Does term life insurance have a cash value?
It’s a common question that comes up with buying term life insurance. Here’s what you need to know.
They say that value is simply what someone is willing to pay for something. So, in that sense, sure: We suppose term life insurance could have a cash value, provided you can find someone willing to pay for it.
But, does term life insurance have cash value? The actual answer in the real world is a bit more complicated. We’ll lay it out for you below.
In this article:
Cash value life insurance
Before answering the big question, it helps to know what cash value actually is. So what is cash value life insurance? This type of life insurance coverage has a cash value component that grows over time. A policy owner can benefit from a cash value policy by drawing from the funds.
No, term life insurance does not have a cash value
So to answer the question: No, term life insurance doesn’t have a cash value component. You are, perhaps, thinking of permanent life insurance, which some literally refer to as cash value life insurance. (These policies also go by whole life insurance, variable life insurance, and universal life insurance. No wonder people get confused!)
While the death benefit of a permanent policy can protect your family financially if you were to die (by helping to replace your income, for example), the cash value of a permanent policy accumulates as premiums are paid. You are able to borrow or withdraw some of this growth and use it for any purpose – such as for paying premiums, college or supplementing retirement.
Keep in mind that: Loans and withdrawals can impact the total death benefit paid to your beneficiaries and the total cash value of the permanent insurance policy.
The idea of building up cash value in a life insurance policy can be an attractive feature to some because it means you have something tangible to show for your premiums. However, because they build cash value, permanent life insurance policies are much more expensive than term life insurance policies — sometimes as high as 6 to 10 times more expensive.
Because of the expense and complexity, people often consult with a financial professional before applying for a permanent insurance policy to determine if it’s right for them.
Why term life insurance doesn’t have a cash value
Term life insurance is what those in the know call “pure” insurance. That is, you pay premiums at a set rate for a set period of time (like 10, 20 or 30 years), and if you die while you’re covered by the term policy, the insurer will pay your beneficiaries a set amount.
If you outlive your term life insurance policy, well, you don’t get any money out of it. But you’re still alive, which seems like a win. It’s simple, cheap and effective — and provided you use tools like an online insurance calculator, you should have plenty of coverage for your loved ones in the event the worst should happen.
With the different types of life insurance policies, some prefer a term life policy as it provides flexibility in terms and is generally more affordable. And while no, you won’t be able to take out money once you’ve paid your term life insurance premiums, you’ll also be paying a fraction of the premiums you would with a permanent life insurance policy. And again, you’ll be providing outsized value to your loved ones in the event that you pass away while covered. You can’t put a price on peace of mind.
About Louis Wilson
Louis Wilson is a freelance writer whose work has appeared in a wide array of publications, both online and in print. He often writes about travel, sports, popular culture, men’s fashion and grooming, and more. He lives in Austin, Texas, where he has developed an unbridled passion for breakfast tacos, with his wife and two children.Read more by Louis Wilson
Our editorial policy
Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our editorial policy
Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.
Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.
Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.
MassMutual is rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of Aril 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.
Haven Life Plus (Plus) is the marketing name for the Plus rider, which is included as part of the Haven Term policy and offers access to additional services and benefits at no cost or at a discount. The rider is not available in every state and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made accessible under the Plus Rider, which are provided by third party vendors (partners). For more information about Haven Life Plus, please visit: https://havenlife.com/plus
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