Principal, LifeNet Insurance Solutions, Redmond, WA
Cash value of life insurance is an integral part of whole life and some universal life insurance policies. As funds accrue within policies in place for a long period of time, they may be used to help pay premiums or may be borrowed out for emergencies. Note that most policies of this type are structured to pay only the death benefit minus any borrowing. In some cases use of this money may cause a policy to lapse, so before borrowing make sure you understand the downside. Speak to your agent and ask for an illustration showing how the policy will perform if you borrow.
Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
Cash value in life insurance is the amount remaining after you submit your premium payment to your insurance company and the carrier takes out any cost of insurance and mortality & expense charges.
There is no exact figure for it as it will vary by policy - your face amount, length of coverage, risk class, premiums, and other factors go into the calculation. The cost of insurance/mortality & expense charges on permanent policies will vary from carrier to carrier as well as whether the policy is a Universal or Whole life policy.
The cash value can be borrowed against (acting like a loan with interest rates and the expectation to be paid back - when not paid back, the outstanding balance of the loan is deducted from the death benefit and the beneficiary receives the difference), or pay your premiums for you.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
When an insurance company agrees to pay a death benefit whenever it occurs, it is called a permanent policy. In order to meet that obligation the company must reserve funds to offset the rapidly increasing cost of insurance in the later years of life. These reserves can be held in directed funds or in guaranteed funds. The guaranteed funds are known as cash value and appear in the policy itself. It is the amount that the company will give you if you surrender the policy. There are other options.
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There is no exact figure for it as it will vary by policy - your face amount, length of coverage, risk class, premiums, and other factors go into the calculation. The cost of insurance/mortality & expense charges on permanent policies will vary from carrier to carrier as well as whether the policy is a Universal or Whole life policy.
The cash value can be borrowed against (acting like a loan with interest rates and the expectation to be paid back - when not paid back, the outstanding balance of the loan is deducted from the death benefit and the beneficiary receives the difference), or pay your premiums for you.