Add To Cash Value Option

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Term Life Insurance

    A policy with a set duration limit on the coverage period. Once ...
  2. Universal Life Insurance

    A type of flexible permanent life insurance offering the low-cost ...
  3. Variable Life Insurance Policy

    A form of permanent life insurance, Variable life insurance provides ...
  4. Risk

    The chance that an investment's actual return will be different ...
  5. Lloyd's Of London

    A British insurance market where members join hands as syndicates ...
  6. Reinsurer

    A company that provides financial protection to insurance companies. ...
Related Articles
  1. 15 Insurance Policies You Don't Need
    Insurance

    15 Insurance Policies You Don't Need

  2. Variable Vs. Variable Universal Life ...
    Retirement

    Variable Vs. Variable Universal Life ...

  3. Long-Term Care Insurance: You Have Options
    Options & Futures

    Long-Term Care Insurance: You Have Options

  4. Life Insurance: Putting A Price On Peace ...
    Insurance

    Life Insurance: Putting A Price On Peace ...

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center