Is Life Insurance an Asset? A Complete Guide For You

Is Life Insurance an Asset

Is life insurance an asset? It depends! Term life provides protection, while whole & universal life build cash value you can access and grow tax-deferred.


Life insurance policies vary in how they qualify as assets. Permanent policies like Whole Life have cash value components that earn interest while offering access through withdrawals or loans during your lifetime.

However, term policies lack this feature and therefore aren’t typically seen as assets. This article explores what factors make up an asset-worthy policy and when investing may make sense.

What is an asset?

Assets are economic resources that offer current or future advantages to an individual or company, including tangible or intangible forms like money. Examples of assets may include physical items like money bills or tangible forms like homes and cars that have value. Net worths can be determined by adding up all their assets minus liabilities.

Life insurance policies vary significantly in their classification as assets or liabilities; term policies do not accumulate cash value and, therefore, should not be considered assets. On the other hand, certain term policies can be converted to permanent life policies that build cash value over time, making these more suitable as assets because you can access these savings while you’re alive while it also accrues interest.

Liquidity is another deciding factor when assessing whether a life insurance policy should be seen as either an asset or a liability. Liquid assets include those that can easily be converted to cash without suffering significant value loss, such as bank accounts, stocks, bonds, and jewelry. Policies not considered liquid assets include whole life and universal life policies which only pay out upon death or have cash surrender values – such as those considered whole life policies and universal life policies.

What is an asset?

Is life insurance considered an asset?

People usually think of assets in terms of physical items like cars or houses, liquid assets like savings accounts and retirement funds, and even life insurance as assets; depending on which policy type is purchased. However, life insurance could also be considered an asset depending on its type and purpose.

Answering the question “Is life insurance considered an asset?” depends on whether or not it builds cash value and how that cash is utilized. Whole life and universal life policies are considered assets because they build cash value which can be utilized through policy loans or withdrawals for retirement planning or to supplement income during your golden years – two reasons many consider these policies investments.

Term life insurance does not accumulate cash value and therefore should not be seen as an asset. Instead, the term life is used as financial protection that will pay out your death benefit upon your passing to your beneficiaries – much like property insurance in this sense – similar to how their rights to claim upon your pass can also be claimed upon their demise.

As another method to minimize estate taxes, placing a life insurance policy within an irrevocable life insurance trust (ILIT) can also help minimize taxation on both the death benefit and any accumulated cash value accumulations.

Is life insurance considered an asset?

Advantages and disadvantages of life insurance as an asset

Life insurance death benefits can often serve as an asset and resource for your beneficiaries, helping to pay down debts or outstanding liabilities and providing a cash sum that they can use however they please.

Life insurance policies differ depending on their purpose; term life policies generally do not accumulate any cash value and should not be used as estate planning tools. On the other hand, certain permanent policies such as whole life or universal life policies provide additional living benefits known as cash value which accumulates as part of your premium payment and should be treated as assets that can be borrowed against or withdrawn from.

Your life insurance cash value can help meet long-term financial goals, such as improving retirement income. Unlike investments which are taxed regularly, cash values in life insurance are tax deferred allowing it to continue earning compound interest over a longer period. But beware: loans taken against your policy’s cash value could reduce its death benefit and may even cause your policy to lapse.

Which types of life insurance policies are considered assets?

Answering “Is life insurance an asset?” depends on which policy type you hold. In general, only permanent policies with cash value accumulation such as whole life, universal life, and variable life policies qualify as investments; these may earn interest while being accessible during life whereas term life policies only pay out death benefits without accruing cash value.

One way to determine whether a life insurance policy is an asset or not is to assess your overall financial picture and consult a financial advisor. This will allow you to select which type of life insurance best meets your needs and determine how much coverage might be necessary.

Tax implications should also be considered when making the determination of whether life insurance should be considered an asset or a liability. Assets tend to be taxed at a lower rate than liabilities; however, there may be exceptions such as when paid from an estate and depending on how much money is deposited into your policy; it’s wise to speak with both a financial advisor and agent when selecting an appropriate policy.

Which types of life insurance policies are considered assets?


Life insurance can be a valuable financial tool, but whether it qualifies as an asset depends on the type of policy. Term life insurance provides pure protection, but whole and universal life policies build cash value that you can tap into during your lifetime. Consider your financial goals and consult with a professional to determine the right policy type for you.


Is insurance an asset or not?

Depends on the policy. Term life is an expense, but whole/universal life builds cash value like an asset.

Is an insurance policy a financial asset?

Permanent life insurance (whole/universal) with cash value can be considered a financial asset.

Is life insurance considered a liquid asset?

No, typically life insurance isn’t very liquid (easy to sell quickly). You might get a loan or withdraw cash, but it could reduce benefits.

Where does life insurance go on a balance sheet?

Life insurance doesn’t usually go on a personal balance sheet. It’s protection, not a typical financial holding.

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