Universal Life Insurance Cash Value

Universal life insurance does more than protect your loved ones; it can also help you build financial value over time. Unlike term life policies, universal life includes a cash value component that grows with interest. If you’re over 50 and have a universal life insurance policy, you could be sitting on more than just financial protection; you might have access to untapped savings. In this guide, we’ll explain how universal life insurance builds cash value, how to access it, and why selling your policy through a life settlement might be the smartest move.

What Is Cash Value Life Insurance?

Cash value life insurance is a type of permanent policy that includes a savings or investment component in addition to the death benefit. While your beneficiaries receive the death benefit when you pass away, the cash value builds while you’re still alive, and you may be able to access it through loans, withdrawals, or by selling your policy.

Does Universal Life Insurance Build Cash Value?

Yes, universal life insurance builds cash value. A portion of your premiums goes into a cash value account that grows based on interest rates set by the insurer or linked to market performance. Unlike term life insurance, universal policies can offer both lifelong coverage and a way to accumulate savings you can use during your lifetime.

Cash Value vs. Death Benefit

Your premiums pay for both the insurance coverage and the cash value account. The death benefit is the amount your loved ones receive. The cash value is the portion you can access during your lifetime. Unless specified otherwise, your beneficiaries typically don’t receive the cash value in addition to the death benefit.

Types of Life Insurance That Build Cash Value

Definitions and policy terminology in this section are adapted from guidance published by the Washington State Office of the Insurance Commissioner (WA OIC).

Below is a comparison of the main types of permanent life insurance that build cash value, so you can see how they differ in risk, flexibility, and growth potential:

Not all policies accumulate cash value. Here are the main types that do:

Whole Life Insurance

• Premiums are fixed.
• Cash value grows at a guaranteed rate.
• Offers stability and predictability.

Are you considering Selling your Whole Life Insurance Policy? Read our article to learn more about it.  

Universal Life Insurance

• Premiums are flexible.
• Growth is tied to interest rates.
• Can use cash value to cover premiums.

Variable Life Insurance

• Premiums may be fixed or flexible.
• Cash value depends on performance of investment subaccounts.
• Higher risk but higher potential returns.

Indexed Universal Life Insurance

• Cash value growth is tied to a stock market index like the S&P 500.
• Includes a floor and a cap on returns.
• Offers balance between risk and reward.

How Does Cash Value Grow Over Time?

When you make a premium payment, the insurance company splits it into three parts:

1. A portion goes to the cost of insurance.
2. A portion covers administrative fees.
3. The rest goes into your cash value account.

It usually takes 2–5 years before you see meaningful cash value growth. The speed and amount of growth depend on your policy type, how long you’ve held it, your age, and your insurer’s performance.

Growth Timeline Example

• Year 1–2: Most of your premium covers insurance costs and fees; little or no cash value accrues.
• Year 5: Some accumulation begins. You may have enough to borrow small amounts.
• Year 10+: Growth accelerates, especially with consistent premium payments.
• Year 20+: Significant cash value may be available, often tens of thousands or more.

Over 65 and no longer need your policy?

You may be able to sell it for more than its cash surrender value. Find out with a free no-obligation estimate here.

Ways to Use Your Policy’s Cash Value

Once your policy has built up enough cash value, you have options.

Take Out a Loan

• Borrow against the value without surrendering the policy.
• Interest applies, and unpaid balances reduce your death benefit.

Example: John, 68, borrowed $25,000 from his policy to cover medical bills. He didn’t repay it before passing. His $200,000 death benefit was reduced to $175,000.

Make a Withdrawal

• Access cash directly, but it may reduce your death benefit.
• Withdrawals above your paid premiums may be taxed.

Example: Maria needed $15,000 to help her daughter with college tuition. She withdrew that amount from her universal life policy, lowering her death benefit from $150,000 to $135,000.

Use It to Pay Premiums

• Some policies allow you to use your cash value to cover premium payments.
• Useful during retirement or financial hardship.

Surrender the Policy

• Cancel the policy and take the surrender value.
• Surrender fees and taxes may apply.
• You lose the death benefit.

Fund Senior Living or Long-Term Care

• Many seniors use policy cash value or settlement proceeds to help pay for long term-care, assisted living or in-home care.
• Selling a life insurance policy can be a lifeline when other savings have run low.
  

Example: Carol, 75, used her life settlement funds to move into a high-quality assisted living facility, easing the financial burden on her children and giving her access to daily care.

Can I Sell a Universal Life Insurance Policy for Its Cash Value?

Yes. If you no longer need your policy or can’t afford the premiums, you may be able to sell it through a life settlement. This is where Lighthouse Life can help. We simplify the process and help you understand what your policy is really worth. You could receive significantly more than the surrender value.

How It Works:

• Quick estimate based on your age, policy type, and face value.
• No obligation to sell.
• Our team handles the paperwork and guides you through every step.

Final Thoughts: Making Cash Value Work for You

Universal life insurance isn’t just a safety net, it’s a financial tool. If you’ve held a policy for years, you might have more options than you think. Whether you need extra funds or are considering letting go of your policy, start by getting a free estimate. Lighthouse Life is here to help you turn your policy into something more useful,  peace of mind, and cash in hand.