Life Insurance That Builds Cash Value

Shawn Plummer

CEO, The Annuity Expert

These are the best life insurance policies that can build cash value over time, providing tax-free income in the future. This is life insurance allows the insured to

  • Borrow from utilizing loans,
  • It never expires as long as you pay the premium, and
  • It can be cashed out.

What is Life Insurance Cash Value?

Cash-value life insurance is a type of permanent life insurance that includes an investment feature. The cash surrender value of life insurance is the part of your policy that earns interest and can be withdrawn for income or be used for emergencies.

Permanent life insurance policies have a cash value. Term life insurance does not offer the cash value feature.

Here are the different types of permanent life insurance policies:

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Some permanent life insurance policies offer two features:

  • Death Benefit: also known as “Face Value,” is the amount paid out to beneficiaries when the insured person passes away.
  • Cash Value: an additional feature that might make your policy more valuable because you may be able to access the money while you’re still alive.

Cash value life insurance has two parts. First, the death benefit insures you when you die, and the cash value that builds up cash is tax-deferred while you are alive.


Here are four ways you may be able to access its cash value:

  • Make a withdrawal from the cash value
  • Take out a loan
  • Surrender the policy
  • Use the cash value to help pay premiums

Withdrawing Money from your Cash Value Policy

First, you can withdraw some money, tax-free, from your permanent life insurance policy. But if you take more than you have paid so far, then it is taxed as income.

Also, remember that it will reduce the death benefit paid out to your beneficiaries if you withdraw your cash value funds.

Taking Out a Loan on Your Policy

You can borrow up to the cash value on your policy. This might include part of what you paid for the policy and any interest it has earned.

Loan money is not considered taxable income. But if you die before you pay the loan, then the amount left is subtracted from your death benefit. However, until you pay the loan back, your debt accrues interest, decreasing your policy’s potential death benefit.

Surrendering Your Life Insurance Policy for its Cash Surrender Value

A “surrender” is when you cancel your policy, and in return, you receive the life insurance cash surrender value. When this happens, you no longer have life insurance coverage. The amount of money you paid into the account and interest that has added up over time will be your “equity.”

Fees and Charges When Surrendering Your Life Insurance Policy

  • Any loans or unpaid premiums on the policy.
  • Additional surrender fees
  • Income tax on the money you receive.

Using Cash Value to Pay Premiums

If you are short of money, you can use the cash value in your policy to help pay the premiums until you catch up financially.

Cash Value of Life Insurace Calculator

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Life Insurance That Builds Cash Value

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Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on 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.

The Annuity Expert is an online insurance agency servicing consumers across the United States. 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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