Whole Life Insurance Cash Value Chart [3 Great Examples]

January 27, 2024
Written by: Steven Gibbs | Last Updated on: April 19, 2024
Fact Checked by Jason Herring and Barry Brooksby (licensed insurance experts)

Insurance and Estates, a strategic life insurance provider composed of life insurance professionals, is committed to integrity in our editorial standards and transparency in how we receive compensation from our insurance partners.

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The following article examines three different whole life cash value charts to understand how different policy designs affect the outcome of the policy’s long term cash value growth.

Table of Contents

What is Whole Life Insurance Cash Value?

Whole life insurance, a type of permanent life insurance, is designed to provide coverage for the entire lifetime of the policyholder. It not only guarantees a death benefit to the beneficiaries upon the policyholder’s death but also includes a savings component known as the cash value. This cash value grows over time at a guaranteed rate set by the insurance company and can be used by the policyholder for various financial needs, such as loans or withdrawals, while still alive. Unlike term life insurance, which only offers coverage for a specified period, whole life insurance remains in effect as long as premiums are paid, offering both a predictable premium structure and a way to build cash value as a financial asset.

Permanent life insurance is an integral part of most financial or retirement plans. Although most people don’t relish the idea of discussing their own mortality, the reality is that if you have people in your life who would struggle financially if you were no longer here, then it is likely that you need life insurance.

While term life insurance provides “basic” death benefit protection, there are other types of cash value life insurance that offer many additional enticing features – benefits that can be enjoyed while the insured is still alive – based on how the permanent life insurance policy is structured.

One of these types of policies is whole life insurance. But not all whole life insurance policies are the same. So, it is important that you have the right type of cash value life insurance plan in place. Otherwise, you could end up unintentionally forfeiting various benefits that you – and those you care about – were counting on.

The Key Components of Cash Value Whole Life Insurance

Cash Value Whole Life is a form of permanent life insurance coverage. This means that the policy will remain in force – for the “whole lifetime” of the insured – as long as the premium is paid. These policies include two primary components. These are the:

  • Death benefit
  • Cash value

A whole life insurance policy differs from term life insurance, which only offers a death benefit (with no accumulated cash value account growth). There are some additional differences between a term policy and whole life policy.

Term Life Insurance

Term life insurance is typically used for “temporary” needs because, as its name implies, it only remains in force for a certain amount of time, or “term,” such as 10 years, 20 years, or 30 years, with some companies offering 40 year term life insurance.

The cost of a term life insurance policy is oftentimes low, especially if the insured is young and in good health at the time of application. However, the term policy does not last the insureds entire lifetime, which can pose a problem down the road if the insured wishes to keep the life insurance after the term expires.

If the insured is still alive after a term life insurance policy has come to the end of its time limit, he or she may have to requalify if they want to renew their coverage. At this point, the new term life insurance premium going forward will usually be higher (and in some cases, much higher) because it will be based on the insured’s then-current age and health condition.

If the insured has contracted a serious health condition, they may even be considered uninsurable – and this could have devastating financial consequences for loved ones who were counting on the death benefit for their future financial support.

Whole Life Insurance

With a whole life insurance policy the coverage will stay in force, and generally, the life insurance premium amount will remain the same for the entire life of the policy – even as the insured ages, as well as if they become seriously ill.

Because of this, owning whole life insurance can be a viable strategy for ensuring that you will have financial protection in place for your survivors, both now and in the future. Plus, the death benefit funds are also received income tax-free to the beneficiary(ies).

Cash Value

Whole life insurance also includes a cash value account. The funds that are in this part of the policy grow tax-deferred, meaning that there is no tax due on the gain unless or until the money is withdrawn.

While whole life insurance is also designed to pay an income tax-free death benefit to beneficiaries, because of the accumulated cash value growth, these flexible financial tools can be used for so much more – such as:

  • Generating tax-free retirement income
  • Paying off higher-interest debts (such as credit card balances)
  • Providing another avenue for tax-advantaged growth (in addition to IRA and/or retirement plan funds)
  • Paying the policy’s premium (as versus making these payments out of pocket)
  • Making purchases – including “high ticket” items like vehicles – without having to borrow money from a bank or other lender

How Cash Value Builds in a Whole Life Insurance Policy

Three Pools

When you make a premium payment on a whole life insurance policy, the insurance company divides your funds into three “pools.” One of these goes towards the death benefit (with the cost being based on the insured’s age, health, and other underwriting factors), another goes for the operating costs of the insurer, and the third goes into the policy’s cash value account.

