Cash value.
In plain English
Cash value is the part of a permanent life insurance policy (such as whole, universal, or variable life) that grows over time as you pay premiums. A slice of each premium goes toward this account, which builds slowly at first and faster later. You can borrow against it, withdraw from it, or surrender the policy to take it as cash. Term life insurance has no cash value; only permanent policies build it.
01Why it matters
Cash value is why permanent life insurance costs far more than term, so it matters whether that slow-growing savings account is actually worth the higher premium for your situation.
02The math, step by step
Imagine you pay into a whole life policy for 15 years. Each year, after the insurer takes its cost and fees, part of your premium adds to the cash value, which also earns a credited interest rate set by the insurer. After 15 years you might have built tens of thousands in cash value you could borrow against. The exact growth depends on your policy's credited rate and fee structure, so check the credited interest rate and surrender values in your own policy illustration.
03What this is NOT
Cash value is not the same as the death benefit. The death benefit is what your beneficiaries get when you die. Cash value is the living savings inside the policy, and on many policies any unpaid loans against it reduce the death benefit your family receives.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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