For instance, if the face value of your whole life policy is $200,000 and the cash value that has accumulated is valued at $20,000 when you pass away, the beneficiaries of your policy will receive the $200,000 face value of your policy the $20,000 that remains will be collected by the insurance company. In other words, they do not receive the cash value of your policy. The amount of money they receive is the face value of your policy they will not have access to the money that has accumulated in the cash account. When you pass away, your beneficiaries can file a claim with your life insurance provider. The face value of a whole life insurance policy is also known as the death benefit of the policy. The amount of money that your insurance provider puts toward the policy is known as the face value and is the amount that will be paid out to your beneficiaries when you pass away. Only permanent life insurance policies, such as whole life and universal life, have a cash value account. The amount of money that has accumulated is known as the cash value of the whole life policy.
The amount placed in the cash fund collects non-taxable interest.
What Is the Cash Value and Face Value of a Whole Life Insurance Policy?Ī percentage of the premium you pay toward your whole life insurance policy is put toward the cost of the insurance, and the remaining amount is placed in a cash fund. Both of these terms refer to the benefits that your life insurance policy offers, the meaning of these terms are very different not only are they different to you, but they are also different to your beneficiaries. Whole life and universal life are two types of permanent life insurance policies.Ĭash value and face value are features of a permanent life insurance policy. If you have a permanent life insurance policy, there are two terms that you should familiarize yourself with: cash value and face value.Īs the name suggests, a permanent life insurance policy offers permanent coverage because it offers coverage for the entire span of your life, rather than just a specific amount of time, like term life insurance.