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Have you ever stumbled upon a whole life insurance cash value chart while reviewing your policy documents and felt a surge of confusion? This chart is crucial, as it visually represents how cash value accumulates in a whole life insurance policy over time. But it may not be easy to understand without some background knowledge.
Whether you already have a life insurance policy or are contemplating purchasing one, understanding how whole life insurance cash value charts work can help you make informed decisions about your financial future.
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What Is Whole Life Insurance Cash Value?
Cash value is a component of whole life insurance policies. At its core, the cash value is a tax-favored investment account within the policy. As you pay your premiums on a whole life insurance policy, a portion of the payments goes into the cash value, which will grow over time through interest accruals and—if you choose—dividends.
The cash value serves as an accumulating savings element you can tap into during your lifetime.
How Does Cash Value Accumulate in Whole Life Insurance?
The cash value in a whole life insurance policy grows at a fixed rate determined by the policy’s terms. Typically, this accumulation begins slowly and picks up pace over time.
“The growth of a whole life policy’s cash value is influenced by several factors: premiums paid, dividends received and interest earnings.” – Daniel Adams, CFP at CEG Life Insurance Services
When you pay your premiums, a portion is allocated to the policy’s cash value. Over time, this contributes to its steady growth.
If you have a “participating” policy, cash value can increase through life insurance dividends paid out by the insurer. These dividends, though not guaranteed, can be substantial, as they stem from the insurer’s profits. Policyholders may choose to reinvest these dividends back into the policy—amplifying future growth through paid-up additions—or use the dividend money in other ways.
The policy’s interest rate also plays a crucial role, often guaranteeing a minimum growth rate of the cash value, ensuring that it increases regardless of market conditions. This steady, predictable growth is a key attraction for those seeking a stable, long-term financial plan.
Whole Life Insurance Cash Value Charts
In the examples below, guaranteed value numbers show a situation where there are no dividends paid and policy costs reach the maximum limit. Though this scenario is historically unlikely, it is important to see the worst-case scenario, explains Adams.
Non-guaranteed values are based on current (conservative) projections. The policy could perform better or worse than these projections.
Whole Life Cash Value Chart With Dividends Withdrawn
In this example, the policyholder chooses to withdraw dividends annually when dividends are paid. As you’ll see, the death benefit increases very little over the course of a lifetime, and the cash value grows at a steady rate.
Whole Life Cash Value With Dividends Withdrawn: Guaranteed Values
| Policy year | Age at end of year | Policy premium | Cash value at end of year | Death benefit at end of year |
|---|---|---|---|---|
| 1 | 31 | $10,580 | $0 | $1 million |
| 5 | 35 | $10,580 | $22,970 | $1 million |
| 10 | 40 | $10,580 | $68,430 | $1 million |
| 15 | 45 | $10,580 | $120,170 | $1 million |
| 20 | 50 | $10,580 | $181,290 | $1 million |
| 25 | 55 | $10,580 | $249,220 | $1 million |
| 30 | 60 | $10,580 | $326,290 | $1 million |
| 35 | 65 | $10,580 | $410,580 | $1 million |
| 40 | 70 | $10,580 | $500,390 | $1 million |
| 45 | 75 | $10,580 | $593,290 | $1 million |
| 50 | 80 | $10,580 | $683,860 | $1 million |
| 55 | 85 | $10,580 | $769,430 | $1 million |
| 60 | 90 | $10,580 | $838,750 | $1 million |
| 65 | 95 | $10,580 | $891,600 | $1 million |
Source: MassMutual sample illustration for a 30-year-old male in excellent health with coverage of $1 million.
Whole Life Cash Value With Dividends Withdrawn: Non-Guaranteed Values
| Policy year | Age at end of year | Annual net outlay at beginning of year | Dividend paid at beginning of year | Total cash value at end of year | Total death benefit at end of year | Total paid up insurance at end of year |
|---|---|---|---|---|---|---|
| 1 | 31 | $10,580 | $0 | $0 | $1 million | $0 |
| 5 | 35 | $9,620 | $960 | $24,160 | $1,001,190 | $115,609 |
| 10 | 40 | $8,040 | $2,540 | $71,320 | $1,002,890 | $291,900 |
| 15 | 45 | $5,100 | $5,480 | $126,260 | $1,006,090 | $443,874 |
| 20 | 50 | $3,600 | $6,980 | $188,500 | $1,007,210 | $568,164 |
| 25 | 55 | $2,370 | $8,210 | $257,690 | $1,008,470 | $665,487 |
| 30 | 60 | $580 | $10,000 | $336,740 | $1,010,450 | $748,111 |
| 35 | 65 | -$2,340 | $12,920 | $424,160 | $1,013,580 | $817,389 |
| 40 | 70 | -$5,670 | $16,250 | $517,330 | $1,016,940 | $873,543 |
| 45 | 75 | -$9,130 | $19,710 | $613,830 | $1,020,540 | $918,852 |
| 50 | 80 | -$13,030 | $23,610 | $708,190 | $1,024,330 | $954,472 |
| 55 | 85 | -$11,657 | $26,770 | $797,010 | $1,027,580 | $981,769 |
| 60 | 90 | -$14,551 | $30,790 | $870,180 | $1,031,430 | $1,002,061 |
| 65 | 95 | -$16,006 | $32,810 | $924,240 | $1,032,640 | $1,013,954 |
Source: MassMutual sample illustration for a 30-year-old male in excellent health with coverage of $1 million.
