Cash Value Life Insurance

Definition - What does Cash Value Life Insurance mean?

Cash value life insurance is a type of permanent life insurance that pays out a death benefit and accumulates value over time. The policyholder can borrow against the cash value, pay policy premiums with it later on, pass it on to their heirs, or use it as a non-taxable investment.

Insuranceopedia explains Cash Value Life Insurance

Cash value insurance typically costs more than term life insurance as it is a permanent policy and has a savings component. There are three main types available: Whole life has cash value that accumulates depending on the performance on the life insurance company's investment portfolio; variable life allows the policyholder to choose investments from mutual funds and other investment vehicles; and universal life expands investment options to money market and Treasury securities. Ultimately, it is up to the individual to decide which best suits their needs and investment style. Keep in mind that some have criticized these policies due to the potentially limited investment options and the fact that the returns may be smaller than what an investor could achieve on their own.

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