Cash Value

Cash Value is a term that applies to life insurance policies that carry an accumulating cash balance as part of the policy.  There are several types of policies that carry a cash value; these policies include whole life insurance and universal life plans.

A portion of the premiums paid on these policies is directed to the cash account, which usually earns a guaranteed rate of interest.  The benefit of having an insurance policy that has a cash value is the money can be borrowed to pay for expenses like a down payment on a new home.  The cash value of a policy is added to the insurance amount when providing payment benefits.  This means the total value of the insurance benefit is the amount of the insurance plus the account's cash value.