Accumulated Value
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Definition of 'Accumulated Value'The total amount an investment currently holds, including the capital invested and the interest (gain) it has earned to date. Accumulated value is important in the insurance field because it refers to the total acquired value in cash value life insurance. It is calculated as the sum or total of the initial investment plus the interest earned to date.Also referred to as accumulated amount or cash value. |
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Investopedia explains 'Accumulated Value'For example, the accumulated value of a fixed annuity is the quantity invested plus the interest collected, subtracting any fees or previous withdrawals. For insurance purposes, this value begins to accumulate when the policy holder pays a monthly premium. This premium pays for the insurance cost, policy expenses and other related expenses. The resulting amount after these costs and expenses are deducted is placed in an internal account by the insurance company. This amount placed in the internal account gains compounded interest and is considered the accumulated value.The accumulated value can be thought of as a forced savings account. The policy owner can even borrow against the accumulated value while keeping the policy intact. If the policy owner cancels the policy, they can cash it in for the cash value although penalties may be incurred. |
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