There are many different types of life insurance policies available, and one of the most popular types of policy with the longest history is the Cash Value Life Insurance policy. Suppose you are new to the world of researching life insurance policies.

In that case, however, you might not know much about cash value life insurance, and getting a good sense of how these policies work and whether they are a good fit for you and your particular personal needs is an important step on the road to sorting out the perfect life insurance policy to protect you and your family in the case of an unexpected death.

What is Cash Value Insurance?

You might have encountered cash value life insurance under the name “permanent life insurance,” which is exactly the same thing.

This type of life insurance policy is unique in that as well as the standard death benefit, it also allows you to build up an additional cushion of investments and savings, with the cash in the policy remaining tax-free as it grows.

This means the money set aside in your insurance can keep growing until it is withdrawn, which is the only point at which you will have to pay tax on the policy.

Cash-value life insurance does not expire, remaining fully in force for as long as the premium continues to be paid. That even covers situations in which you develop an unexpected health condition, giving it a big advantage over standard term life insurance policies!

Types of Cash Value Life Insurance Policy

Cash value is something that grows slowly over time, at a rate dependent on exactly what sort of cash value life insurance policy you have chosen to take out. There are four main types of cash value life insurance policies, and each of them works slightly differently.

Whole Life insurance grows cash from dividends from the insurance company. Universal Life insurance grows cash at a set rate based on an interest rate set by the insurance company.

Index Universal Life insurance and Variable Universal Life insurance are both a little riskier, as these policies grow cash through tracking financial indexes.

If those markets perform well, then your cash could grow significantly, but if they perform poorly, then your life insurance policy could potentially decrease in value over time.

Is a Cash Value Life Insurance Policy a Good Choice?

There are many advantages to taking out a cash value life insurance policy, but there are also a number of disadvantages that you should be aware of before taking out a policy of this type.

The big advantage is that the money in your policy is allowed to grow over time with no immediate taxation, allowing it to grow significantly at no cost to you.

Although a cash value life insurance policy is not an investment, some types of cash value life insurance come with the risk of loss due to the poor performance of the market.

Others can be stable and ignore the fluctuations of the stock market, and it is important to check which of these your chosen policy is in advance! The biggest disadvantage, however, is the cost.

A cash value life insurance policy has a much higher monthly cost than a comparable term life insurance policy, which can put off potential customers.

Getting the Most out of your Cash Value Policy

Getting a quote for a cash value life insurance policy can be a difficult process, as every insurance provider has its own software to calculate the costs of your chosen policy based on a range of factors.

The best way to make sure you are getting the best insurance rates possible for your cash value insurance policy is to work with a trusted independent insurance agent.

Another important thing to bear in mind is the process of withdrawing cash from your life insurance policy. You can access some of the money in the form of a loan or make a direct cash value withdrawal from some types of insurance, but both of these options will be eligible for tax payment!


The monthly cost of a cash value life insurance policy may be higher than a term life insurance policy, but the potential payouts are far higher, giving more of a sense of financial security and providing for your family better.

Ultimately, the choice of whether this policy type is right for you or not is down to personal preference and your personal situation. There is no objectively correct answer, so just make sure that you do your research carefully before committing to anything!