# How Do You Calculate the Cash Value of Life Insurance?

Interested in calculating the cash value of your life insurance? If you have permanent life insurance, a portion of the premiums you pay gradually accumulates in a savings account. Whole, variable, and universal life insurance policies are types of permanent life insurance that accumulate cash value. How can you determine the cash value of your policy?

## Calculating the Cash Value of Life Insurance

You can calculate your life insurance’s cash value by adding the total of the premium payments you’ve made for the policy and subtracting fees, commissions, and expenses charged by the insurer.

1. Death benefit (the payout to your beneficiary)
2. Insurance company’s fees and profits
3. Cash savings account

The distribution of your premium payments means that your permanent life insurance policy builds cash value over time. But knowing the cash value of the policy is essential. If you don’t use it, your beneficiary will receive the death benefit when you die, but the cash value will return to the insurance company.

## Factors that Affect the Current Cash Value of Your Life Insurance

Multiple factors affect the current cash value of your policy.

• Your age when you acquired the policy – According to LIMRA research, 40 percent of life insurance policy owners wish they bought a policy at a younger age. When you’re younger, a large portion of your premium payments will go toward the cash value of your policy. As you age, it costs more for insurers to provide coverage for you, so a large portion of your premium goes toward your policy. For example, if you acquired the insurance at age 50, although you’ve had it for 20 years, most of your premiums are used to insure you, and cash accumulation will be limited.
• Rate of return on your investment – The growth of the cash value of your life insurance depends on the type of policy, the terms of your insurer, and the rate of return on the investment. Ask your insurance company for a cash value chart to see the projected appreciation rate.
• Loan balances – If you’ve already borrowed from your insurance policy, an outstanding loan decreases the cash value.

You can gather the data and try to calculate cash accumulation on your own. But it’s easier to sign up for an online account on your insurance company’s website to access the amount. Or you can contact the insurer and request the cash value of your policy.

## What Can You Do with the Cash?

As mentioned, cash accumulation is a use-it-or-lose-it feature. As the funds build, some of the ways you can use them include:

• Increase the death benefit for your survivors
• Pay the premiums for the policy
• Borrow money with the understanding that an outstanding loan balance decreases the payout to your beneficiary
• Make a withdrawal, which might affect the death benefit total