Life Insurance Face Value vs. Cash Value

Shawn Plummer

CEO, The Annuity Expert

A permanent life insurance policy including whole life insurance and universal life insurance has a face value and a cash value, which are two distinct values.

The face value is the death benefit. The policy owner’s beneficiaries will receive this amount when he or she dies. This number can be found in the policy’s schedule of benefits.

The cash value is the amount you would receive if you terminated your insurance early, giving up the death benefit in return for money upfront. These are shown on monthly statements sent by insurers to their customers.

The cash value may also be referred to as the cash surrender value.

In most circumstances, the face amount of life insurance is exempt from taxes.

Life Insurance Face Value vs. Cash Value While Alive

Most life insurance companies also offer add-ons called living benefits, which are extra features that can be included in a plan. A living benefit rider is a separate coverage on your basic life insurance policy that supplements certain benefits and safeguards you at an extra cost.

Living Benefits essentially allows the insured to spend the face value while alive. You may spend the living benefits on things like medical costs, among other expenses. With that said, when you die, your beneficiaries will get a lower life insurance payment because you used a portion of the policy previously.


  • Cash Value: When withdrawing from the life insurance policy’s cash value, any interest earned could be subject to ordinary income taxes.
  • Face Value: When taking a loan from the face value or utilizing a living benefit, the income withdrawn could be tax-free.

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Shawn Plummer

CEO, The Annuity Expert

I’ve sold annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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