Most life insurance pays only at death. Cash value life insurance is different: it's permanent coverage that also builds a savings-like component you can use while you're alive.
How cash value works
Part of each premium funds the cash value, which grows tax-deferred. Depending on the policy type, it grows at a guaranteed rate (whole life), an index-linked rate with a floor (IUL), or a declared rate (universal life).
Using the living benefit
You can borrow against or withdraw from cash value for any purpose — supplementing retirement, an opportunity, or an emergency. Properly structured policy loans are generally income-tax-free under current law, though unpaid loans reduce the death benefit.
Is it right for you?
Cash value policies cost more than term and reward long-term, consistent funding. They fit people who want permanent coverage plus a tax-advantaged asset — not those who only need temporary protection.
What types of life insurance build cash value? +
Permanent policies: whole life, universal life, and indexed universal life (IUL). Term life does not build cash value.
Is cash value the same as the death benefit? +
No. The death benefit is paid to your beneficiaries; cash value is a living benefit you can access while alive. Unpaid loans/withdrawals reduce the death benefit.
Is cash value taxed? +
It grows tax-deferred, and properly structured loans are generally income-tax-free under current law. Withdrawals above your basis may be taxable. Consult a tax professional.