What does the cash value of a life insurance policy mean?

The cash value of a life insurance policy refers to the savings component that accumulates over time within certain types of life insurance, such as whole life or universal life insurance. Unlike term life insurance, which provides coverage for a specific period and does not build any cash value, permanent life insurance policies offer both a death benefit and a cash value accumulation feature. As policyholders make premium payments, a portion of those payments goes toward building the cash value. This cash value grows on a tax-deferred basis, meaning that policyholders do not have to pay taxes on the growth until they withdraw or borrow against it. The cash value can be accessed through policy loans or withdrawals, providing flexibility for policyholders in times of need. However, it is important to note that taking out loans against the cash value may reduce the death benefit if it is not repaid. When considering the cash value feature, policyholders should also review the associated costs, potential growth rates, and the long-term implications of accessing the cash value. It is advisable to refer to specific policy documents or the Pacific Life website for more detailed information regarding cash value and how it operates within their policies.