Accumulated Value

What is '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.

BREAKING DOWN '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.

RELATED TERMS
  1. Add To Cash Value Option

    A common benefit option on life insurance policies wherein the ...
  2. Whole Life Insurance Policy

    A life insurance contract with level premiums that has both an ...
  3. Cash Accumulation Method

    A mathematical method of comparing the costs of different cash ...
  4. Annuity Unit

    An accumulation unit for which the annuitant has annuitized their ...
  5. Accumulation Option

    A policy feature of permanent life insurance that allows policyholders ...
  6. Capital Accumulation

    This refers to profits that a company uses to increase its capital ...
Related Articles
  1. Insurance

    How Cash Value Builds In A Life Insurance Policy

    If you have permanent life insurance, more of your insurance premium goes to cash value in the early years of your policy: a step-by-step guide.
  2. Options & Futures

    Permanent Life Policies: Whole Vs. Universal

    If you're looking for life-long security, choosing between these two is the key.
  3. Insurance

    Getting Life Insurance in Your 20s Pays Off

    Find out how Americans in their 20s can benefit from a well-thought-out life insurance policy, especially if they are able to build cash value for retirement.
  4. Insurance

    6 Ways To Capture The Cash Value In Life Insurance

    If you die with cash value left in your life insurance policy, the money goes to the insurance company – not to your beneficiaries. Here's what to do instead.
  5. Insurance

    Indexed Universal Life: Cash, Flexibility And Safety

    IULs boast the security of fixed universal life policies and the interest-earning potential of variable policies.
  6. Investing

    Advising FAs: Explaining Life Insurance to a Client

    Life insurance was initially designed to protect the income of families, particularly young families in the wealth accumulation phase, in the event of the head of household's death.
  7. Retirement

    Life Insurance: How To Get the Most Out Of Your Policy

    There are many benefits to owning a life insurance policy - if you get the right one for you.
  8. Insurance

    Beware the Sneaky Math of Universal Life Insurance

    Universal life insurance's cash value can be a cash cow – if there's any left. Read on to see if it'll work as an income source after you've retired.
  9. Insurance

    Understanding Taxes on Life Insurance Premiums

    Learn about the tax implications of life insurance premiums, including when they might be taxable and whether they are tax deductible.
  10. Insurance

    Life Insurance With an Increasing Death Benefit

    Why buy a life insurance policy with an increasing rather than level death benefit
RELATED FAQS
  1. What is the difference between the death benefit and cash value of an insurance policy?

    Understand the difference between the various components of a life insurance policy including the death benefit and a policy's ... Read Answer >>
  2. How do I determine the face value of a life insurance policy?

    Read about how to determined the face value for any life insurance policy, and see what circumstances can trigger a change ... Read Answer >>
  3. What is the difference between carrying value and market value?

    Understand the difference between carrying value and market value. Learn when a company uses carrying value to value an asset ... Read Answer >>
  4. How is accumulation area calculated?

    Explore the use of accumulation areas in the analysis of traded securities. Learn about on-balance volume and its role in ... Read Answer >>
  5. What is the difference between term and universal life insurance?

    Term life insurance is the most basic of insurance policies. It is nothing more than an insurance policy that provides protection ... Read Answer >>
  6. Why should value investors consider the insurance sector?

    Discover why value investors should consider the insurance sector. Value investors look for extremes in valuation and sentiment ... Read Answer >>
Hot Definitions
  1. Physical Capital

    Physical capital is one of the three main factors of production in economic theory. It consists of manmade goods that assist ...
  2. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  3. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  4. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  5. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  6. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
Trading Center