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Ask the Life Insurance Expert

What is the value of a term life insurance policy with a $300,000 death benefit? This policy has been in force since 1995. Is there any cash value?

If you die before the term has expired, then the policy will pay out $300,000 to your beneficiary. Aside from the death benefit, term life insurance does not have any value, no matter how long the policy has been in force, and it provides protection only for the stated term, such as 10, 15, 20 or 30 years.

You're probably thinking of permanent life insurance, such as whole life, universal life or variable life. Permanent life insurance, which provides insurance coverage for a policyholder's entire life, features a cash account that accumulates value over time. You withdraw the cash or borrow against it, but the death benefit is reduced if you don't repay the money, plus interest. This is why financial planners advise against viewing cash value in life insurance as a traditional investment.

Permanent life insurance is much more expensive than term life and has more moving parts. Term life is the preferred choice for most life insurance buyers because of its affordability during the term. It's possible to retain a term life policy once the term is over, but premiums rise dramatically.

For more, see life insurance basics and the basics of term life insurance.

Last updated: Apr. 27, 2011