Cash value life insurance includes a savings component that earns interest and grows over time. Part of your premium goes toward this cash value, which increases your policy's overall value.
Learn what cash value life insurance is and how it works below.
Updated: September 29, 2026
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Cash value life insurance is a permanent policy that builds savings while providing a death benefit to your beneficiary.
Several types of life insurance build cash value, including whole life, universal life and indexed universal life.
Term life insurance doesn't build cash value but costs less than permanent policies.
Permanent life insurance policies build cash value alongside the death benefit they pay to beneficiaries. The cash value portion earns interest over time.
Universal life and whole life insurance both build cash value. These policies cost more than term life insurance, which doesn't include cash value.
You can borrow against or withdraw cash value once your balance reaches the insurer's minimum access amount. The policy type determines how quickly that value grows and what you can do with it.
Policy Type | Description |
|---|---|
Whole Life | Permanent policy with the most straightforward structure. Your cash value earns interest at a fixed rate set by the insurer when you buy the policy. |
Guaranteed Acceptance | A whole life policy that earns cash value interest at a fixed rate. This policy carries higher premiums relative to the death benefit because no medical exam is required. Cash value builds slowly given the lower coverage limits, usually $25,000 or less. |
Simplified Issue | A whole life policy with fixed-rate cash value growth. Your cash value grows faster than guaranteed acceptance policies but slower than standard whole life. |
Universal Life | Universal life credits interest to the policy's account value, subject to a guaranteed minimum rate specified in the contract. Current credited rates can change over time. |
Variable Universal Life | You can grow cash value faster by investing in subaccounts like bonds, mutual funds or stocks. Your cash value grows or shrinks based on investment performance. |
Indexed Universal Life | Cash value growth is tied to a market index, such as the S&P 500. Indexed universal life policies' credited interest can be limited by participation rates, caps and other policy terms. |
Cash value life insurance works as a savings and investment vehicle inside your policy. Part of your premium goes into the cash value account, which grows over time. You can access this money during your lifetime through withdrawals or loans. When you die, any remaining cash value returns to the insurance company.
Decide how much coverage you need and whether you want a fixed or variable growth rate before you buy. Our life insurance calculator gives you a quick estimate.
A portion of every premium goes toward insurance costs; the rest builds your cash value account. Whole life policies use fixed premiums and guaranteed growth schedules. Universal life deducts policy charges from the account value directly, and the remaining balance earns interest per the policy terms.
Accessible cash value takes several years to build. The growth rate depends on the policy type. Whole life builds at a fixed, guaranteed rate. Variable and indexed policies track market or index performance.
Once your cash value reaches the insurer's minimum access amount, you can use it in five ways:
Your access method affects both the death benefit and the policy's survival:
Cash value growth is tax-deferred, meaning you owe nothing on gains until you withdraw the funds. How you access the money determines the tax outcome.
Tax treatment varies by state and policy structure. A tax advisor familiar with life insurance can help you determine whether a policy loan or withdrawal makes more sense for your situation.
Cash value life insurance costs more than term coverage: a 40-year-old male pays around $59 per month for a $500,000 20-year term policy, versus $574 per month for whole life. The higher premium funds both the death benefit and the cash value account. Several factors determine exactly how much you'll pay.
Premiums rise with age. Insurers price coverage based on mortality risk, which increases as you get older, so the longer you wait to buy, the more you'll pay.
Health issues raise your premiums. Insurers review your medical history to assess your life expectancy and the statistical likelihood of paying out the death benefit.
Costs vary by policy type. Whole life costs more than universal life but guarantees your cash value growth rate.
The death benefit amount sets your premium baseline. Higher coverage means higher monthly costs.
Adding riders raises your premium. Common options include a waiver of premium rider, which keeps your coverage active if you become disabled, and an accelerated death benefit rider, which lets you access part of the death benefit if you're diagnosed with a terminal illness.
Your premium supports the policy's insurance costs, overhead expenses and fees, and cash value. How much contributes to cash value and how that value grows depend on the policy type.
Term life and cash value life insurance cover the same fundamental need: a death benefit for your beneficiaries. But these policies do it differently and at very different costs. For most buyers who need coverage for a fixed period, term life is the better choice. Cash value policies work for buyers with a permanent coverage need that won't expire, or for high earners who've maxed out their 401(k) and Roth IRA and want additional tax-deferred growth with no IRS contribution limits.
