Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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The length of time that it takes for a life insurance policy to start to accumulate cash value depends on the type of policy. A whole life policy will start to do so from the day it is issued.

A universal life insurance policy also has a savings component, but the policy may need to be in force for several years before the insured is entitled to a cash return on it. A term life insurance policy does not have any cash value associated with it.

The length of time it takes for life insurance cash value to build up in your policy also depends on the amount of premiums that you contribute as some policies allow you to put in additional premium amounts so that the cash value will accumulate faster.

Read on to learn the details of cash value build up in life insurance and then be sure to enter your zip code above for free insurance quotes!

Whole Life Insurance Coverage

A whole life insurance policy is a type of permanent insurance coverage. The plan will pay out a death benefit as long as the policyholder passes away while the policy is in force. This policy option provides the security of premiums that do not increase over the life of the policy. The policy also accumulates a certain amount of cash value over time.

The cash value that a universal life insurance policy accumulates does so on a tax-free basis. The funds are taxable when they are withdrawn from the cash account associated with the insurance policy. If the policy is surrendered (cancelled), the policyholder will receive the cash value accumulated by the insurance plan.

The policyholder receives dividends from the insurance company, and he or she can borrow against the cash value of the policy if the funds are needed. Interest is charged on the loan at a rate set by the insurance company. Borrowing against a whole life insurance policy means the amount of the death benefit and cash surrender value are reduced.

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Universal Life Insurance Policy

A universal life insurance policy is another form of permanent life insurance. It provides a greater level of flexibility than a whole life policy does. The policyholder can decide the level of life insurance he or she would like to have. The premium level and death benefit are also selected by the policyholder.

A certain amount of the premiums paid for the insurance coverage is invested on the policyholder’s behalf by the insurance company. The money can be used to invest in mutual funds, stocks, bonds, or a combination of any of these investments. The insurance company agrees to pay a guaranteed return on the investment.

There are two ways that a universal life insurance policy can be set up. The first option is for the death benefit to be funded from the policy’s accumulated cash value. This is the more economical way to go, since as the cash value increases over time, the insurance company is required to pay out less money from its own funds when the policy holder passes away.

The second option pays out the face amount on the policy as the death benefit. It also pays out whatever the accumulated cash value of the policy is as of the date of death. As a result, it is the more expensive option.

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Term Life Insurance Plan

A term life insurance policy means that the policyholder is only covered for a set term. This is a less expensive option for life insurance coverage, but there is no savings component to the plan. At the end of the term, the policy expires.

The customer has the option of buying another term policy if he or she wishes. Since the individual will be older at that point and riskier to insure, the cost of arranging coverage will be higher. Term life insurance can be put in place for periods of up to 20 years at a time, and this can be enough to get the insured through his or her prime earning years and pay off a mortgage or provide funding for child care or college for the insured’s children.

Choosing an insurance plan with a cash value attached to it is a way to get the benefits of having life insurance and a pool of money that can be accessed in an emergency or for other purposes. Depending on the type of plan chosen, the cash value may start to accumulate immediately or it may take a number of years before there is any cash value accumulated.

Insurance policy customers need to understand that choosing a term life plan to save money means that there is no cash value associated with the plan at all. In return for better rates, there is no cash value accumulating in the insurance policy. For some people, this is the best coverage option.

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