Is Life Insurance an Asset You Can Count On?

The short answer? Yes, but it's not a simple yes-or-no question. Only certain kinds of life insurance policies can truly be considered a financial asset.

Let's cut to the chase: permanent life insurance—think whole life and universal life—is the type that builds cash value. This makes it an asset you can tap into through loans or withdrawals. On the other hand, term life insurance is more like your car insurance; it provides critical protection but doesn't build any equity for you.

What Makes It an Asset?

To figure out whether life insurance is an asset, you have to understand the difference between policies built just for protection and those designed to grow value over the long haul.

A great way to think about it is renting vs. owning a home. Renting (term life) gives you a roof over your head, but that's it. Owning a home (permanent life) not only gives you a place to live but also lets you build equity—a real, tangible asset that boosts your net worth. Permanent life insurance functions in a similar way by including a cash value component that grows right alongside your policy.

This is where the policy transforms from a simple safety net into a powerful financial tool.

The two pillars that really hold up its status as an asset are the tax-deferred growth of its cash value and the guaranteed death benefit.

Permanent vs. Term: The Core Difference

The conversation really boils down to one critical feature: cash value. This is the savings-like element tucked inside a permanent policy that grows separately from the death benefit your family would receive.

• Permanent Life Insurance: This is an asset precisely because it has a cash value account. When you pay your premiums, a portion goes toward funding this account, which then grows on a tax-deferred basis. It's your money, and you can get to it during your lifetime through policy loans or withdrawals.

• Term Life Insurance: This is generally not considered an asset. It’s pure protection. It pays out a death benefit if you pass away during a specific time frame (say, 20 or 30 years), but there's no cash value building up behind the scenes. When the term is up, the policy simply ends.

To make this crystal clear, here's a quick side-by-side look at how these two types of policies function from an asset perspective.

Life Insurance At a Glance: Asset vs. Expense

Feature	Permanent Life Insurance (Whole/Universal)	Term Life Insurance
Primary Purpose	Lifelong protection and wealth accumulation	Temporary protection for a specific period
Cash Value	Yes, builds a cash value account over time	No, has no cash value component
Asset Status	Yes, the cash value is a tangible asset	No, it's a protection-based expense
Premiums	Higher, as they fund both the death benefit and cash value	Lower, as they only cover the death benefit
Access to Funds	Yes, via loans or withdrawals against the cash value	No, only the death benefit is paid out

As you can see, the presence of a growing cash value is what elevates a permanent policy from a simple expense into a legitimate part of your financial portfolio.

Understanding What Makes a Financial Asset

Before we can answer whether life insurance is an asset, we need to be on the same page about what an "asset" actually is. At its simplest, a financial asset is anything you own that has real economic value and can be turned into cash. It's one of the core components of your personal wealth.

A great way to think about this is the classic own-versus-rent debate. Owning a home allows you to build equity, which is a tangible asset that boosts your net worth over time. On the other hand, renting an apartment is just an expense—it gives you a place to live, but you're not building any value for yourself.

An asset is something that works for you, adding a positive number to your financial ledger. This simple idea is the key to figuring out where certain types of life insurance fit into your financial plan.

The Core Qualities of an Asset

For something to officially count as an asset on your personal balance sheet, it needs to check a few specific boxes. These are the characteristics that separate a true wealth-building tool from a simple expense.

Generally, a true asset has these features:

• Ownership: You have a legal right or claim to it.

• Economic Value: It has a clear, quantifiable monetary worth.

• Convertibility: You can sell it or liquidate it for cash.

An asset isn't just a line item on a spreadsheet; it’s a resource with the power to provide a future economic benefit. It's something that adds to your financial strength instead of just taking from it.

This framework is why your house, your car, and your investment portfolio all clearly qualify as assets. Now that we have this foundation, we can dive into how the cash value component of a life insurance policy fits these exact criteria.

Exploring the Two Types of Life Insurance

When you start digging into life insurance, you quickly realize it’s not a one-size-fits-all product. There are really two main flavors, and each one gives a totally different answer to our big question: "is life insurance an asset?" Figuring out this split is the first real step to understanding how a policy can fit into your overall financial picture.

