Cash value

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Cash Value

The amount of cash that becomes available to an insured person upon the cancellation of his/her insurance policy. Most often, this applies to the savings portion of a canceled whole life policy. This value is considered an asset and can be borrowed against or used as collateral. It may also be called a cash surrender value or a surrender value.

Cash value.

Cash value is the amount that an account is worth at any given time.

For example, the cash value of your 401(k) or IRA is what the account is worth at the end of a period, such as the end of a business day, or at the end of the plan year, often December 31.

The cash value of an insurance policy is the amount the insurer will pay you, based on your policy's cash reserve, if you cancel your policy. The cash value is the difference between the amount you paid in premiums and the actual cost of insurance plus other expenses.

References in periodicals archive ?

In participating whole life, death benefits and cash values are guaranteed, and the resulting profits are distributed among the policyholders as dividends.

Lifetime Planning with Life Insurance

The cash values that are accumulated are put into investments with the intention of earning more in interest.

Important lines of life business and products

If the plan is to use policy cash values for living needs, the policyowner will want to avoid MEC status.

Cash value accumulation test or guideline premium test: a comparison

It can provide guaranteed lifetime income that cannot be outlived by using the accumulated cash values. Even better, this income can be paid income-tax free.

The value of cash value life insurance

They can also borrow against permanent life insurance cash values tax-free as long as the policy remains in force.

Selling a life insurance policy can be taxing

Unlike many other products, participating whole life insurance offers three important guarantees: a guaranteed, level premium that will not increase for the life of the contract; guaranteed cash values and nonguaranteed dividends that accumulate on a tax-deferred basis and can be accessed through loans throughout the policyholder's lifetime; and a guaranteed death benefit to beneficiaries, which is usually income tax-free.

Whole life insurance turns 2,000

While term insurance can provide a lot of protection for a lesser cost, it builds no cash values and has no permanent values.

Life insurance products

All other things remaining the same, as the number of payments decreases the annual premium, and consequently, the rate of growth of policy cash values, becomes correspondingly larger.

Chapter 14: Single premium life insurance

The executive, or his/her trust, owns the cash values from day one."

A new look for compensation: all CEOs with deferred pay must review their plans

So, the next step in our analysis is to determine the cash value for each branch of our tree diagram, since the final cash values will represent the payoffs for these branches.

Decision making under uncertainty: Part 2

To identify plan abuses, the IRS is looking at the use of "springing cash values," which occurs when a plan makes large initial payments on its insurance contracts, then the plan is terminated and the contracts transferred to plan participants.

The retirement alternative: Sec. 412(i) plans

Based on this narrow view it's no wonder so many CPAs fall into the trap of agreeing to allow unneeded policies to lapse or be surrendered for just their cash values. This is especially true if the coverage is no longer necessary and the premiums have become burdensome.