PUAs

The cash value can be further enhanced through the use of riders, such as the paid up additions rider. A paid up additions rider allows you to purchase additional paid up life insurance, which increases your policy’s available cash value.

Guaranteed Rate

Although some other types of permanent life insurance policies provide the opportunity to generate higher returns, the funds that are in a whole life policy’s cash value grow based on a guaranteed rate that is set by the insurer.

This rate is typically around 3-4%. And your principal and your previous gains are also protected from market risk, so there is no need to “make up” for any losses – even if the stock market endures a significant correction.

Dividends

Dividend paying whole life insurance pays out a dividend to participating policyholders annually. The default for dividends is to purchase paid up additions, which grow your cash value and death benefit.

Tax Deferred

The tax-deferred nature of whole life insurance cash value can also help to boost your overall return. That is because the money is generating a true compound interest return on your principal, as well as on prior interest, and on funds that would have otherwise been paid out in taxes each year. Therefore, compared to a fully taxable account, whole life insurance cash value can perform substantially better over time as a true compound interest growth account (with all other factors being the same).

Tax-Deferred versus Fully Taxable Account

Although the cash component of a whole life insurance policy will usually grow somewhat slowly in the initial years (due in large part to your premium going to pay the insurer’s expenses), the value can really snowball over time due to true compound growth, particularly given its tax-advantaged nature.

So, with that brief look at what makes whole life insurance so great, let’s take a look at some cash value charts. (Please note, you can click the following link if you are interested in seeing some whole life insurance rates.)

Whole Life Insurance Cash Value Charts

We will be looking at three different whole life insurance cash value charts. Policy one designed for maximum death benefit, policy two is designed for accelerated cash value growth, and policy three is focused on maximum early cash value accumulation.

whole life insurance cash value chart

Taking a look at a basic whole life insurance cash value chart (see below) can provide more insight on how the funds perform over time. Using an example of a $12,000 yearly premium, the funds in the initial years go entirely towards the cost of insurance, as well as to the insurer’s operating costs.

Over time, though, the cash value account grows – especially given the tax-deferred feature that takes annual gains taxes out of the equation. Due to the amount of cash in the policy, the insured can eventually stop making premium payments altogether, and instead keep the policy in force by using money from the cash value to fund it.

Whole Life Cash Value Chart #1

In this example, the whole life insurance policy is structured solely for the death benefit, so the entire premium payment is all going to the base.

Policy 1    
Maximum DB    
All Base    
Policy YearAgeAnnual PremiumAnnual Cash Value IncreaseTotal Cash Value
1361200000
2371200000
338120005,9865,986
4391200010,70516,691
5401200014,89631,587
6411200013,58445,172
7421200014,58959,760
8431200015,53175,291
9441200016,52891,818
10451200017,590109,408
11461200018,288127,696
12471200019,362147,058
13481200020,488167,546
14491200021,647189,193
15501200022,843212,036
16511200022,451234,487
17521200023,652258,139
18531200024,907283,047
19541200026,221309,267
20551200027,583336,850
21561200028,978365,829
22571200030,459396,287
23581200032,021428,309
24591200033,692462,001
25601200035,458497,459
26611200037,303534,762
27621200039,238574,000
28631200041,226615,226
29641200043,305658,532
30651200045,456703,987
31661200047,785751,772
32671200050,176801,948
33681200052,663854,611
34691200055,266909,877
35701200057,970967,847
36711200060,7491,028,597
37721200063,6181,092,214
38731200066,5291,158,743
39741200069,5121,228,255
40751200072,5621,300,817
4176063,2571,364,074
4277065,9021,429,977
4378068,6221,498,598
4479071,4461,570,044
4580074,3181,644,362
4681077,2071,721,569
4782080,1191,801,687
4883083,1151,884,803
4984086,0831,970,886
5085089,0032,059,889
5186092,1792,152,068
5287094,9012,246,969
5388097,4632,344,432
5489099,8372,444,268
55900102,1622,546,430
56910104,4362,650,866
57920106,7182,757,584
58930109,1682,866,751
59940111,9122,978,664
60950115,1613,093,824

Using Riders to Enhance Whole Life Insurance Cash Value Build-Up

As with many other financial and insurance products, whole life can be “customized” so that the policy more closely fits in with your specific needs. One way to do this is by adding various riders.

