cash value
Definition
Cash value is the actual dollar amount you would receive if you surrendered or cashed out a life insurance policy before it matures or before you die. Over time, a portion of the premiums you pay into certain types of life insurance policies builds up as savings inside the policy, and that accumulated savings is the cash value. Think of it as the living benefit of a permanent life insurance policy, separate from the death benefit your beneficiaries would receive.
Example
You bought a whole life insurance policy 10 years ago and have been paying premiums ever since, so the policy now has a cash value of $15,000 that you could borrow against or withdraw if you needed emergency funds for your business.
Watch Out
Withdrawing or borrowing against your cash value can reduce the death benefit your family would receive and may trigger unexpected tax consequences.
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This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.
