Cash Value Life Insurance: What It Is and How to Unlock Its Full Potential
Life insurance is often viewed simply as a way to provide financial protection for loved ones — but certain types of policies offer much more. Cash value life insurance combines long-term coverage with a built-in savings component that grows over time, creating a powerful financial asset you can use during your lifetime.
Understanding how your policy’s cash value works — and how to access or leverage it effectively — can make a significant difference in your financial planning. From borrowing against your policy to selling it through a life settlement, there are multiple ways to unlock the value you’ve built and put it to work for your goals.
In this guide, we’ll break down how cash value life insurance works, what factors affect its growth, and the different strategies for tapping into your policy’s full potential. Whether you’re looking to boost retirement income, reduce expenses, or explore new financial opportunities, this article will help you make informed, confident decisions about one of your most overlooked assets.
What Is Cash Value in Life Insurance?
The cash value in life insurance refers to a built-up savings component included in many permanent policies. As you pay premiums, part of that money goes toward the death benefit and part goes into a tax-deferred savings account.
Over time, that savings grows based on interest or investment returns, depending on the policy type. You can borrow against it, withdraw from it, or—if it makes financial sense—sell the entire cash value life insurance policy through a life or viatical settlement.
Types of Life Insurance with Cash Value
Not all life insurance policies come with cash value. Only permanent policies include this feature. These include:
- Whole life insurance – Has fixed premiums and guaranteed cash accumulation.
- Universal life insurance – Offers flexible premiums and interest-based growth.
- Variable life insurance – Allows for investment in subaccounts, with variable returns.
- Indexed universal life – Tied to stock market indexes like the S&P 500.
Term life insurance, by contrast, does not have any cash value—it’s purely protection-based for a limited time.
How Does the Cash Value Grow?
The growth of cash value life insurance depends on the policy type:
- Whole life: Grows at a fixed, guaranteed rate.
- Universal life: Grows based on a current interest rate declared by the insurer.
- Variable life: Growth is tied to market performance of selected investments.
- Indexed: Gains are tied to the performance of a market index, but usually capped and floored.
This accumulation creates an accessible resource that you can use while you’re still alive.
What Can You Do With Your Life Insurance Cash Value?
If you’ve accumulated significant value in your life insurance policy, here are your primary options:
- Withdraw Cash: You may be able to take out a portion of the cash value—usually tax-free up to your basis. However, it reduces the death benefit.
- Take a Loan: Many policies allow you to borrow against the cash value. Interest will accrue, and unpaid balances reduce the death benefit.
- Pay Premiums: Some policyholders use the cash value to cover future premium payments, keeping the policy in force without new out-of-pocket costs.
- Surrender the Policy: You can cancel the policy and receive the surrender value, which is typically lower than the full cash value due to fees.
- Sell the Policy: This is often the most overlooked and most valuable option. By working with Summit Life Settlements, you may be able to sell your cash value life insurance policy for significantly more than the surrender value.
Selling a Cash Value Life Insurance Policy
If your life circumstances have changed—retirement, rising healthcare costs, reduced financial obligations—your policy may no longer serve its original purpose.
That’s where Summit Life Settlements comes in. We help policyholders access the hidden value in their coverage by facilitating a life settlement: the legal sale of your policy to a licensed buyer in exchange for a lump-sum payment.
- You receive cash
- Stop paying premiums
- The buyer takes over the policy
This option often yields 3 to 5 times more than the cash surrender value—especially for seniors over 65 or those with declining health.
Who Qualifies to Sell a Life Insurance Policy?
To explore a life settlement with Summit, we look for:
- Age 65 or older
- A policy with a face value of $100,000+
- Some health changes since the policy was issued
- A permanent policy (or a convertible term policy)
Our team offers a free review and helps determine whether your life insurance cash value could unlock far more than you expect.
Real Example: How Linda Benefited from Her Cash Value
Linda, 72, had a $300,000 whole life insurance policy. Over time, she had built up $60,000 in cash value. She considered surrendering it—but contacted Summit first.