Paid Up Additions (PUA)

One rider in particular is the paid up additions, or PUA, rider, which can allow you to have equity in your whole life insurance policy starting in the very first month. This is one of the most powerful components with respect to the accumulation of cash value in a whole life insurance policy.

In essence, a paid up additions rider adds more cash value into a participating whole life insurance policy which increases the performance of the policy’s cash value account.

In this case, every dollar of premium that is allocated to the paid up additions rider creates a small “paid up” insurance policy that has its own cash value that is created right away.

With that in mind, a whole life insurance policy that has a substantial portion of its total premium payment going towards paid up additions will often perform much better than those that do not take advantage of PUAs.

Given more of a focus on growing the cash value (and less on the policy’s death benefit coverage), take a look again at the whole life insurance cash value chart above that shows the base plan and compare it with the chart below which shows a policy that includes a PUA rider on it.

As with the base plan, the insured starts the policy at age 36, and pays a premium of $12,000 per year into it between Year 1 and Year 40 (until age 75), for a total input of $480,000 in premiums paid in.

Whole Life Cash Value Chart #2

In this example, the policy is structured so that a portion of the premium payment is going equally to the base and to paid up additions. This design will provide more cash value, with a lower initial death benefit that will grow over time as the cash value in the policy increases.

Policy 2    
Accelerated CV Growth    
Base + PUA    
Policy YearAgeAnnual PremiumAnnual Cash Value IncreaseTotal Cash Value
136120005,8105,810
237120006,37812,188
338120009,56021,748
4391200012,16133,909
5401200014,53148,440
6411200014,30862,748
7421200015,20977,957
8431200016,09794,054
9441200017,039111,092
10451200018,041129,134
11461200018,901148,035
12471200019,963167,998
13481200021,077189,075
14491200022,236211,311
15501200023,446234,757
16511200023,932258,689
17521200025,214283,903
18531200026,558310,461
19541200027,965338,426
20551200029,429367,855
21561200030,944398,799
22571200032,544431,343
23581200034,232465,575
24591200036,025501,600
25601200037,920539,521
26611200039,906579,427
27621200041,984621,410
28631200044,132665,543
29641200046,380711,923
30651200048,713760,637
31661200051,225811,861
32671200053,805865,666
33681200056,506922,172
34691200059,322981,494
35701200062,2611,043,755
36711200065,2871,109,042
37721200068,4091,177,451
38731200071,5921,249,043
39741200074,8691,323,913
40751200078,2211,402,133
4176069,6111,471,745
4277072,6041,544,349
4378075,6921,620,041
4479078,8851,698,926
4580082,1551,781,081
4681085,4451,866,526
4782088,7861,955,312
4883092,2102,047,522
4984095,6282,143,150
5085099,0052,242,155
51860102,6652,344,820
52870105,8592,450,679
53880108,9152,559,593
54890111,7812,671,374
55900114,5962,785,970
56910117,3682,903,338
57920120,1273,023,465
58930123,0533,146,518
59940126,2703,272,788
60950129,9773,402,765

PUA + Term Rider

To maximize the growth in the cash value account even further, yet another alternative could be to add a paid up additions rider, as well as a term rider. In this scenario, you would add term life insurance into the overall mix.

Why would you do that – especially if you already have a whole life insurance policy that provides death benefit protection?

One reason is so that you don’t “overfund” the whole life policy and turn it into a Modified Endowment Contract, or MEC – which could take away the tax advantages of the plan. In its most basic sense, a Modified Endowment Contract is a tax qualification of a life insurance policy whose funding exceeds federal tax law limits.

According to the IRS, if a policy holder places too much cash inside of a life insurance policy, it will lose its status as “insurance,” and it instead becomes an investment vehicle – and this can erase its tax-advantaged status, such as allowing the cash value to grow on a tax-deferred basis.

