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What is cash value life insurance?

Cash value life insurance offers coverage for a lifetime with a cash value component that can grow over time. Understand how it differs from term life insurance and if it’s the right fit for you.

Close up of a couple drinking coffee with a small dog putting its head on a table

There are many types of life insurance coverage out there — the purpose being to provide shoppers with more options so they can find coverage that suits their individual needs. These different forms of coverage come in varying face amounts, lengths of coverage and price points. It can be overcomplicated.

To keep it simple, there are two main types of life insurance: term and permanent.

Term life insurance is characterized by its set term length of coverage — 10, 15, 20 or 30 years — and is usually one of the simplest to understand, purchase, and manage. It’s also affordable for most people. For example, a 30-year, $500,000 policy would cover a healthy 35-year-old woman until she’s 65 for about $38 per month.

With permanent policies, you have two common varieties are: whole life and universal life. These types of policies offer coverage for a lifetime and are characterized by a cash value component (thanks for staying with us) that can grow over time. These types of policies can cost 10 to 20 times more than a term life insurance policy depending on the term length you choose. Take that same woman above. A whole life insurance policy that would offer her coverage for a lifetime with a $500,000 face amount would start at about $512 per month.

The price of permanent policies can be cost prohibitive or require people to purchase less coverage in order to have a more affordable premium pricing. However, for those who want lifetime coverage and can afford the higher premiums, cash value policies can accumulate money that can be used however you want.

What exactly is cash value and how can you use it?

While the death benefit of 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 policy, can increase the possibility that the policy will lapse, and may result in a tax bill if the policy terminates before the policyholder’s death.

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, as previously mentioned, these types of policies can be cost prohibitive because of the significant monthly premiums.

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Term versus permanent life insurance: which is the right choice for you?

When deciding if a cash value policy is right for you, ultimately you’re making a decision on whether to purchase term or permanent life insurance. And, depending on your financial situations, the answer could be both.

Term life insurance might be the right choice if you:

  • Are looking for a low-cost option for financially protecting your spouse and children
  • Need coverage until your children are financially independent
  • Need a policy to help pay specific cosigned debts (i.e. a mortgage or student loans)
  • Have, or plan to have, substantial money saved for retirement
  • Financially agree with term life advocates on the “buy term and invest the rest” strategy

Permanent life insurance might be the right choice if, beyond the primary need for insurance protection, you:

  • Seek coverage that lasts a lifetime and won’t expire before you pass away
  • Have maxed out tax-advantaged savings accounts
  • Are seeking a product that offers a cash value component
  • Have a high income and do not qualify for other types of tax-advantaged vehicles
  • Can afford 3-figure premium payments on a monthly basis
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Buying life insurance to financially protect your loved ones

When shopping for life insurance, don’t let the seemingly countless options distract you from the core purpose: to financially protect the most important people in your life. The proceeds from a life insurance policy can help your family continue to meet ongoing financial obligations like the mortgage, shared debts, childcare, schooling, and the many other day-to-day bills we all have. This is the case with any type of life insurance — term or permanent.

The right coverage for you will fit into your budget and will provide you with dependable coverage while your loved ones need it most.

Haven Life: Life insurance that’s actually simple

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Nikolas Jintri is a writer and educator who teaches at Temple University in Philadelphia.

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About Adam Weinberg

Adam Weinberg is the Brand Director for Haven Life, where he’s working hard to make life insurance easy. Adam is a creative problem solver who uses unique brand moments to create meaningful customer experiences.  Adam has more than a decade of diverse editorial, marketing, and branding experience, including work on several award-winning campaigns for various digital media companies.

Read more by Adam Weinberg

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.

Our disclosures

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:

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