Cash Value Insurance

Life insurance that combines a death benefit with a potential tax-deferred buildup of money (called cash value) in the policy. The three main kinds of cash value insurance are Whole Life Insurance, Variable Life Insurance and Universal Life Insurance. In whole life, cash value is accumulated based on the return on the company's investments in stocks, bonds, real estate, and other ventures. In variable life, the policyholder chooses how to allocate the money among stock, bond, and money market options. In universal life, a policyholder's cash value is invested in investments such as money market securities and medium-term Treasury bonds to build cash value. All cash values inside an insurance policy remain untaxed until they are withdrawn from the policy. Unlike cash value insurance, Term Life Insurance offers only a death benefit, and no cash value buildup.