After a free review, Linda received offers from buyers on the secondary market and ultimately accepted a settlement worth $97,000—more than 50% more than her surrender value. She used the funds to pay off debt and make long-needed home upgrades.
Why Work with Summit Life Settlements?
We understand that navigating options like cash value in life insurance can be complex. Here’s how we simplify the process:
- No-cost consultation – Get clarity on your policy’s worth without pressure or obligation.
- Multiple buyers – We list your policy on our marketplace where institutional investors compete to offer the highest payout.
- Confidential and supportive – Every client is treated with dignity, transparency, and respect.
- Higher returns – Many clients receive significantly more than their policy’s surrender value.
We don’t just show you your options—we help you navigate the life settlement market in order to make a confident decision.
Final Thoughts
Your cash value life insurance policy could be worth far more than you realize—especially if your priorities have shifted in retirement. Whether you’re facing new expenses, simplifying your finances, or just ready to put your policy to work now, Summit Life Settlements can help.
Instead of surrendering or letting it lapse, explore what your policy could be worth in a competitive market.
👉 Start with a free, no-obligation policy review by contacting us.
Frequently Asked Questions About Cashing In Life Insurance
1. What is cash value life insurance?
Cash value life insurance is a type of permanent life insurance that includes both a death benefit and a savings or investment component known as the cash value. Over time, a portion of your premiums builds up as cash value, which you can access while you’re still living.
2. How does cash value grow?
Your policy’s cash value grows tax-deferred, meaning you don’t pay taxes on the gains as long as they remain inside the policy. Growth depends on the policy type:
Whole Life: Earns a fixed interest rate.
Universal Life: Grows based on credited interest.
Variable Life: Linked to market investments and can fluctuate.
3. Can I withdraw money from my cash value?
Yes. You can typically withdraw or borrow from your policy’s cash value once enough has accumulated. Withdrawals may reduce your death benefit, while loans accrue interest but allow you to keep the policy in force.
4. Do I have to pay back a loan from my cash value?
You’re not required to repay a policy loan, but any unpaid balance (including interest) will reduce your death benefit. Paying back the loan helps preserve your policy’s full value for beneficiaries.
5. What happens if I surrender my policy?
If you surrender (cancel) your policy, you’ll receive the cash surrender value — the accumulated cash value minus any fees or outstanding loans. However, surrendering also ends your coverage and may trigger tax consequences on gains.
6. Can I sell my cash value life insurance policy?
Yes — many policyholders choose to sell their cash value life insurance through a life settlement. This option can provide significantly more cash than surrendering the policy. In a life settlement, an institutional investor buys your policy, takes over future premiums, and pays you a lump sum upfront.
7. How much is my cash value life insurance policy worth in a life settlement?
The amount depends on several factors: your age, health, policy type, death benefit, and premium costs. On average, a life settlement can pay 4–10 times more than the surrender value — making it a valuable option to explore before canceling a policy.
8. Are there taxes on cash value withdrawals or settlements?
Withdrawals or life settlement proceeds may be partially taxable, depending on how much you’ve paid in premiums and how much your policy has gained. It’s wise to consult a tax or financial advisor before making any decisions.
9. Does every life insurance policy have cash value?
No. Only permanent policies such as whole life, universal life, and variable life build cash value. Term life insurance has no cash value unless it’s convertible to a permanent policy.
10. What are the benefits of cash value life insurance?
Cash value life insurance provides:
Lifelong coverage
Tax-deferred growth
Access to funds while living
Flexible financial options, such as loans, withdrawals, or selling the policy through a life settlement
11. What are the downsides or risks?
Drawbacks may include higher premiums compared to term insurance, slow cash value accumulation in early years, and fees that reduce early growth. Understanding these factors helps ensure your policy aligns with your long-term goals.
12. How can Summit Life Settlements help?
Summit Life Settlements helps policyholders understand all their options — including whether selling a cash value life insurance policy through a life settlement could yield greater financial benefit than surrendering it. We offer free policy evaluations, no upfront fees, and transparent, client-first guidance to help you make the best decision for your financial future.
