What is cash value in life insurance?

Cash value is a feature of certain types of life insurance policies, such as whole life or universal life insurance. It refers to the amount of money that accumulates over time within the policy, based on premiums paid and investment returns.

How does cash value differ from the death benefit?

Cash value and death benefit are two separate components of a life insurance policy. Cash value is the savings component that grows over time, while the death benefit is the amount paid out to beneficiaries upon the insured person’s death.

Can I access the cash value of my life insurance policy?

Yes, policyholders can access the cash value of their life insurance policy through various options such as policy loans, withdrawals, or surrendering the policy. However, it’s important to note that accessing the cash value may have implications on the death benefit and future premiums.

What can I use the cash value for?

Policyholders can use the cash value of their life insurance policy for various purposes. It can be utilized to pay premiums, cover financial emergencies, supplement retirement income, fund education expenses, or even as a source of collateral for loans.

Does the cash value earn interest?

Yes, the cash value in certain types of life insurance policies can earn interest. The interest rate may vary depending on the insurance company and the performance of the investment portfolio associated with the policy. It’s advisable to review the policy terms to understand how the interest is credited.

What happens to the cash value when the insured person dies?

When the insured person passes away, the cash value is typically not paid out to the beneficiaries. Instead, the death benefit, which is a separate amount determined by the policy, is paid out. The cash value remains with the insurance company.

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