What is cash value in a life insurance policy?

Cash value is the savings component that accumulates inside permanent life insurance policies—whole life, universal life, and indexed universal life (IUL). A portion of each premium you pay goes toward building this account, which grows on a tax-deferred basis.

You can access cash value through policy loans or withdrawals while you're still alive. Policy loans are not considered taxable income and do not require repayment, though unpaid interest accrues and reduces your death benefit. Withdrawals up to your basis (total premiums paid) are generally tax-free; amounts above your basis may be taxable.

In whole life policies, cash value grows at a guaranteed minimum rate. IUL policies tie growth to a market index with a floor (typically 0%) protecting against losses and a cap (typically 8–12%) limiting gains. Universal life allows flexible premiums but growth rates can vary.

Cash value takes time to accumulate—policies are designed for the long term. Surrendering early may result in fees and tax consequences. Guarantees are backed by the financial strength and claims-paying ability of the issuing carrier.