How to make money using life insurance?

You can make money with life insurance as a policyholder by using the cash value of a permanent policy to fund investments, borrow tax-free loans, or earn dividends.

Build and Use Cash Value

Permanent life insurance policies, like whole life, include a savings component called cash value. A portion of your premium goes into this account and grows over time.

• Earn interest and dividends: Your cash value grows on a tax-deferred basis. If you have a policy with a mutual insurance company, you may also receive annual dividends based on company profits. You can take these dividends in cash or use them to buy more coverage.
• Take policy loans: You can borrow money from the insurance company using your cash value as collateral. The cash value keeps earning interest and compounding inside the policy while you use the borrowed funds.
• Arbitrage investing: Some people borrow against their policy at a lower interest rate and invest the cash into assets that yield a higher return, using the investment income to pay back the loan.

Alternative Ways to Cash Out a Policy

If you no longer want or need your permanent life insurance policy, you can convert it into a lump sum of money while you are still alive:

• Surrender the policy: You can cancel your policy and collect the cash surrender value built up over the years.
• Life settlement: You can sell your life insurance policy to a third party for more than its cash surrender value, but less than the actual death benefit. This is often used by older or ill policyholders.
• Accelerated death benefits: If you become terminally or chronically ill, some policies let you access a portion of your death benefit early to pay for medical care.