Whole Life Cash Value Chart With Dividends Reinvested
In this example, the policyholder chooses to reinvest dividends from the insurer through paid-up additions (PUAs). PUAs are additional death benefit amounts purchased using reinvested dividends, deposits or both.
As a result of the reinvested dividends, you’ll see the accelerated growth of cash value and the death benefit, Adams explains. With each reinvestment of annual dividends, the death benefit grows, which means a bigger dividend payout each year. If the dividend payout is always reinvested, the cycle of growth hypothetically continues.
Whole Life Cash Value With Dividends Reinvested: Guaranteed Values
| Policy year | Age at end of year | Policy premium | Cash value at end of year | Death benefit at end of year | Annual dividend at end of year |
|---|---|---|---|---|---|
| 1 | 31 | $10,580 | $0 | $1 million | $0 |
| 5 | 35 | $10,580 | $22,970 | $1 million | $1,231 |
| 10 | 40 | $10,580 | $68,430 | $1 million | $3,122 |
| 15 | 45 | $10,580 | $120,170 | $1 million | $6,803 |
| 20 | 50 | $10,580 | $181,290 | $1 million | $8,971 |
| 25 | 55 | $10,580 | $249,220 | $1 million | $11,555 |
| 30 | 60 | $10,580 | $326,290 | $1 million | $15,651 |
| 35 | 65 | $10,580 | $410,580 | $1 million | $22,077 |
| 40 | 70 | $10,580 | $500,390 | $1 million | $30,080 |
| 45 | 75 | $10,580 | $593,290 | $1 million | $40,280 |
| 50 | 80 | $10,580 | $683,860 | $1 million | $52,160 |
| 55 | 85 | $10,580 | $769,430 | $1 million | $64,596 |
| 60 | 90 | $10,580 | $838,750 | $1 million | $78,019 |
| 65 | 95 | $10,580 | $891,600 | $1 million | $85,284 |
Source: MassMutual sample illustration for a 30-year-old male in excellent health and coverage of $1 million.
Whole Life Cash Value With Dividends Reinvested: Non-Guaranteed Values
| Policy year | Age at end of year | Cash value of additions at end of year | Total cash value at end of year | Paid-up additions at end of year | Total death benefit at end of year | Total paid up insurance at end of year |
|---|---|---|---|---|---|---|
| 1 | 31 | $0 | $0 | $0 | $1 million | $0 |
| 5 | 35 | $3,694 | $26,644 | $17,678 | $1,017,678 | $127,593 |
| 10 | 40 | $16,429 | $84,859 | $67,240 | $1,067,240 | $347,311 |
| 15 | 45 | $47,364 | $167,534 | $166,511 | $1,166,511 | $588,975 |
| 20 | 50 | $98,324 | $279,614 | $296,361 | $1,296,361 | $842,793 |
| 25 | 55 | $170,411 | $419,631 | $440,088 | $1,440,088 | $1,083,701 |
| 30 | 60 | $271,495 | $597,785 | $603,160 | $1,603,160 | $1,328,056 |
| 35 | 65 | $415,057 | $825,637 | $799,848 | $1,799,848 | $1,591,068 |
| 40 | 70 | $614,285 | $114,675 | $1,037,258 | $2,037,258 | $1,882,196 |
| 45 | 75 | $880,238 | $1,473,528 | $1,317,642 | $2,317,642 | $2,205,747 |
| 50 | 80 | $1,224,072 | $1,907,932 | $1,649,760 | $2,649,760 | $2,571,441 |
| 55 | 85 | $1,645,358 | $2,414,788 | $2,026,777 | $3,026,777 | $2,974,572 |
| 60 | 90 | $2,133,769 | $2,972,519 | $2,457,155 | $3,457,155 | $3,423,023 |
| 65 | 95 | $2,662,417 | $3,554,017 | $2,920,854 | $3,920,854 | $3,899,000 |
Source: MassMutual sample illustration for a 30-year-old male in excellent health and coverage of $1 million
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Whole Life Insurance Cash Value Chart Frequently Asked Questions
Can the cash value of my whole life insurance policy decrease?
Although the cash value of a whole life insurance policy grows at a guaranteed steady rate, it can decrease due to withdrawals, policy loans or charges related to the policy’s maintenance.
“Dividends are not guaranteed and the cost of insurance can increase,” says Adams. It’s crucial to be aware of these variables when monitoring your policy’s cash value.
Is the cash value growth guaranteed in whole life insurance?
In whole life insurance, the cash value is guaranteed to grow at a fixed rate. Even if you withdraw or borrow from the cash value and the balance decreases, it will continue to grow at the predetermined rate.
Is whole life insurance cash value taxable?
Whole life insurance cash value growth is tax-deferred, meaning you don’t pay taxes on the gains while they remain in the policy. But if you withdraw amounts exceeding the total premiums you’ve paid, those excess amounts are taxable.
“A policy owner can withdraw up to the amount of the premiums paid into the policy tax-free,” says Adams. “After that limit is reached, they will pay taxes on everything above and beyond that amount that they withdraw.”
How long does it take for whole life insurance to build cash value?
Whole life insurance policies start building cash value from the time you begin paying premiums, but significant accumulation usually takes several years. In the early years, a larger portion of your premiums goes towards the insurance cost and associated fees.
What happens to the cash value if I cancel my whole life insurance policy?
If you surrender a cash value life insurance policy, you’re entitled to the accumulated cash value minus any surrender charge. The payout is known as the policy’s “surrender value.”
Also, if a policy lapses or is terminated with an outstanding loan amount, there could be tax consequences. Speak to your insurer or a financial expert before making such decisions.
