Cash Value

The savings component inside permanent life insurance, built from excess premiums and credited with growth.

Overview

It grows tax deferred, belongs to the policyholder, and can be accessed by withdrawal up to basis, by policy loan, or by full surrender. Loans accrue interest and reduce the death benefit if unpaid at death, and withdrawals beyond cumulative premiums trigger taxable gain. Cash value supports the policy in later years as mortality charges rise, which is how a level premium can fund coverage to age 100 and beyond. Insurers promote living benefits such as loans for education or retirement income, though heavy borrowing risks a lapse and a surprise tax bill if the policy drains. The gap between death benefit and cash value shrinks over the life of the contract.