Life Insurance & Annuities Forum

Nov. 13, 2007

I own a $500,000 variable universal life policy. When I die will my beneficiaries get the death benefit or the death benefit and the cash value?

Vic, Ohio

Dear Vic,

Many universal and variable universal life insurance policies offer the option to pay your beneficiaries both the death benefit and the cash value when you die, but you must specifically select this option in order for your beneficiaries to receive the cash value.

So, unless you specified otherwise in your life insurance contract, when you die your beneficiaries will receive only the death benefit, not any cash value that may have accumulated. In either case, any withdrawals you make from the cash value (either in terms of a loan or partial withdrawal) of the life insurance will reduce your death benefit.

For example, if you took out a loan against your policy you would not be obligated to pay it back, but any money you owed, plus interest, would be deducted from your death benefit when you died. So if you don't pay for it, your beneficiaries will.

For more on the workings of cash value, read Cash value in life insurance: What's it worth to you?

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