The best way I’ve found to explain it is to think about renting versus owning a home. One type of policy is like renting an apartment—you get the protection you need for a set period, but you don't build any equity. The other is like buying a house; it’s a long-term commitment that offers lifelong protection while also letting you build up real value over time.

Term Life Insurance: The Rental Agreement

Term life insurance is protection, pure and simple. You buy a policy for a specific period of time—the "term"—which is usually 10, 20, or 30 years. If you die within that window, your family gets a tax-free payout, known as the death benefit.

It’s wonderfully straightforward and almost always the most affordable option, which is why so many people start here. But here's the catch: once the term is up, the coverage just stops. You walk away with nothing to show for all the premiums you paid, just like a renter who moves out and has no equity to take with them. Because it has no savings or investment component, term life insurance is not an asset.

Permanent Life Insurance: The Ownership Deed

Permanent life insurance, on the other hand, is built for the long haul. This category includes popular products like whole life and universal life, and they’re all designed to cover you for your entire life. But the game-changer here is that they combine that death benefit with a savings or investment account called cash value.

With every premium you pay, a portion goes into this cash value account, where it grows tax-deferred. This is the secret sauce that turns the policy from a simple expense into a genuine financial asset. It’s a pool of money you can actually tap into while you're still alive through loans or withdrawals, giving it real, tangible economic value.

A permanent life policy is a financial multi-tool. It protects your loved ones with a death benefit while also building a separate, accessible fund that grows and becomes part of your net worth.

The idea of using life insurance as a financial tool isn't new, but it's certainly gained traction. We saw this back in 2021, which had record-breaking life insurance sales and growth we hadn't seen in over 40 years. People were looking for stability and recognized the value of having both risk protection and cash accumulation in one place. You can read more about these trends in this insightful industry report. This shift really highlights how permanent policies have earned their spot as reliable, multi-purpose financial instruments.

How Cash Value Turns Insurance Into an Asset

The idea of a life insurance policy being an actual asset boils down to one key feature: cash value. This is the engine that transforms a permanent policy from a simple safety net into a dynamic financial tool you can actually use while you're alive.

Think of each premium payment you make as being split in two. A portion goes toward the cost of the insurance itself—the death benefit that protects your family. The rest gets funneled into a separate, built-in savings or investment account. That's your cash value, and it's set up to grow over time, usually on a tax-deferred basis.

It's this dual purpose that makes a permanent policy a legitimate asset. You get the protection your family needs, plus a growing reserve of cash you can borrow against or access. This unique combination is a big reason the global life insurance market is expected to surge from $8.25 trillion in 2025 to over $18 trillion by 2034. You can dig into the numbers yourself in this detailed life insurance market analysis.

Tapping Into Your Policy’s Value

The real power of cash value isn't just watching it grow on a statement; it's the fact that you can get to it. This liquidity means you can tap into it for real-world financial needs, often without having to sell off other investments. It turns an abstract number into a practical resource.

There are three main ways to access this growing fund:

• Policy Loans: You can borrow against the cash value you've built up, often at a pretty competitive interest rate. The best part? The loan is generally tax-free and doesn't involve a credit check because, well, you're borrowing your own money.

• Withdrawals: You can also take a straight-up partial withdrawal from the cash value. While this might reduce your final death benefit, it gives you immediate access to cash.

• Surrendering the Policy: If your need for coverage changes down the road, you can choose to surrender the policy altogether. In that case, you'd receive its full cash value, minus any outstanding loans or surrender fees.

The cash value component is like having a private, tax-advantaged savings account embedded within your insurance. It provides financial flexibility that a term policy simply cannot offer.

Let's say you need a down payment for a house. Instead of draining your emergency savings or cashing out stocks and taking a tax hit, you could take a loan from your policy. Or maybe you hit a rough patch and need to cover bills for a few months. A policy loan could be the bridge that gets you through without derailing your entire financial plan. That's how life insurance stops being just an expense and starts becoming a true asset.

Using Life Insurance in Your Financial Strategy

It’s one thing to know that permanent life insurance is an asset, but it’s another thing entirely to know how to use it. A policy with cash value can be much more than just a death benefit—it can become a surprisingly flexible and powerful tool in your long-term financial plan.

Think of it as a financial multi-tool. Its cash value offers stability that can help balance out the more volatile investments in your portfolio, making it a key part of smart [portfolio management best practices](https://blog.yourwealthsignal.com/2025/06/18/portfolio-management-best-practices/).

