Life Insurance What is guaranteed cash value in a life insurance policy? Written by: Laine Adley Laine Adley 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. | Reviewed by: Nupur Gambhir Nupur Gambhir Nupur Gambhir is a content editor and licensed life, health, and disability insurance expert. She has extensive experience bringing brands to life and has built award-nominated campaigns for travel and tech. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service. | Updated on March 22, 2023 Why you should trust Insure.com Quality Verified At Insure.com, we are committed to providing honest and reliable information so that you can make the best financial decisions for you and your family. All of our content is written and reviewed by industry professionals and insurance experts. We maintain strict editorial independence from insurance companies to maintain editorial integrity, so our recommendations are unbiased and are based on a comprehensive list of criteria. 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. Laine AdleyContributing 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. Related Articles Can I take out a life insurance policy on my spouse? By Penny Gusner What happens to the cash value of my whole life insurance policy when I die? By Nupur Gambhir Can I withdraw money from my term life insurance? By Nupur Gambhir Do life insurance policies pay out if a person dies of old age? By Les Masterson Can you cash in a paid up life insurance policy? By Les Masterson How to forfeit life insurance proceeds? By Susan Manning