DEFINITION of 'Add To Cash Value Option'

A common benefit option on life insurance policies wherein the policy owner allows the dividends from policy to be used for the purposes of accumulating cash values. On death, the beneficiaries receive an increased death benefit from the cash value amount that was accrued within the policy.

BREAKING DOWN 'Add To Cash Value Option'

In universal life insurance, policy owners can opt to participate in the surplus of the insurance company and receive the dividends annually. Here, they have the option to add the accumulated cash value to the face amount when the death benefit is paid.

For example, on death, if the cash value accrued within a policy is $100,000. Under the add to cash value option, the beneficiaries would receive the face value of the life insurance policy plus the $100,000 cash value. However, the increased benefit option indicates higher premiums for the policy owners.

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