Cash value is a savings part inside some permanent life policies. It builds over time, and you can borrow or take money from it while you are alive.
Whole life, universal life and variable life can have cash value. Term life does not.
With whole life, the cash value grows at a set rate written in the policy. With variable life, the money is invested, so you carry the risk.
Cash value grows slowly in some policies. Others build it at a steady pace. Read your policy to see how yours works.
The growth on cash value is tax deferred. That means you do not pay tax on it while it stays in the policy.
Cash value is not extra money on top of the death benefit. When you die, it usually stays with the insurer and your family gets the death benefit.
- Borrow against it
- Take some out
- Use it to pay your premiums
- Cash it all out by canceling the policy
More questions
Why do permanent policies cost more?
Part of your premium goes into the cash value. That is why they cost more than term.
Can I get cash value from term life?
No. Term life has no cash value.
Words to know
- Cash value
- The savings part of a permanent policy. It grows over time and can be used for loans, cash, or to pay premiums.
- Universal life
- Permanent life insurance with flexible premiums and a cash value. If the cash value runs out, the policy can lapse.
- Variable life
- Life insurance with a cash value that goes up or down based on investments you pick, usually mutual funds. You can lose money.
- Whole life
- Permanent insurance that lasts your whole life as long as you pay. Premiums, death benefit, and cash value are guaranteed.
