Life Insurance

What happens to the cash value when you die?

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2015-07-17 17:43:19
2015-07-17 17:43:19

The cash value in any life insurance policy does not belong to the owner of the policy. The cash value is an asset belonging to the insurance company which they will use to pay the claim, which will surely come due, when the insured finally dies. Now if the owner of the policy would relieve the insurance company of the obligation of paying the claim, by cancelling the policy or lapsing the policy, the cash value in the policy is no longer needed by the insurance company, so they will give it to the owner of the policy under the terms of the policy's "non-forfeiture" clause.

People often ask "If that's my cash value, why don't I get it when I die in addition to the insurance benefit?" There's two reasons. First, you're dead and can't cash a check. Second, it's NOT your cash value. It's just easier for the agent to pretend that it is. Don't worry, though. You can have it if you take the company off the hook. That's only fair.

Well it depends on the type of "Cash Value" life insurance a person has. If you have a Universal Life policy then there is a greater than not that you will lose the cash value (savings, accumelation account, etc.). It really depends on the OPTION that was picked (done usually by the agent)? Sometimes known as Option 1 or 2, A or B which means what will be explained in the policy itself.

The insurance companies that sell these types as well as Whole Life, Variable Life, Variable Universal Life (also known as V.U.L.) make it really confusing for the unsuspecting consumer to easly understand but I'll try to explain it to you...

The two OPTIONS offered are there based on wheather or not you will receive the cash value. It's the wording that makes you want to scream, if you look in the table of contents you'll find "Policy Proceeds" or "Death Benefit Options", once there you'll read something like this...

"Upon proof of death of the insured, the benefit under Option 1 (or A) is the greatest of:"

1) The face amount; or2) The accumulation account value on the insured's death.

under Option 2 (or B), the death benefit is greater of:

1) The face amount plus the accumulation account valueon the date of the insured's death; or2) The accumulation account value multiplied by the applicable percentage from the table of Death Benefit Percentages shown below."

You see what I mean, most people don't read their policies and when they start I'm sure they get dizzy on account of the way it is written, and don't think it was by accident either. I believe that policies are designed that way on purpose to discourage anyone from just picking it up and reading it.

That's why in the front of the policy is says "This is a contract, PLEASE read it carefully." what a joke!!!

In any case, I say Buy Term and Invest the Difference" like my wife and I have. You won't be sorry!!! If you want me to reffer you to someone go ahead and email me, I'll be glad to help out and also THANKS to FaqFarm for the opportunity to respond.

I welcome any comments or views, just don't think I'll automatically agree, I AM VERY knowledgable about life insurance and the "scams" comapnies and their agents pull against American Families.

Thanks Again...

MrTermite:)

With almost all cash value life insurance policies, you have access to the cash when you are alive. If you were to die, the company keeps the cash value and pays your beneficiaries out the death benefit.

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