Does whole life insurance have cash value?

Yes. Whole life insurance policies come with a cash value account that accumulates value over time.

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Rebecca Shoenthal

Rebecca Shoenthal

Editor & Licensed Life Insurance Expert

Rebecca Shoenthal is a licensed life, disability, and health insurance expert and a former editor at Policygenius. Her insights about life insurance and finance have appeared in The Wall Street Journal, Fox Business, The Balance, HerMoney, SBLI, and John Hancock.

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The type of whole life insurance policy you choose determines how the cash value component grows or shrinks overtime. Unlike term insurance, a whole life policy cannot be convertible or renewable.

Not all cash value policies are the same, so it’s important to know the difference when shopping for whole life insurance. Below we’ll compare the different types of whole life insurance so you can decide what type of policy is right for you.

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How cash value works

A whole life policy is permanent protection that lasts your entire life or until age 100, depending on the policy selected. If you die while the policy is active, your beneficiaries receive a death benefit, and if you are still living at age 100, the insurer will pay out the face value to you.

A cash value account is a benefit of whole life insurance you can access while you’re alive. It’s separate from the death benefit and can grow overtime, similar to other savings accounts. The cash value can be accessed in the form of policy loans (borrowing money from the policy) or by surrendering the policy to receive the existing cash value. 

Cash value for traditional whole life insurance

Cash value grows at a fixed rate for traditional whole life insurance. Traditional whole life insurance policies offer coverage with level premiums paid up to a certain age (either age 65, 99, or 121) or for a specific period of time (usually 10 or 20 years). Cash value for these types of policies accumulates until age 100 and the face value (death benefit) remains level. 

Traditional whole life policies earn a specified guaranteed rate of return. Once the cash value has accumulated for a certain number of years, typically three years, the owner can borrow against the policy.

How does a whole life policy build cash value?

Cash value works differently depending on the type of whole life insurance policy you have. The different types of whole life insurance policies that have cash value include:

  • Indexed whole life insurance: Earns interest based on an investment index chosen by your provider. 

  • Single-premium whole life insurance: Cash value grows at a fixed rate set by your insurer with a minimum guaranteed rate of return.

  • Variable whole life insurance: The cash value is invested in various funds offered by the insurance company, including mutual funds and annuities. Investment performance depends on market trends, so the policyholder bears all investment risk.

  • Whole life insurance for children: The cash value will grow or shrink according to which type of policy you select. Typically, whole life policies for kids are traditional whole life so the cash value will grow at a fixed rate. 

Other types of cash value

Other types of permanent life insurance – including Universal Life, Indexed Universal Life, Variable Life, and Variable Universal Life – also build cash value. The cash value works differently for these policies than it does for whole life insurance:

Whole life insurance cash value chart

Type of life insuranceDeath BenefitCash valuePremiumsLoans/Partial SurrendersWho bears investment risk?
Whole LifeFixed, guaranteed minimumGuaranteedFixedLoans availableInsurer
Universal LifeAdjustable, guaranteed minimumGuaranteed minimumFlexibleLoans and Partial surrendersInsurer
Variable LifeVariable, guaranteed minimumNot guaranteedFixedLoans availablePolicyowner
Variable Universal LifeVariable & adjustable, no guaranteed minimumNot guaranteedFlexibleLoans and Partial surrendersPolicyowner

If you’re wondering what type of cash value growth is best for your investment needs, reach out to a Policygenius agent for free to learn more. 

Frequently asked questions

Does term insurance have cash value?

No. Term life insurance only provides a death benefit. Only permanent life insurance policies can build cash value.

What is a whole life insurance policy’s cash value?

The cash value acts as an alternate savings vehicle. It is separate from the death benefit and builds value differently depending on the type of policy you choose.

How does a whole life policy build cash value?

It depends on which type of whole life insurance you have. For a traditional whole life insurance policy, the cash value grows based on a guaranteed minimum interest rate set by the insurer.