---
title: "Cash Value: What It Means in Life Insurance | Riskado"
description: "Cash value is the savings part of a permanent life policy you can borrow, withdraw or surrender. Charges and loans can cut the payout below the value shown."
url: "https://riskado.com/insurance-terms/cash-value/"
lang: "en"
published: "2026-07-01"
modified: "2026-10-01"
image: "https://riskado.com/og/default.jpg"
alternates:
  es: "https://riskado.com/es/terminos-de-seguros/valor-en-efectivo.md"
---

# Cash value

[Life and Health](https://riskado.com/life-and-health-insurance/) · Updated Oct 1, 2026

Cash value is the savings element of a permanent life insurance policy and represents the policy owner's interest in it. You can reach it through a policy loan, withdrawal or surrender. It is not necessarily what you paid in premiums, and surrender charges, loans, interest and policy terms can reduce the net cash surrender value.

Also called: cash surrender value, cash value life insurance, surrender value

Cash value is money that builds inside a permanent [life policy](https://riskado.com/insurance-terms/life-insurance/), such as [whole life insurance](https://riskado.com/insurance-terms/whole-life-insurance/), and that you can use while the [insured](https://riskado.com/insurance-terms/policyholder/) is alive. The figure on a statement is rarely the amount you would walk away with: surrender charges, [policy loans](https://riskado.com/insurance-terms/policy-loan/) and loan interest come off first, and using the value can shrink the [death benefit](https://riskado.com/insurance-terms/death-benefit/) or put the [policy](https://riskado.com/insurance-terms/policy/) at [risk](https://riskado.com/insurance-terms/risk/) of lapsing. Check whether the number in front of you is the current cash value, the net cash surrender value, or a projection.

## How cash value turns into a payout

Cash surrender value is the cash value stated in the policy minus surrender charges, outstanding loans and loan interest, according to the [New York Department of Financial Services (opens in a new tab)](https://www.dfs.ny.gov/consumers/life_insurance). Take an illustrative policy with a $20,000 policy value, a $2,000 surrender charge, a $5,000 outstanding loan and $250 of accrued loan interest.

Illustrative cash surrender value calculation

Hover or tap a row to highlight it.

| Item | Amount |
| --- | --- |
| Policy value | $20,000 |
| Less surrender charge | $2,000 |
| Less outstanding policy loan | $5,000 |
| Less accrued loan interest | $250 |
| Cash surrender value | $12,750 |

If the owner surrenders, the insurer pays about $12,750 under these assumed values, the policy ends, and the death benefit is gone. If the owner instead takes a $5,000 policy loan, the owner receives $5,000, but the loan and its interest reduce the available value and may reduce the death benefit; the policy stays in force only if its terms and funding support it.

## How cash value differs by policy type and by how you use it

The type of permanent policy shapes how the value grows. Whole life usually has scheduled premiums, a stated death benefit and guaranteed minimum values, and participating policies may pay dividends that can be taken in cash, applied to premiums, used to buy paid-up additions or left to build value. Universal life has flexible premiums and an account credited with interest and reduced by insurance costs, expenses, withdrawals and other charges, so coverage can lapse if the account runs too low. Variable life ties the value to investment options, which brings greater potential for growth and greater risk of loss, according to the [NAIC Life Insurance Buyer's Guide (opens in a new tab)](https://content.naic.org/sites/default/files/publication-lig-lp-consumer-life.pdf).

How you use the value changes the policy. A loan gives access to money without surrendering, but interest accrues and unpaid amounts reduce benefits. A partial withdrawal removes part of the value and may lower the death benefit. A full surrender pays the net value and ends coverage. Two nonforfeiture options keep some insurance instead: extended-term insurance uses the value to continue coverage for a limited period, and reduced paid-up insurance buys a smaller fully paid policy.

Surrender charges generally apply for a set period, often 10 years and sometimes as long as 20, though the policy controls, according to [New York DFS (opens in a new tab)](https://www.dfs.ny.gov/consumers/life_insurance). The cash value may not match the premiums paid, since premiums go partly to insurance costs, expenses and fees.

