What does it mean when you have a insurance policy that says cash value 8000 and face value 16000?

  1. 1313 POINTS
    Lenny Robbins
    Principal, LifeNet Insurance Solutions, Redmond, WA
    Generally, whole life and some universal life policies have a cash value as the policy ages.  This is the amount of cash available for loan.  If you look at a current illustration which can be obtained from the insurance company, you will see that the cash value and surrender value will be the same in later years.  The face value is the death benefit which will be paid minus any borrowing of the cash value.  If you do decide to borrow, make sure you understand how that will affect the policy and premiums in later years.
    Answered on April 14, 2014
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  2. 63333 POINTS
    Peggy Mace
    Most of the U.S.
    The cash value is the amount of money available for you to borrow from. If you would terminate your policy, this would be approximately the amount of cash value you would receive, minus any surrender charges and fees. The face amount of $16,000 is the amount your beneficiary would receive if you would pass away.
    Answered on April 14, 2014
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  3. 21750 POINTS
    Jim Winkler
    CEO/Owner, Winkler Financial Group, Houston, Texas
    Great question! The "face value" is the amount that would be paid to the beneficiary, minus any loan amounts or unpaid premiums. The "cash value" is the amount that could be borrowed or received upon surrender of the policy. The cash value will usually be less than the face value of the policy until very long after you've had it, in most cases.If you have more questions, please feel free to contact me. Thanks for asking!
    Answered on April 14, 2014
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  4. 325 POINTS
    Robert Bland, CLU
    Founder, CEO, LifeQuotes.com, Darien, IL
    It sounds like you own a whole life or universal life policy, which can get confusing.  The face value is the death benefit, in your case $160,000.  If you died, your beneficiary would receive $160,000 and no more.  The $8,000 cash value melts to zero value in that case.  The cash value is a kind of forced "side account" within your life policy that is realized by you only if you surrender the policy or borrow against it, which can then reduce your death benefit by the amount of debt owed.  If you need cash, you can borrow against the $8,000 and pay interest, but then any indebtedness would be deducted at time of death from the $160,000. 
    $160,000 seems like a very low amount of life insurance these days.  Most experts recommend 10x your annual income assuming you have debts or people depending upon that income.   For example, a healthy 40 year old can buy $500,000 worth of 20 year level term life insurance for less than $33 per month. 
    Answered on April 14, 2014
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  5. 11498 POINTS
    Jason Goldenzweig
    Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
    The face amount of the policy is the monies to be paid out to the beneficiary in the event of the insured's death during the life of the policy. The cash value inside of the policy is an amount available for the policyowner to borrow from.

    As per the question, the $16,000 is the amount that will be paid to the policy's beneficiary upon the death of the insured. The $8,000 is the cash value - an amount that the policyowner can borrow from while the insured is living. The program at hand is a form of permanent coverage.

    Permanent life insurance programs have cash value building inside the policies - term insurance does not build cash value. There are two primary types of permanent coverage - universal and whole life.

    When the policyowner borrows from the cash value, he/she is creating a loan. But with any loan, there is an interest rate attached because you are expected to repay the loan back to the insurance company. If the insured dies with an outstanding loan against the policy, the death benefit paid out will then be the face amount less the outstanding loan value and any remaining interest attached to the loan.
    Answered on April 15, 2014
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  6. 37376 POINTS
    David G. Pipes, CLU®, RICP®
    Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
    I just want to point out that it is the cash value that allows the company to pay the death benefit regardless of when it occurs.  One way you can look at this is that the company has already accumulated half of the death benefit.  They are willing to give you half of the death benefit now rather than wait and pay the death claim later.  If there wasn’t a cash value, there couldn’t be a level death benefit for a level premium.
    Answered on May 7, 2014
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