Can Life Insurance Generate Income?

Shawn Plummer

CEO, The Annuity Expert

Can Life Insurance Generate Income?

Yes, with Permanent Life Insurance:

Permanent life insurance policies, such as whole life or universal life, can generate income. These policies include a cash value component that grows over time, which can be borrowed against or withdrawn, potentially providing an income stream.

No, with Term Life Insurance:

Term life insurance does not generate income. It provides coverage for a specific period and pays out only if the policyholder dies during that term. There is no cash value or investment component in term life insurance.

Examples of Income Generation from Permanent Life Insurance

Loan Against Policy:

  • Policyholders can take a loan against the cash value of their permanent life insurance policy. This can serve as a source of income.
  • Interest is charged on the loan, but the policy remains active.

Withdrawal of Cash Value:

  • Some policies allow the withdrawal of a portion of the cash value, offering a direct way to access funds.
  • Withdrawals may reduce the death benefit.

Dividend Payments:

  • Certain whole life policies pay dividends, which can be taken as cash, reducing premiums, or left to accumulate interest.

Term vs. Permanent Life Insurance

FeatureTerm Life InsurancePermanent Life Insurance
DurationFixed term (e.g., 20 years)Lifelong coverage
Death BenefitOnly if death occurs during termPaid whenever death occurs
Cash Value ComponentNoneGrows over time
Income GenerationOnly if death occurs during the termYes, through loans, withdrawals, dividends
PremiumsGenerally lowerHigher, but part goes into cash value


Permanent life insurance can generate income through loans, withdrawals, and dividends, offering a financial tool beyond death benefits. Term life insurance, while more affordable, lacks this feature. Understanding the differences between these policies is crucial for making informed decisions about life insurance as an income source.

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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