Cash value life insurance is a type of permanent life insurance that includes an investment feature. Cash value is the portion of your policy that earns interest and may be available for you to withdraw or borrow against in case of an emergency.

Where does the cash value come from?

A portion of your premiums are directed to the investment account — the cash value — and this money grows with interest over time. If you decide to cash in your life insurance early and surrender your coverage to the insurer, you will receive the policy’s cash value (minus fees).

Does life insurance have a cash value component?

Not every type of life insurance has a cash value component. For example, term life insurance does not have cash value. Whole life and universal life are forms of life insurance that have a cash value component.

Who gets the cash value in a life insurance policy?

The life insurance company will absorb the cash value and your beneficiary will be paid the policy’s death benefit. However, there is an exception. The beneficiary receives both the cash value and the face value if you purchased a policy rider that calls for that.

What is the cash value of a life insurance policy?

The cash value of a life insurance policy is value that your policy has accumulated since the policy issue date. The policy owner can often access this value via the surrender of the policy, a loan or partial withdraw. Note that not all policies offer all the access to cash options, so the policy contract needs to be consulted.

Which is the best way to cash out a life insurance policy?

The best ways to cash out a life insurance policy are to leverage cash value withdrawals, take out a loan against your policy, surrender your policy, or sell your policy in a life settlement or viatical settlement. These policies contain built-in savings accounts that accumulate cash value over time from the premiums that you pay.

Can a whole life cash value be taken out?

The guaranteed cash value can be taken out as a policy surrender or as a policy loan. The dividend value, which exists only in participating whole life policies, can be taken out as a withdrawal policy surrender or policy loan.

How long does it take to build cash value on life insurance?

The length of time it takes to build cash value on a life insurance policy depends on the type of policy you purchase. It can take decades to build up a substantial cash value, but some policies are designed to accumulate a cash value more quickly in the policy’s early years.