A Cornerstone of Estate Planning

One of the most powerful roles for life insurance is in estate planning. When you pass away, your heirs might suddenly be hit with significant costs, like estate taxes or lingering debts. The life insurance death benefit provides tax-free liquidity, giving them the cash they need to cover these expenses without having to rush to sell off other assets, like the family home or a business.

This creates a much smoother transfer of your wealth. Instead of being forced to liquidate valuable properties under duress, your loved ones can use the insurance proceeds to settle obligations, keeping the core of your estate intact for the next generation.

By providing immediate cash, a life insurance policy acts as a financial shock absorber for your estate, ensuring your legacy is passed on as you intended.

This strategic function is a major reason why life insurance is such a massive part of the global financial system. In 2024 alone, global life insurance premium income reached a staggering EUR 2,902 billion, showcasing its critical role as both a protection and a capital-building tool.

Beyond estate planning, it can also serve as a conservative supplement to your retirement income. By taking tax-free loans against the cash value, you can create another income stream without having to sell off stocks or other investments during a down market.

Common Misconceptions About Life Insurance Assets

When it comes to life insurance, a few common myths can muddy the waters and lead to some serious confusion. Let's clear the air so you have a realistic picture of how a policy actually fits into your financial big picture.

One of the biggest misunderstandings is the idea that all life insurance policies are assets. This simply isn't true. As we've covered, only permanent policies like whole or universal life insurance build that all-important cash value. A term life policy is purely about protection; it’s an expense, not an asset you can tap into while you're alive.

Another common trip-up is viewing permanent life insurance as a high-octane investment. At its core, its primary job will always be protection.

While the cash value does grow, it’s built for stability and tax advantages, not to go head-to-head with the potential returns from stocks or real estate. Think of it as a financial anchor, not a speedboat.

Finally, a lot of people mistakenly think the cash value is just "free money" sitting there for the taking. Accessing it through loans or withdrawals comes with a direct consequence: it shrinks the death benefit your loved ones will eventually receive.

It’s a critical trade-off to weigh carefully. Using the asset during your lifetime directly impacts the size of the financial safety net you're leaving behind for your family.

Got Questions? We've Got Answers

Even after breaking down how permanent life insurance works, it's natural to have a few more questions bubble up. Let's walk through some of the most common ones that people ask.

Is the Death Benefit Considered My Personal Asset?

This is a great question with a two-part answer. For you, the policyholder, the death benefit isn't a personal asset because you won't be the one receiving it.

But for your loved ones, it becomes a major asset—one that's typically paid out tax-free. It's also important to know that for estate planning, the death benefit is usually included when calculating the total value of your estate.

How Can I Check My Policy’s Cash Value?

The simplest way is to look at your annual policy statement. It should give you a clear breakdown of the policy's performance and current cash value.

Most insurance companies now have online portals where you can log in and see this information anytime. And of course, your insurance agent is always just a phone call away and can give you an up-to-the-minute valuation.

Here's a key point many people miss: loans taken against your policy's cash value have no impact on your credit score. Since you're essentially borrowing your own money, the transaction isn't reported to any of the credit bureaus.

Will Taking a Loan From My Policy Hurt My Credit Score?

Nope, not at all. A policy loan is a private transaction between you and your insurance company, so it won't show up on your credit report or affect your score.

Just remember the trade-off: any loan balance you haven't paid back, plus any accrued interest, will be subtracted from the death benefit your beneficiaries receive.

Is It Possible to Lose the Cash Value in My Policy?

It really depends on the type of policy you have.

• With whole life insurance, the cash value growth is generally guaranteed by the insurer. It won't go down unless you take out a loan or make a withdrawal.

• In universal or variable life policies, the cash value can fluctuate. Its growth is tied to market interest rates or the performance of underlying investments, so it can go up or down.

The biggest risk, regardless of policy type, is letting the policy lapse. If you stop paying your premiums, you could forfeit the cash value you've worked so hard to build.

---

Secure your family's future with a plan that reflects your values. At America First Financial, we provide straightforward insurance solutions designed for patriotic Americans. Get a no-hassle quote in under three minutes and discover the peace of mind that comes with reliable protection.

Find your plan at https://www.americafirstfinancial.org.