What Is a Life Insurance Savings Account?

A life insurance savings account is a whole life insurance policy that comes with a guaranteed savings account. It’s a good choice if you want a policy that combines a death benefit and safe investment into one account. The savings account portion is funded by a percentage of your premiums and is also referred to as a forced-savings account. The insurer also pays a dividend from their annual profits into your cash value, which grows at a slow rate over time.

How Much Does a Life Insurance Savings Account Cost?

The cash value and savings component of a whole life insurance policy make it more expensive than other types of insurance policies. Whole life insurance can be anywhere from 5 to 15 times more expensive than a term life insurance policy with the same benefit amount.

Premiums for your whole life insurance policy — or life insurance savings account — vary depending on the following:

Coverage amount: Your premium cost depends on the type of policy you buy and the amount of coverage.
Health: Preexisting conditions and issues in your medical history could increase the cost of your premiums.
Age: The older you are, the higher your risk — and premiums — will be. Some insurance professionals estimate premiums increase between 5-8% annually in your 40s, and between 9-12% every year if you're over 50.
Length of policy: Life insurance policies with longer term lengths and cash value cost more than term life insurance.
Riders: Some riders are included for free; however, including additional customized coverage can raise your policy premiums.

Whole Life Insurance as a Life Insurance Savings Account

Whole life insurance is a policy that lasts your entire life and includes a cash value savings component that grows at a rate determined by your insurer. It’s a low-risk savings vehicle with a guaranteed minimum rate of growth for the cash part, but returns on your investment may be smaller than other traditional savings investments. That's because insurance companies take out administrative fees for managing the policy.

The cash value of your policy can also be accessed while you’re alive, although you could be charged a penalty and administrative fees.