Asked by Crystal  |  Submitted February 16, 2016

I have a cash value policy. When I die, what happens to the cash?

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  Answers  |  3

February 16, 2016

We would all like it if the cash - plus the death benefit - went to our heirs. The death benefit goes to the beneficiary but the cash does not. It remains with the carrier. If that rubs you the wrong way, then consider what might be done with the cash before you die so that you get to put it to some good use.

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!


$commenter.renderDisplayableName() | 09.27.20 @ 17:02


February 18, 2016

Depending on the carrier, some whole life policies can be set up so that your beneficiary gets BOTH the cash value and the death benefit. I'd contact your carrier for the specifics. But most are not set up this way. If yours is not, you may consider taking some of the cash out and using it to purchase a single premium whole life policy. With this type of policy, you only pay once, but the coverage lasts forever and, depending on your age, typically yields a death benefit much higher than what you paid for the coverage. The good news is that you have options. Best wishes,

Mike Zaino

$commenter.renderDisplayableName() | 09.27.20 @ 17:02


February 23, 2016

It depends entirely on what type of cash value policy you own. With some that have a level death benefit, the cash values replace the term insurance within the plan reducing the cost over time. For example you start with 100k death benefit and over the years you build 40k in cash values. That 40k replaces some of the death benefit so you're only paying for 60k of life insurance at that point.

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.

$commenter.renderDisplayableName() | 09.27.20 @ 17:02