In life insurance, what is cash value?

Cash value in life insurance refers to the money that accumulates in a permanent life insurance policy over time. This amount represents the savings component of the policy, which grows tax-deferred and can be accessed by the policyholder through loans or withdrawals. The cash value is a key feature of whole life, universal life, and variable life insurance policies, providing policyholders with a financial asset that can be utilized during their lifetime.

In contrast, the other options do not accurately describe cash value. The first option mentions investments in stocks, which pertains to the investment aspect of certain types of permanent policies but does not define cash value itself. The total premiums paid is relevant but does not equate to cash value, as it doesn’t account for the growth element and other factors involved in the cash value accumulation. Lastly, the payout received upon policy maturity refers to the death benefit or cash surrender value, which is distinct from the concept of cash value within the policy itself.