I have a cash value policy. When I die, what happens to the cash?
Answers | 3
Here are a couple of ways to use it. Let's say that the amount is significant - above 10K. If this is Universal coverage, you could arrange for the cash to pay future premiums. This can be tricky so some consultation would be needed to make it happen the right way. The end result will be that you stop paying out of your pocket, the cash value expires completely at age 95 or 100, and you expire before that.
You may use some of the cash to pay for other insurance. Take some of the cash on an annual basis and pay for your long term care coverage; the cash will build back up over time with compound interest and you can keep this going for some time. The end result will be that you did not have to come out of pocket for the new coverage since it is the result of interest on the principal in the life policy.
Hope that helps!
Another form of this is a plan B universal life where you pay for a constant level of life insurance and you get the cash values as well. So that 100k is charged for the life of the policy and that 40k just adds to the death benefit.