Home Life insurance Life insurance basics How to maximize the cash value of a life insurance policy How to maximize the cash value of a life insurance policy Written by: Lynnette Khalfani-Cox Lynnette Khalfani-Cox Lynnette Khalfani-Cox, The Money Coach®, is a nationally-known personal finance expert, speaker, and New York Times bestselling author. She has also been published by outlets such as AARP, Black Enterprise, Essence, Kiplinger Advisor, The Wall Street Journal, USA Today, and VOX. | Reviewed by: Michelle Megna Michelle Megna Michelle, the former editorial director, insurance, at QuinStreet, is a writer, editor and expert on car insurance and personal finance. Prior to joining QuinStreet, she reported and edited articles on technology, lifestyle, education and government for magazines, websites and major newspapers, including the New York Daily News. | Posted on December 27, 2011 Why you can trust Insure.com Quality Verified At Insure.com, we are committed to providing the timely, accurate and expert information consumers need to make smart insurance decisions. All our content is written and reviewed by industry professionals and insurance experts. Our team carefully vets our rate data to ensure we only provide reliable and up-to-date insurance pricing. We follow the highest editorial standards. Our content is based solely on objective research and data gathering. We maintain strict editorial independence to ensure unbiased coverage of the insurance industry. When you buy life insurance, the primary purpose is to provide cash for your loved ones in the event of your death.But many policyholders unwittingly shortchange their beneficiaries by leaving large, unused amounts of cash value in their permanent life insurance policies, according to Jean Dorrell, president of Senior Financial Security Inc., a retirement- and estate-planning firm. According to Dorrell, you want to try to die with “as little cash value as possible” in a permanent life insurance policy. “Otherwise, it [the cash value] just goes to the insurance company, and your beneficiaries simply get the death benefit.” There is a strategy, however, to leave more money to your beneficiaries when you have a policy that has accumulated a sizeable cash value over time. The solution is to contact your life insurance company and ask for a higher death benefit in exchange for the cash value of your policy. Trading in cash value for face valueThis tactic allows those who own permanent life insurance policies of all kinds — including whole life, universal life and variable life – to “trade in” the cash value of their policies for a higher death benefit for their loved ones. For more information on permanent life insurance products, see Insure.com’s The basics of permanent life insurance.The goal is to reduce the cash value to as close to zero as possible, and increase the face amount– the death benefit — by an equal amount.Here’s an example of how it works.Dorrell had a 74-year-old female client whose universal life insurance policy had a face amount of $150,000, and $120,000 in cash value. So, Dorrell had the client to call up her insurance company and ask for more death benefit in exchange for her cash value.The company obliged the request and Dorrell’s client nearly doubled the death benefit she’s leaving behind to her beneficiaries. Now, instead of getting a $150,000 cash payout upon her death, the woman’s heirs will receive $270,000.Why are companies willing to do this? So they won’t lose your business, says Dorrell.She says that in about 40 percent of the cases where she sits down with new elderly clients, the person has a policy with a cash value and a death benefit that are virtually equal. Not understanding the options with the cash value of your policy is a big mistake because it leaves you paying premiums unnecessarily or dying with a big, unused cash value that never benefits your relatives, Dorrell says.“When people die with large amounts of cash value, the insurance companies just salivate over that,” Dorrell says. She adds that when you die with a big cash value that hasn’t been liquidated, leveraged or converted to a death benefit, “the insurance company is making out better than your heirs.”Paying life insurance premiums with cash valueIf you don’t want or need to increase the death benefit to heirs, you can also benefit by using your cash value in another way. Dorrell recommends telling your life insurance company to take premiums out of your policy’s cash value. This way, you don’t have to pay insurance premiums anymore. For many people, this could save $2,000 a year or so in premiums, Dorrell says.According to Dorrell, there is no standard rule on how much cash value you should have in a policy before making such a request.“I would say depending on your premiums, make sure your cash value is about four to five times what your premiums would cost annually,” Dorrell says. She says that is because if your cash value is too low, you might have to add monies to make up the cost of insurance.Dorrell cites MetLife, New York Life, Northwestern Mutual and Prudential as companies that typically honor requests to increase your death benefit with your cash value. But she says many other life insurance companies will do the same. “You just have to ask for it,” she says. × Get Free Life Insurance Quotes Today! Zip Code Please enter valid zip Age Age 16 – 20 21 – 24 25 – 34 35 – 44 45 – 54 55 – 64 65+ Coverage Amount Coverage Amount $50,000 – $100,000 $100,000 – $200,000 $200,000 – $300,000 $400,000 – $500,000 $500,000 – $1,000,000 $1,000,000 – $2,000,000 $2,000,000 – $5,000,000 $5,000,000+ Coverage Type Coverage Type Whole Life Term Life Final Expense Not Sure Gender Gender Male Female Non-Binary Tobacco Use Yes No Compare Quotes Lynnette Khalfani-Cox  . .Lynnette Khalfani-Cox, The Money Coach®, is a nationally-known personal finance expert, speaker, and New York Times bestselling author. She has also been published by outlets such as AARP, Black Enterprise, Essence, Kiplinger Advisor, The Wall Street Journal, USA Today, and VOX. QuickTake How to make sure you have enough life insurance Understanding your life insurance policy options What is a life insurance beneficiary? 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