By adding a term rider to your policy, then, the amount of the death benefit is increased, which can help to keep the policy from becoming a Modified Endowment Contract – and allow you to place more money into the paid up additions rider, increasing the cash value even faster.

So, in some instances, it makes sense to include a term rider to your plan. Here again, by paying premiums of $12,000 per year for 40 years, the cash value account could end up growing to nearly $3.5 million – which represents more than 7 times the premium cost outlay…and this is accomplished with no stock market risk to contend with. As an added “bonus,” the policy will provide an income tax free death benefit to the beneficiary(ies) if the insured passes away.

Whole Life Cash Value Chart #3

In this example we have a policy structured for maximum early cash value growth, by designing the policy with Base+Paid Up Additions+Term Rider. The addition of the term rider allows for more cash to be put into the policy in the early years.

Policy 3    
Maximum CV Growth    
Base + PUA + Term    
Policy YearAgeAnnual PremiumAnnual Cash Value IncreaseTotal Cash Value
136120007,6307,630
237120008,36315,994
3381200010,68326,677
4391200012,62939,306
5401200014,43253,738
6411200014,52768,265
7421200015,38283,647
8431200016,24199,888
9441200017,164117,052
10451200018,144135,197
11461200019,046154,243
12471200020,096174,338
13481200021,201195,539
14491200022,354217,893
15501200023,562241,455
16511200024,303265,758
17521200025,596291,355
18531200026,951318,305
19541200028,369346,674
20551200029,844376,518
21561200031,371407,889
22571200032,970440,859
23581200034,664475,524
24591200036,471511,995
25601200038,387550,382
26611200040,398590,780
27621200042,502633,282
28631200044,683677,965
29641200046,971724,937
30651200049,356774,292
31661200051,942826,234
32671200054,607880,841
33681200057,420938,261
34691200060,374998,635
35701200063,4901,062,125
36711200066,6401,128,765
37721200069,8391,198,604
38731200073,1041,271,708
39741200076,4711,348,179
40751200079,9141,428,092
4176071,4821,499,574
4277074,5791,574,153
4378077,7771,651,930
4479081,0801,733,010
4580084,4691,817,480
4681087,8811,905,360
4782091,3501,996,710
4883094,9032,091,613
4984098,4562,190,069
50850101,9722,292,042
51860105,7772,397,819
52870109,1152,506,934
53880112,3212,619,255
54890115,3382,734,593
55900118,3022,852,896
56910121,2282,974,124
57920124,1333,098,256
58930127,2043,225,461
59940130,5663,356,026
60950134,4133,490,439

All Whole Life Insurance Policies are NOT the Same

Even though it is possible to build up a significant amount of cash value in a whole life insurance policy, it is absolutely essential to understand that not all of these policies are exactly the same. In fact, there are certain types of whole life insurance policies that are only offered through specific insurers that can provide this type of performance.

These are known as “participating” whole life policies – and they are provided through mutual life insurance companies.

Mutual life insurance companies are essentially “owned” by their policy holders. Therefore, these individuals have a right to vote on the board of directors. They may also receive dividends on their whole life insurance policies.

The life insurance dividends may be added to the cash value account, which in turn, can add even more to the total value of the account. While the payment of dividends is not guaranteed, there are some mutual insurance carriers that have consistently paid dividends every year to their policy holders for well over 100 years.

A mutual life insurance company differs from a “stock” insurance company in that the latter are owned by stockholders. Therefore, the key objective of stock insurers – like most other publicly traded companies – is to generate a profit for these shareholders, and this may not necessarily benefit the company’s insurance policy holders.

The dividends that are paid out by a mutual life insurance company are in addition to the guaranteed annual cash value account increases. Given that – plus the tax-deferred nature of the cash value growth – it is easy to see how a properly structured whole life insurance policy from a mutual insurer could add a significant amount of cash that could be used for any number of pursuits, such as retirement income or purchasing cash flowing real estate
.

What Other Types of Life Insurance Have Cash Value?

The other primary type of life insurance that has a cash value component is universal life insurance. There are three types of universal life policies, guaranteed universal life, indexed universal life and variable universal life.

