There are 2 primary types of life insurance: term and whole life. In some instances, whole life insurance can be considered an asset, but term insurance is never considered an asset.

Term life insurance is usually offered for a specific length of time that is stated in the policy. The insurance lasts for the length of the term, unless converted or extended, and does not build up cash value. The policy only pays out if the insured person dies during the term of the insurance. If that does not happen, there is no benefit or payout on the policy. Because term life insurance does not have a cash value, it is not recognized as an asset.

Whole life insurance, also known as permanent life insurance, combines the insurance coverage with a cash value. Often this policy will allow you to get part of this cash value back by cashing in the policy or by borrowing against the cash value that has built up. The policy continues as long as the insured person lives and continues to keep the premiums and other requirements current.

The cash value in a whole life insurance policy is attributable to the owner of the policy, not the beneficiary. If you own the policy, it could be counted as an asset to the extent of the available cash value.

Jamie Lynn Byram, MBA, AFC, MS
Ms. Byram is an Accredited Financial Counselor as well as a Professor in Practice and the Director of Financial Planning Programs at the University of Southern Mississippi.

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