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 including whole life insurance and universal life insurance policies.

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