Add to Cash Value Option

Definition - What does Add to Cash Value Option mean?

Add to cash value option is a feature in a universal life insurance where the policyholder turns over the cash value to the face value of his or her policy. The death benefit to the beneficiary is higher than the usual fixed amount. The premium for this option gets higher, too.

Insuranceopedia explains Add to Cash Value Option

The cash value of an insurance policy is the portion of the life insurance that the policyholder can use in many ways, like investing it to yield interests in the future or using it as a premium payment. Another way is by adding it to the death benefit.

When one adds it to the death benefit, the beneficiary gets more. For example, if one has a policy that is $100,000 with a cash value of $25,000. If the person will not use this option, the beneficiary gets $100,000. But if the person uses the add-to-cash value option, the beneficiary receives $125,000 upon his or her death.

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