Define: Cash Value

Cash value refers to the accumulated savings or investment component of certain types of insurance policies, such as whole life or universal life insurance. It represents the amount of money that policyholders can access or borrow against during the policy’s lifetime.

While the death benefit is the amount paid out to beneficiaries upon the insured’s death, the cash value is the policyholder’s own savings within the policy. The death benefit is typically larger than the cash value.

Yes, policyholders can generally withdraw cash from their life insurance policy’s cash value. However, the amount available for withdrawal may be subject to certain restrictions, such as surrender charges or tax implications.

Withdrawals from the cash value of a life insurance policy may be subject to income tax if the amount withdrawn exceeds the total premiums paid into the policy. It is advisable to consult with a tax professional for specific guidance.

Yes, policyholders can often borrow against the cash value of their life insurance policy. These loans are typically tax-free and do not require credit checks. However, any outstanding loan balance may reduce the death benefit if not repaid.

If you surrender your life insurance policy, you will receive the cash value accumulated within the policy, minus any surrender charges or outstanding loans. Surrendering a policy means you will no longer have coverage or access to the death benefit.

In some cases, the cash value of a life insurance policy can be transferred to another policy through a process called a 1035 exchange. This allows policyholders to switch policies without incurring tax consequences.

In many states, the cash value of a life insurance policy is protected from creditors. However, there may be exceptions, such as if the policy was purchased with fraudulent intent or if the policyholder owes child support or alimony.

Yes, the cash value of a life insurance policy can be inherited by the policyholder’s beneficiaries. Upon the insured’s death, the beneficiaries will receive both the death benefit and any remaining cash value within the policy.