Q:

What is a cash value in a life insurance policy?

A:

Quick Answer

Life insurance policies are designed to pay beneficiaries pre-determined amounts upon the policyholder's death, but some policies accrue cash value during the policyholder's lifetime, made up of a portion of the premiums paid, according to Investopedia. The cash value can be borrowed against, be used to pay policy premiums or even be used as a tax-sheltered investment.

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Full Answer

The cash value is different than the face value, notes Kiplinger. The face value is the amount that beneficiaries receive when the policyholder dies. Some people tap into the cash value of their insurance policies to cover expenses in retirement, particularly when the beneficiaries of the policy do not really need the money provided by the policy's face value after the policyholder's death.

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