Is like a special savings account?
In: Economics
It’s a “feature” of certain types of life insurance products such as “whole life” or “permanent life” insurance. In comparison to ordinary term life insurance, these products charge higher premiums and build up a value over time. If the policy holder cancels the policy, then they get back all or a portion of that value that is built up.
In general, they are a bad idea for most people because the investment returns are relatively low, and a large part of the initial contributions go into commissions for the insurance salesperson. So, most people would be better off buying a term life policy and then separately investing the extra. But, because of those commissions, insurance agents love to sell these policies.
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