What is cash value in a whole life policy

Cash value is a savings component typically included in permanent life insurance policies. Depending on your particular policy, the cash value can grow at a fixed or variable interest rate over time. You can borrow against your policy's cash value in the form of a life insurance loan.

Can I cash out my cash value life insurance policy?

The first way is to surrender the policy back to the insurance company. The insurance company will give back your policy's cash value minus any fees or penalties when you do this. The second way to cash out your policy is to take out a loan against your policy's cash value. This is called a policy loan.

What is the cash value of a $25000 life insurance policy?

Upon the death of the policyholder, the insurance company pays the full death benefit of $25,000. Money collected into the cash value is now the property of the insurer. Because the cash value is $5,000, the real liability cost to the life insurance company is $20,000 ($25,000 – $5,000).

What happens to the cash value of a whole life policy at death?

A permanent or whole life policyholder may take out loans or withdrawals against the cash value of the policy while he or she is still alive⁴. After the insured passes away the whole life insurance death benefit is distributed to beneficiaries, but any excess cash value may be retained by the insurance company.