Does Term Life Insurance Have a Cash Value?

Cash value is a savings component that comes with some life insurance policies. It’s an added benefit of life insurance that can help build wealth over time, allowing you to meet more financial goals. If you’re interested in term life insurance from Aflac, it’s important to understand the cash value is not offered on these plans. Keep reading to find out what term life insurance is and whether it offers this component.

3 Min Read

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Key Takeaways

Cash value is an added benefit of life insurance that grows the value of the policy so you may borrow against it, withdraw funds, or increase your death benefit.
Term life insurance does not have a cash value, but it does offer a death benefit and much lower monthly premiums.
Aflac offers both whole life insurance with cash value and term life insurance policies.

What is term life insurance?

Term life insurance is a temporary contract between you and a life insurance company. It typically lasts for a specific time period, such as 10, 20, or 30 years. As long as you continue to make your premium payments, the insurer will pay out a death benefit if you pass away before the policy ends.

Unlike permanent life insurance, term life insurance has an expiration date. Once it expires, you can renew your coverage, convert it to permanent life insurance, or apply for another policy.¹

Do term life insurance policies have cash value?

While term life insurance can be a useful policy for many people, it doesn’t build cash value. With this type of policy, you pay for a potential death benefit payout that your beneficiaries will receive if you pass away before the end of its term. The death benefit is fixed. Since there is no cash value, term life insurance is cheaper than whole life insurance.² It typically has the most cost-effective premiums compared to other types of life insurance policies.

What is cash value life insurance?

Life insurance with cash value is a type of permanent policy, such as whole life, universal life, and indexed universal life insurance. If you purchase one of these, a portion of your premium payments will go toward the policy’s cash value component, which will earn interest over time.

You can typically access this cash value while you’re still living by withdrawing funds, getting a life insurance loan, or surrendering the policy. Keep in mind that just like term life insurance, life insurance with cash value will also pay out a death benefit to your beneficiaries upon your death.²

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Types of life insurance policies with cash value

There are several types of life polices that have cash value, each varying in complexity. Some of the most common are:

Whole life insurance

With whole life insurance, you receive coverage for your entire life. This type of policy typically offers fixed premium payments, the death benefit is guaranteed, and the cash value can still grow with potential tax savings. You may tap into the cash value component while you’re still alive.

Universal life insurance

Universal life insurance is a flexible type of policy that provides a death benefit and cash value account. It allows you to adjust your premiums or death benefit amount as needed.³ If you choose to pay higher premiums for at least the first few years, you may accumulate a larger cash value.

Final expense life insurance

Final expense life insurance is designed to help protect your family from hefty final expenses, such as funeral costs and medical bills. It also includes a cash value component that you can possibly take advantage of during your lifetime.

Should I get life insurance with cash value?

Life insurance with cash value has several compelling benefits:

Wealth creation: Cash value can grow your wealth as you contribute over time. Since it grows at a guaranteed rate, it also reduces the risk of investing in the stock market.
Increased inheritance: Cash value increases a death benefit, which may provide a larger inheritance to your beneficiaries.
Living benefits: Some policies allow you to withdraw from the cash value while you're still alive, which can be especially valuable if you're living on a fixed income.⁴
Collateral: Cash value policies can be used as collateral for borrowing money to meet financial goals like paying for college or starting a business.⁴

Advantages of term life insurance

Although term life insurance doesn’t offer cash value, it still has several benefits that make it compelling for many individuals and families:

Cost: Term life insurance is significantly more affordable than permanent life insurance with cash value.
Simplicity: Term policies are active for a fixed period and have a fixed death benefit, so they don’t require any active management beyond paying your premiums.
Predictability: With fixed monthly payments, you can easily budget for a term life policy.
Peace of mind: Term life provides the peace of mind that should you pass away unexpectedly, your beneficiaries will have financial protection.

Aflac offers whole life insurance with cash value and term life insurance.

While term life insurance doesn’t build cash value, getting this type of policy can be a great way to help protect your loved ones financially. But if you want cash value life insurance, there are plenty of options at your disposal, from whole life insurance to final expense insurance.

Aflac offers both term and whole life insurance plans that come with easier application processes and reasonable premiums. Our whole life insurance plan has cash value that grows over time as you make premium payments. Chat with an agent today to discuss your options and find out what type of coverage can best meet your needs.

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