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Permanent life insurance differs from term life insurance in two major ways. First, it lasts your entire life. Second, guaranteed cash value life insurance policies, such as whole life insurance, have cash saving accounts, where a cash account gradually builds over time.

As you pay premiums, a guaranteed life policy’s cash account grows with interest and is tax-deferred — similar to a savings account. Guaranteed cash value policies can help you pay for emergencies or temporary needs, such as if you need money for a loan, but it takes decades to build enough cash to be able to use it.

Guaranteed cash value life insurance can be complicated. It comes with many financial repercussions, so it is best to discuss your options with a financial advisor before purchasing a policy.

Key Takeaways

  • Permanent life insurance builds cash value, while term life insurance does not.
  • The cash value is a savings component that grows over time with each premium paid.
  • The cash value can be used to pay for premiums, take out a loan (with interest) and withdraw the cash by surrendering the policy.

How do you use the guaranteed cash value of a life insurance policy?

You can use your policy’s guaranteed cash value in a few key ways: 

  • Pay your policy’s premiums: Once the cash value account has reached a certain level, you can use it to pay your insurance premiums. At that point, the policy is known as being “paid up.” However, if you later withdraw some cash from the account, you will need to resume paying premiums.
  • Take out a loan: You can also borrow against the cash value at an interest rate that’s typically lower than what you could get at a bank. However, if you don’t repay the loan, the amount you borrowed plus interest will be deducted from the death benefit. 
  • Withdraw the cash: You can surrender — or cancel — your policy and pocket the cash, but the insurer will subtract administrative fees from the total they pay out. The remaining amount you get is the surrender cash value or the net cash value. While your policy builds up a guaranteed cash value, you only get the cash surrender value when you withdraw from it. 

However you use the policy, there are ramifications for the death benefit and your beneficiaries. Make sure to discuss your options with a financial advisor so that you can implement the best strategy for you and your loved ones. 

How much does guaranteed cash value life insurance cost?

Because guaranteed cash value policies are so variable and carefully curated for your financial needs, there is no one set price for how much they cost. However, you can expect that a policy will cost more than term life insurance, which is more straightforward and doesn’t provide a cash value. 

Who should get a guaranteed cash value life insurance policy?

A life insurance policy with a guaranteed cash value is a good choice for people who have maxed out other investment vehicles or those who want to combine a savings option with their life insurance policy. Additionally, couples who are estate planning or have a high net worth may find these policies useful in creating a robust financial plan. But, those on a stricter budget or with less complex financial needs are better off purchasing a straightforward term life insurance policy.

* Les Masterson contributed to this story.

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Laine Adley
Contributing Researcher


Laine Adley is a licensed life, health and annuities insurance agent in 12 states and specializes in final expense, whole life and term life insurance products.