Guaranteed Universal Life Insurance grows at a fixed rate set by the insurer. Indexed Universal Life grows based on an underlying index, such as the S&P 500. And Variable Universal Life grows based on an investment fund performance, much like a mutual fund.

How to Access Funds from Life Insurance Cash Value

Withdrawal

If you opt to access funds from the cash value account of a whole life insurance policy, there are a couple of ways to go about it. One is to simply take a withdrawal. By doing so, however, you will have to pay tax on any amount of the withdrawal that is considered gain.

Borrow Against Your Cash Value

An alternate option could be to take out a life insurance loan. If you go this route, the money that you access via a loan will be tax-free. In addition, because you are actually taking a loan from the insurance company – and not technically borrowing funds from the cash value of the policy itself – interest will continue to accumulate on the entire amount of your cash value.

For instance, if your policy has a cash value of $80,000 and you borrow $30,000, interest will continue accruing on the entire $80,000. What other bank or lender would allow you to do that?

Although there is typically a small amount of interest that is charged on the outstanding balance of a loan from the cash value of a whole life insurance policy, it is generally less than that of a bank, credit card, or other type of personal loan interest.

Plus, the loan balance does not necessarily have to be repaid during your (or the insured’s) lifetime. In this case, if there is still an outstanding loan balance upon your passing, it will be paid off using the policy’s death benefit proceeds. Then, the remainder of the funds will be paid out to your beneficiary(ies).

How to Choose the Right Whole Life Insurance Policy for Your Specific Objectives

There is a long list of reasons why whole life insurance could be a good addition to your overall portfolio – and they go far beyond just the payout of a death benefit for your beneficiaries in the future.

In fact, there are many cases where it makes sense to minimize the death benefit, while at the same time taking steps to maximize the cash value component of the policy.

When putting together a plan, though, it is essential that all of the proper steps are followed.

In addition, not all whole life policies are the same, nor do all insurance carriers offer the best type of plan to use in the cash value strategy you are looking for.

Pro Client Guide

Because there can be so many parameters to be mindful of, it is recommended that you discuss your goals and needs with a life insurance specialist who can guide you through all of the steps, as well as help you to narrow down which type of policy and life insurance company is best for you. They can also help you to ensure that the policy you go with does not turn into a Modified Endowment Contract and lose the tax advantages that you were counting on.

If you’d like to learn more, simply follow this link to watch our webinar about the High Cash Value Base + PUA + Term designed policy described above.

At Insurance and Estates, we place a key focus on creating strategies that can help grow and protect your assets and income, as well as the people you love and care about. So, if you would like to set up a time to discuss your specific objectives – as well as possible solutions – contact Insurance and Estates by calling (877) 787-7558 or send us an email by going to info@insuranceandestates.com. We look forward to talking with you.

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4 comments

  • Darryl Elsley
    Darryl Elsley

    Please advise the Base Sum Insured in example chart provided. Also what amount of Term Insurance is attaching? The charts do not show Sum Insured at all. Table 3 appears to offer the best value, with immediate Cash Value end of year 1. Why offer tables 1 and 2 ?
    Please advise Commission Paid in 1st year, and trails that follow. Also companies that offer this Policy selection. My Agency and clients see value . Thank you.

    • SJG
      A

      Hi Darryl, thanks for connecting. This is outside of the scope of a blog comment in my opinion, so the best way to get more concrete feedback is to schedule a zoom call with Barry Brooksby who offers agent training, etc. You can email him at barry@insuranceandestates.com.

      Thanks,

      Steve Gibbs for I&E

  • Darryl Elsley
    Darryl Elsley

    Please provide further information on the Sum Insured using the 3 tables demonstrated.
    How much is the Base Sum Insured and what is the Term Sum Insured also.(Not shown)
    Am wondering what are the Benefits of Tables 1 and 2, when the Cash Value under Table 3
    commences in year 1 and provides a superior Cash return long term.
    What is the commission paid 1st year and trails please?
    Name of US companies providing this cover please. My Agency is interested. Thank you.

    • SJG
      A

      Hi Darryl, the best way to get more concrete feedback is to schedule a zoom call with Barry Brooksby who offers agent training, etc. You can email him at barry@insuranceandestates.com.

      Best, Steve Gibbs for I&E

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