Coverage duration | Fixed period (10–40 years) | Lifelong |
Monthly cost | Low | High |
Cash accumulation | None | |
Investment component | None | |
Death benefit | Paid to beneficiaries | |
Who it's for | Most buyers who need temporary coverage | |
Skip it if | You need temporary coverage only |
What policies actually cost: A 40-year-old male in good health pays $59 per month for a $500,000 20-year term policy, based on MoneyGeek's rate analysis. Whole life coverage for the same profile costs $574 per month. Universal life insurance costs an average of $362 per month.
Cash value life insurance isn't the right fit for most buyers. It costs far more than term coverage, whole life runs about 10 times the monthly premium and the cash value grows slowly in the early years. The profiles below show who benefits from building wealth through a permanent policy.
A buyer who has fully funded a 401(k) and Roth IRA and still wants additional tax-deferred savings has limited options inside the standard retirement account system. Cash value life insurance provides a savings vehicle outside those IRS contribution limits.
Life insurance doesn't have the same annual contribution limits as a 401(k) or IRA, but tax rules limit how heavily a policy can be funded before it becomes a modified endowment contract (MEC), a life insurance policy that loses some tax advantages after being funded too quickly.
A parent with a child who has a disability or special needs carries a lifelong financial responsibility. A 20- or 30-year term policy could lapse before that responsibility ends. Permanent life insurance guarantees a death benefit regardless of when the parent dies, so coverage remains in place for as long as the dependent needs support.
High-net-worth individuals use permanent life insurance inside an irrevocable life insurance trust (ILIT) to pay estate taxes and transfer wealth to heirs without forcing a sale of other assets. The death benefit transfers income-tax-free to beneficiaries. Estate taxes can require immediate liquidity; a permanent policy guarantees that liquidity is available.
Many business owners use permanent life insurance in two common structures: a buy-sell agreement, which funds a partner buyout if one owner dies, and key person coverage, which reimburses the business for the financial impact of losing a critical employee.
Some buyers want guaranteed growth that doesn't depend on market performance. Whole life insurance cash value grows at a fixed rate set by the insurer, with a contractual minimum that holds even when financial markets fall. Policy loans let policyholders access that value tax-free during retirement without selling investments at a loss.
Use a cash value life insurance calculator to find your policy's current value. Most insurance companies and financial advisory sites offer these calculators. The calculator estimates your accumulated earnings based on your premium payments, policy age and interest rate.
A cash value life insurance policy is best for someone who has already maxed out other tax-advantaged savings vehicles, such as a 401(k) or IRA. It can also be a good fit for those with permanent life insurance needs, like paying for end-of-life expenses or someone with a dependent special needs child.
For most, term life insurance is sufficient if you’re solely looking for an affordable death benefit, with other options for investment savings.
It depends on the policy type. Whole life insurance has a guaranteed minimum return, so the cash value doesn't shrink. Variable policies tie your cash value to market performance, and losses are possible if the market drops.
Surrendering the policy means cashing it out. You'll receive the accumulated cash value minus any surrender fees, but the death benefit will be terminated, leaving you without life insurance coverage.
No, you don't have to repay withdrawals from the cash value, but if not managed properly, withdrawals may reduce the death benefit and have tax implications.
It depends on the policy's death benefit structure. Most permanent policies use a level death benefit, meaning beneficiaries receive only the stated payout; the insurer keeps the cash value. Some policies offer an increasing death benefit option, which adds the accumulated cash value to the payout, giving beneficiaries both. Check your policy documents to confirm which structure applies.
Mark Fitzpatrick is a licensed Property and Casualty (P&C) Insurance Producer and MoneyGeek's resident expert in insurance and economics. In nearly a decade covering the insurance market at LendingTree and MoneyGeek, he's analyzed hundreds of carriers and millions of rates across auto, home, renters, health and life insurance.
His work has appeared in The Washington Post, The New York Times and NPR. He draws on independent cost and consumer experience data, and no insurance company partnerships affect his recommendations.
Mark studied at Boston College and later earned a master's in economics and international relations from Johns Hopkins University. He worked in financial risk management at State Street before joining MoneyGeek. He's also a five-time “Jeopardy!” champion.
