Whole Life Insurance Cash Value Chart

How much cash can you expect to have in a life insurance policy with cash value? Let’s take a look.

Written by Stephanie Colestock / September 26, 2022

Quick Bites

  • Whole life insurance policies offer a lifetime of coverage, often with a cash value component, meaning you’re also setting aside money as a kind of savings.
  • A portion of each month’s premiums go toward building the policy’s cash value; these funds can grow further with dividends and other guaranteed returns.
  • This cash value is in addition to the policy’s set death benefit.

Life insurance comes for a fixed term–usually 10 to 30 years–or for your lifetime, assuming you pay our premiums. Those are known as permanent life insurance policies, and come in all sorts of flavors, including whole life insurance.

Your premium in a whole life insurance policy pays for a death benefit that goes to your loved ones after you die, and it also goes into a separate account where it can accrue interest. That’s the cash value component.[1]

Let’s take a closer look at whole life insurance and the benefit of having cash value.

Inside this article

  1. How cash value works
  2. Sample cash value chart
  3. Using the cash value
  4. Does it make sense for you?

How a whole life insurance policy with cash value works

A whole life insurance policy is one that offers a lifetime of coverage, in exchange for a set premium. This coverage stays the same and at the same price, even as the policyholder ages, moves or develops certain medical or health conditions. No matter when the individual die, their loved ones are guaranteed a payout, as long as the policy is in good standing.[2]

In addition to the death benefit, whole life insurance coverage includes a cash value benefit. This benefit adds a savings account component to the policy, allowing you to build up a cash reserve that you can borrow against, withdraw from or even use to pay future premiums.

So, how does this work?

Each month, as the agreed premium is paid, the insurance carrier puts a portion of that payment toward the actual cost of insuring you. The other portion is put into a savings account of sorts, where it builds the policy’s cash value. Over time, as the cost of insuring you increases (due to rising market rates, your increased age, etc.), a smaller and smaller portion of the premium goes into the cash value account.

A whole life policy’s cash value benefit will continue to grow over time, thanks to dividends and/or interest growth (which may sometimes be guaranteed). Any cash value growth may be subject to income taxes if and when it’s withdrawn, but will grow tax-deferred in the meantime.[3]

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Sample cash value chart

Sound Dollar | Sound Dollar

Let’s look at a hypothetical whole life policy with a death benefit of $500,000. This policy has annual premiums of $9,060, or $755 per month, and a guaranteed cash value return.[4]

As you make your annual premium payments, a portion of those payments goes toward the actual cost of the insurance coverage, while the other portion goes toward building the policy’s cash value.

By the end of year five, for example, you will have paid a total of $45,300 in premiums, and built a cash value of $26,340 over that same period. And you have the guaranteed $500,000 death benefit. Not a bad investment.

After 30 years, the cash value growth totaling $276,040 would exceed the amount paid in premiums $271,800. And you still get the $500,000 benefit.

Using the cash value in your whole life policy

So, once that cash value is established and growing, how do you actually access it?

There are a few different options:

  • Borrow against it, which typically means repaying the debt with interest

  • Withdraw it; if you pull out any of the growth, it will be subject to income tax, which can also reduce your loved ones’ total death benefit when you pass away

  • Use it to pay future premiums; as long as this doesn’t cause the policy to lapse, your cash value may be used to cover premiums for a period of time[5]

“The biggest reason to buy a life insurance policy with cash value is to unlock what is perhaps one of the most powerful tax-advantaged assets available: a policy that allows you to leverage substantial after-tax capital and can provide two to four times as much as you ever put into it,” says Brian Haney, founder of The Haney Company, a Washington, DC-based financial services firm.

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When does it makes sense to buy whole life with cash value?

Whole life insurance is just one of many different types of permanent insurance coverage.

This type of policy comes at a notably higher cost than the same amount of term coverage. So, is buying a whole life policy with a cash value the right move—or worth the price tag—for every buyer?

To answer this, it’s important to consider what you’re getting from these policies, and whether those features hold enough value to you.

“The additional expenses of a cash value plan cover the guarantee of a level premium for the duration of the policy, lifetime insurance coverage and a minimum return on the cash value as well as a possible early withdrawal cost,” says Shane Canfield, chief executive officer of insurance provider WAEPA. “The value of these features is a personal decision.”

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Buying whole life coverage may make sense if you:

  • Want to avoid increasing premiums as you age or develop health conditions

  • Want to provide permanent protection for your beneficiaries

  • Have a lifelong dependent (such as a spouse or child with special needs) who will require financial support

  • Want your monthly premiums to go toward building something—like a savings vehicle—even if you don’t die for decades to come

If any of these scenarios applies to you, it’s still worth speaking to a life insurance agent or financial advisor to see if it makes sense. Be sure to shop around before you commit to an insurer.

Article Sources
  1. "Life Insurance with Cash Value," Aflac, https://www.aflac.com/resources/life-insurance/cash-value-life-insurance.aspx.
  2. "What are the different types of permanent life insurance policies?" III, https://www.iii.org/article/what-are-different-types-permanent-life-insurance-policies.
  3. "What is Cash Value Life Insurance?" Allstate, https://www.allstate.com/tr/life-insurance/cash-value.aspx.
  4. “The Story Behind the Numbers: A Guide to Reading Your Whole Life Numbers,” MassMutual, https://massmutual.weebly.com/uploads/1/4/0/6/1406137/howtoreadillustration_final.pdf.
  5. "What is whole life insurance?" Allstate, https://www.allstate.com/tr/life-insurance/whole-life-insurance.aspx.

About the Author

Stephanie Colestock

Stephanie Colestock

Stephanie is an experienced finance writer, specialized in insurance from life to auto and home. Her work can be found on MSN, Fox Business, Forbes, Yahoo! Finance, and Credit Karma. Stephanie is working on her CFP® certification.

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