The cash value of your policy depends on the type of insurance and how long you've held it

The worth of your life insurance policy has two separate meanings, and which one matters depends on what you're trying to do. The death benefit is what your beneficiaries receive when you die — that amount is fixed in your policy documents and doesn't change unless you modify the coverage. The cash value is money you can access while you're alive, but only certain types of policies build it, and it grows slowly at first.

Term life insurance has no cash value. You pay premiums for a set period (10, 20, or 30 years), and if you die during that term, your beneficiaries get the death benefit. If the term ends and you're still alive, the policy expires and you get nothing back. Permanent policies — whole life, universal life, and variable universal life — do build cash value over time, but the amount available to you starts near zero and grows as you pay premiums.

If you're thinking about selling your policy or borrowing against it, the cash value is what matters. If you're wondering what your family will receive, the death benefit is the number to look at.

Key Takeaways

  • Term life insurance has no cash value; only permanent policies (whole life, universal life) build money you can access while alive.
  • Your death benefit is the fixed amount your beneficiaries receive and is stated in your policy documents.
  • Cash value grows slowly in the first years and accelerates over time, but it's always less than the death benefit.
  • You can borrow against cash value or surrender the policy for its cash value, but both reduce what your beneficiaries receive.
  • Your insurance company's annual statement shows your current cash value; if you don't have one, contact your insurer directly.

How to find your death benefit amount

Your death benefit is printed in your policy documents, usually on the first page or in a section labeled "Coverage" or "Policy Summary." If you have paper documents, look for a number next to "Death Benefit," "Face Amount," or "Coverage Amount." That's the amount your beneficiaries will receive.

If you've lost your documents, contact your insurance company directly. You'll need your policy number, which may be on old premium notices, bank statements showing payments, or correspondence from the insurer. Call the customer service number on any document you have, or search the company's website for a "find my policy" tool. Some insurers let you log into an online account to view your policy details immediately.

If you don't remember which company issued the policy, the National Association of Insurance Commissioners runs a Life Insurance Policy Locator Service that can help you search for policies issued in your name. You provide basic information and the service contacts insurers on your behalf.

Understanding cash value in permanent policies

When you buy a whole life or universal life policy, part of each premium goes toward the death benefit and part goes into a cash account. In the first year or two, cash value is minimal — sometimes just a few hundred dollars on a policy with a $250,000 death benefit. The cash value grows tax-deferred, meaning you don't pay taxes on the growth as long as the money stays in the policy.

The growth rate depends on the type of policy. Whole life policies have a may provide minimum rate set by the insurer. Universal life policies are tied to market interest rates and can fluctuate. Variable universal life policies let you direct the cash value into investment accounts, so growth depends on how those investments perform.

After 10 to 15 years, cash value typically becomes meaningful — perhaps 30 to 50 percent of the death benefit, depending on your age when you bought the policy and how much you've paid in. By year 20 or 30, cash value can approach or even exceed the death benefit in some cases, though this is rare.

How to find your current cash value

Your insurance company sends an annual statement showing your current cash value, usually in the mail or through an online account portal. This statement also shows your death benefit, the premiums you've paid that year, and any loans or withdrawals you've made. If you can't find a recent statement, log into your insurer's website using your policy number, or call customer service and ask them to email or mail you a current statement.

The statement will show two numbers: the cash surrender value and sometimes the net cash value. The cash surrender value is what you'd receive if you closed the policy today. The net cash value subtracts any outstanding loans against the policy. If you've borrowed money using the policy as collateral, the net cash value is lower.

Be aware that the cash value shown is not may provide to be accurate forever. Universal life policies can have their cash value reduced if interest rates drop or if you don't pay premiums on time. Whole life policies have more stable cash values, but they can still be affected by policy loans or missed payments.

What happens if you borrow against or surrender your policy

If you need money, you can borrow against the cash value without closing the policy. The loan amount is limited to the cash value (or slightly less), and you pay interest on the loan. The interest rate is set in your policy and typically ranges from 5 to 8 percent, though it varies by insurer and policy type. While you're paying back the loan, the death benefit remains in place, but any unpaid loan balance is subtracted from what your beneficiaries receive.

Alternatively, you can surrender the policy and receive the cash surrender value in a lump sum. Once you surrender, the policy ends and there is no death benefit. If you've paid $50,000 in premiums over 20 years and the cash value is $35,000, you receive $35,000 and lose all coverage. This is permanent — you cannot restart the policy later.

Both borrowing and surrendering have tax consequences. If you borrow and the loan exceeds the total premiums you've paid, the excess is taxable income. If you surrender and the cash value exceeds what you've paid in premiums, the difference is taxable. Consult a tax professional before taking either action.

Selling your policy: the life settlement option

If you have a permanent policy with significant cash value and you no longer want it, you may be able to sell it to a third party through a life settlement. A life settlement company purchases your policy, takes over the premium payments, and receives the death benefit when you die. You receive a lump sum that's typically higher than the cash surrender value but lower than the death benefit.

Life settlements are only available if you meet certain criteria: you're usually at least 65 years old, the policy has a death benefit of at least $100,000, and you've owned it for several years. The sale process takes several weeks and involves a medical underwriting review. Not all policies are may be able to access, and not all states regulate life settlements the same way.

Before pursuing a life settlement, understand that you lose all control over the policy. The new owner decides whether to keep paying premiums, and they have a financial interest in your death. This is a legitimate financial transaction, but it's worth discussing with a financial advisor or attorney first.

Why your policy's worth can change over time

The death benefit itself doesn't change unless you request a modification. However, the cash value can fluctuate, especially in universal life and variable universal life policies. If interest rates drop, the cash value growth slows. If you miss a premium payment, the insurer may deduct the missed amount from your cash value. Some policies allow you to increase the death benefit (usually with new underwriting), which increases your premiums but doesn't affect existing cash value.

If you have a policy loan outstanding, the loan balance accrues interest and reduces the net cash value available to you. Over time, if you don't repay the loan, it can grow large enough to consume the entire cash value, at which point the policy may lapse and the death benefit disappears.

Frequently Asked Questions

Can I find out what my policy is worth without contacting the insurance company?

Not precisely. You can estimate the death benefit if you remember the amount you purchased, but the exact current cash value requires a statement from your insurer. They calculate it based on your specific premiums, policy type, and any loans or withdrawals. Contact them directly or check your online account.

Is the cash value the same as what my beneficiaries will receive?

No. Your beneficiaries receive the death benefit, which is much larger. The cash value is only what you can access while alive. If you die, your beneficiaries get the death benefit, not the cash value — unless you've already withdrawn or borrowed against the cash value, which reduces the death benefit they receive.

What if I have multiple life insurance policies?

Each policy has its own death benefit and cash value. You need to contact each insurer separately to find out what each policy is worth. Keep a list of all your policies and their policy numbers so your beneficiaries can find them after your death.

Does the cash value affect my taxes while I'm alive?

Not while the money stays in the policy. Cash value grows tax-deferred. You only owe taxes if you withdraw money, borrow against it and don't repay, or surrender the policy and the cash value exceeds what you've paid in premiums.

What happens to my policy's value if I stop paying premiums?

On a term policy, the coverage ends and you get nothing back. On a permanent policy, the insurer will use your cash value to pay premiums automatically (called automatic premium loan) until the cash value runs out. Once it's depleted, the policy lapses and the death benefit disappears. Check your policy documents to see if automatic premium loan is active.