Life Insurance Types

Cash Value Life Insurance

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What is cash value life insurance?

Cash value life insurance is distinguished by a component known as "cash value," a financial account which accrues interest and grows through premium payments. Cash value equates to actual dollars which can be borrowed or withdrawn. The owner of a cash value policy may also terminate the policy in order to claim the entirety of its cash value.

There is a variety of cash value life insurance types, distinguished chiefly by how their cash value growth is calculated. The principal division of cash value life insurance types is between whole life insurance and universal life insurance.

Is it the same as permanent life insurance?

The terms "cash value life insurance" and "permanent life insurance" are often interchanged because nearly all permanent policies have a cash value component, and nearly all cash value policies are permanent. Exceptions exist but are rare and offered by few or no life insurance companies today.^†

Pragmatically, it is safe to treat "cash value life insurance" and "permanent life insurance" as synonymous.

What is permanent life insurance?

With permanent life insurance, as long as the policyholder pays the required premiums, coverage will continue until a death benefit is paid. Under the alternative, term life insurance, if the insured does not die within a pre-determined term of coverage (usu. 5–30 years), the policy concludes, and no death benefit is paid.

Even though they guarantee a death benefit, not all permanent life insurance policies last indefinitely: traditional whole life insurance policies can terminate and pay a death benefit even while the insured is still alive. A universal life insurance policy, on the other hand, will persist for as long as the insured remains alive.

^†Exceptions include universal term life insurance (a term life insurance policy with a cash value component) and NLG universal life insurance (a permanent policy without cash value).

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