Whole Life Insurance Check-Up: Evaluating Cash Value

As we get older, it may be smart to take a fresh look at life insurance. One type many older adults have is whole life insurance. This kind of coverage not only provides a death benefit to your loved ones but also builds something called cash value. This article explains how it works and presents key concepts to consider when evaluating whether it's a good fit for your needs.

How does whole life insurance work?

Whole life insurance is a type of permanent life insurance. Unlike term life insurance, which only lasts for a set number of years, whole life remains in effect for life as long as you pay the premiums. That’s one reason people choose it when looking for life insurance with lifetime coverage. With whole life insurance, a portion of your premium contributes to the coverage’s cash value, which grows over time.

What is cash value?

The cash value life insurance builds is a key feature. It can provide access to funds while you’re still alive. It starts to grow after a few years of regular payments and continues as long as the coverage stays active. The growth is tax-deferred, meaning you don’t pay taxes on it as it builds.

How to use cash value

Once your coverage builds enough value — usually after several years of regular premium payments — you may be able to use it in a few ways:

  • Loans: Borrow money from your coverage. Loans are subject to an interest rate, but are usually tax-free and don’t affect your credit. If not repaid, they reduce your death benefit.
  • Premium Payments: Some coverage allows you to use the cash value to pay your premiums.
  • Surrendering the Policy: Cancel the coverage and take the cash. This ends your protection and may have tax consequences.

When can you access the cash value?

Cash value doesn’t build up overnight. It often takes a few years of consistent payments before there's enough accumulated to use. You can check your annual statement or talk with your insurer to find out how much is available.

Is your insurance still a good fit?

Checking on your life insurance needs can help make sure your coverage still fits your life. Ask yourself:

As needs change — like during retirement or after a major life event — your protection might need to change too.

Whole life or term life?

Some people consider buying term life, which usually has lower initial payments. But term policies don’t build cash value and only last for a set time. If you want lifelong coverage, whole life may be the better fit.

Comparing whole life insurance rates

Whole life insurance rates vary based on age, health, and issuing company. If you’re shopping around, compare coverages designed for older adults. Even if you already have coverage, talking with a financial advisor can help you make the most of it.

Looking ahead

Life insurance for older adults can play an important role in long-term planning. The cash value you’ve built may help you now or become a lasting gift for your loved ones. Taking time for a whole life insurance check-up can help ensure your coverage aligns with your current goals.



This article is provided by New York Life Insurance Company for informational purposes only. This article is not intended to provide tax, legal, financial or accounting advice. Please consult your own professional for advice specific to your circumstances.