work as financial assets you can access while living—comparable to retirement accounts or investment funds. These policies accumulate monetary value over time and let owners tap into that value. You might withdraw funds or borrow against your coverage, and with proper planning, you could minimize tax consequences.2

Not every life insurance policy offers the same features. When searching for coverage that can double as an asset, focus on policies that build cash value. Generally, only permanent insurance provides this benefit—term policies, which cost less and last for specific time periods, don’t include accounts that grow money you can access.

Life Insurance Types That Build Assets

Permanent life insurance lets you invest in stable options like mutual funds or ETFs. You decide how to spread your investments across different choices, customizing your policy based on how much risk you’re comfortable with and what you want to achieve. This makes permanent life insurance useful for protecting against market volatility.3

Two primary permanent insurance types can build assets: whole life and universal life insurance.

Whole Life Insurance. This represents the most popular permanent insurance variety, providing both a death payout and cash value accumulation. Part of your monthly payment goes into a cash value account—essentially insurance with a savings element built in. Your cash grows at a minimum guaranteed percentage specified in your policy. Review your policy details carefully to understand this rate. Additionally, your monthly payments typically remain stable throughout the policy duration.

Universal Life Insurance. Universal life works comparably to whole life—policyholders build assets by earning interest over time that they can borrow against.5 However, universal life payments aren’t fixed, meaning they can change, and your money’s growth rate isn’t guaranteed. One variation called “variable universal life insurance” lets owners invest earnings into accounts they select (including mutual funds), creating opportunities for higher returns over time.6

Ways to Access Your Life Insurance Asset

Multiple approaches exist for utilizing your life insurance as an asset. As you make payments over the years, you gain the ability to borrow against your accumulated savings. Your earnings also grow tax-deferred. Here are methods to maximize your asset’s value.

Borrow Against Your Policy. You can get loans using your permanent life insurance’s cash value as backing. Check policy details carefully with this approach. Interest rates might be fixed or adjustable, determined by your insurance company. If you have an unpaid loan when you die, the remaining balance gets deducted from what your beneficiaries receive.

Use Coverage as Loan Security. Sometimes you can pledge your life insurance policy as security when borrowing money, potentially improving approval chances or securing better loan terms. (Your policy essentially demonstrates you’re a reliable borrower.) Remember that if death occurs before repayment, the outstanding amount gets subtracted before beneficiaries receive their payout.

Make Withdrawals. Instead of borrowing with repayment obligations, you can withdraw money from your policy to keep—just understand that withdrawals large enough to touch your investment earnings create tax obligations. (Similar to loans, withdrawn amounts reduce what beneficiaries eventually receive because withdrawals decrease policy value.)

Access Early Benefits. Some policies let you receive benefits during your lifetime if severe medical situations occur, including cancer diagnoses, heart attacks, or kidney failure. Most policies offering this feature allow withdrawals ranging from 25% to 100% of your policy’s worth.

Cancel Your Policy (Cash Out). “Surrendering” a policy means ending your coverage. When this happens, you receive the cash value you contributed, minus any company fees. Examine policy terms thoroughly, as fees might be substantial in some situations. (This resembles early retirement account withdrawals—penalties apply.) Still, if maintaining your policy no longer makes sense and you need the money for urgent matters, canceling can be a reasonable choice.