What happens to the cash value of an insurance policy when you die?

UPDATED: May 1, 2012

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Asked May 1, 2012

1 Answer


In a life insurance policy, the cash value is how much the policy is worth at any given time. Most whole life policies have an accrued value of some sort, and as long as you do not make withdrawals, the amount of accrual will continue to go up over time. But since the cash value ceases to go increase when the person dies, referred to as the policy maturing, then the policy value would be frozen and a check written for the policy value.

Only certain types of life insurance have a cash value. Term life insurance, for example, does not have a cash value and the policy either pays the face value when the policy matures or the term is reached and the policy expires without a payout but whole life insurance does. You can convert or extend term life policies, but they do not carry a built-in cash value that can be accessed at any time.

If the policy has been borrowed against, then the cash value when the policy matures will usually be adjusted to reflect the deductions. The cash value can be lower than the original policy value, but it cannot be greater than the policy value. Look at it this way: The amount you pay into the policy will never be equal to the amount of the policy, and the cash value is calculated according to how much you have actually paid in.

In addition to giving you access to the cash value of the policy, different types of whole life insurance offer other benefits the policy owner can use while the insured person is still alive. Before you decide on a policy to last throughout your lifetime, investigate the different options available.

Answered May 1, 2012 by Anonymous

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