## Where you see the term, and the property meaning

Cash value appears in whole life, universal life, variable life and variable universal life policies, and on the paperwork around them: illustrations and policy summaries, schedules of guaranteed and nonguaranteed values, annual statements, loan, withdrawal and surrender forms, in-force illustrations, and claim letters where a loan or surrender changes the net death benefit paid to the [beneficiary](https://riskado.com/insurance-terms/beneficiary/). A declarations page may show the policy type, but the calculation lives in the contract, illustration, annual statement or the insurer's in-force quote. Term life typically does not build cash value, according to the [Connecticut Insurance Department (opens in a new tab)](https://portal.ct.gov/cid/knowledge-base/articles/life-and-annuity-insurance/what-is-life-and-annuity-insurance).

On a home, auto or business property claim, "actual cash value" means something else: a loss valuation that generally starts with [replacement cost](https://riskado.com/insurance-terms/replacement-cost/) and subtracts depreciation, according to the [California Department of Insurance (opens in a new tab)](https://www.insurance.ca.gov/01-consumers/105-type/95-guides/03-res/res-prop-claim.cfm). It is not a savings element and has nothing to do with life insurance.

## How Connecticut and New York protect cash values

Connecticut's Standard Nonforfeiture Law requires qualifying life policies to provide nonforfeiture benefits when premiums go unpaid. After a default, the cash surrender value must be at least the present value of future guaranteed benefits minus the present value of specified adjusted premiums and any policy debt, under [Conn. Gen. Stat. § 38a-439 (opens in a new tab)](https://www.cga.ct.gov/current/pub/chap_700b.htm#sec_38a-439). The exact figure depends on the policy, issue date, mortality table, interest assumptions and indebtedness.

New York defines cash surrender value for covered policies as the policy value less any surrender charge, before loans and other amounts due, and sets standards for cash values and surrender charges under [Insurance Law § 4221 (opens in a new tab)](https://www.nysenate.gov/legislation/laws/ISC/4221). Before you buy specified policies, [Insurance Law § 3209 (opens in a new tab)](https://www.nysenate.gov/legislation/laws/ISC/3209) requires preliminary information showing guaranteed cash surrender values at the end of the 10th and 20th policy years, or at the end of the premium-paying period if earlier. If an insurer does not pay out a surrender or policy loan within the statutory period, [Insurance Law § 3227 (opens in a new tab)](https://www.nysenate.gov/legislation/laws/ISC/3227) requires interest, subject to its conditions and a $25 minimum interest threshold.

## Questions to ask an agent or insurer

1.  What is my current cash value, and what is my net cash surrender value today? This separates the policy value from what you would actually receive.
2.  Which values in my illustration or statement are guaranteed, and which depend on interest, dividends, investment results, expenses or mortality charges? Projected values may differ from guaranteed minimums.
3.  What happens to my death benefit and policy status if I take a loan, withdrawal or partial surrender? Unpaid loans and withdrawals can reduce benefits or contribute to a lapse.
4.  What surrender charges, loan interest, fees or tax consequences apply if I use or surrender the value? The amount received can be lower than the displayed value, and borrowing or surrendering can have tax effects worth raising with a tax professional.
5.  If this is universal life, what premium keeps it in force under guaranteed and current assumptions? Underfunding can reduce coverage or cause a lapse.

## Frequently asked questions

Three questions come up often.

### Does term life insurance have cash value?

Most term policies do not. Term insurance generally pays a death benefit only during the stated term, while cash value belongs to permanent coverage.

### Can I borrow against my cash value?

Many permanent policies allow loans up to an amount the policy sets. Interest accrues, and an unpaid loan can reduce the death benefit or the policy's ability to stay in force.

### Will a universal life policy stay active if I pay less?

Not necessarily. Lower funding can cause the policy to shrink or lapse, especially when mortality and expense charges rise or credited interest comes in below what the illustration assumed, according to [New York DFS (opens in a new tab)](https://www.dfs.ny.gov/consumers/life_insurance).

## Related terms