Accumulated Value

What Does Accumulated Value Mean?

Accumulated value refers to the total portion of the payment deducted from a policy, which is set aside and invested by the insurance company, along with the interest earned from that investment. It is not tax-deductible.

Insuranceopedia Explains Accumulated Value

An insurance policy is not always solely meant to cover risks or provide benefits. Sometimes, a portion of the premium is invested to earn interest. This amount set aside for investment is known as the accumulated value or cash value. This investment component is one of the main differences between term and permanent life insurance, since term policies do not build any accumulated value at all.

The policyholder can utilize this value in various ways. It can be borrowed by the policyholder, used to pay premiums, or even used to increase coverage, such as raising the amount of the death benefit. Not every permanent policy builds this value at the same pace, and some types are designed to generate cash value immediately, while others take several years before a meaningful balance accrues.