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.

RELATED TERMS
  1. Level Death Benefit

    A life insurance payout that is the same whether the insured ...
  2. Life Insurance

    A protection against the loss of income that would result if ...
  3. Accumulated Value

    The total amount an investment currently holds, including the ...
  4. Acceleration Life Insurance

    A type of policy that pays a portion (typically 25\% or 50\%) ...
  5. Guaranteed Issue Life Insurance ...

    A type of financial-protection policy that provides cash to a ...
  6. Decreasing Term Insurance

    A type of annual renewable term life insurance that provides ...
Related Articles
  1. Managing Wealth

    Life Insurance With an Increasing Death Benefit

    Why buy a life insurance policy with an increasing rather than level death benefit
  2. 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.
  3. 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.
  4. Financial Advisor

    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.
  5. Financial Advisor

    Permanent Life Policies: Whole Vs. Universal

    If you're looking for life-long security, choosing between these two is the key.
  6. Financial Advisor

    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.
  7. Insurance

    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. Retirement

    Understanding Different Types of Life Insurance

    Understand the various types of life insurance, how each can be used in personal or business financial planning, and for whom they are best-suited.
Hot Definitions
  1. Leveraged Buyout - LBO

    The acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition. ...
  2. Current Assets

    A balance sheet account that represents the value of all assets that can reasonably expected to be converted into cash within ...
  3. Tax Liability

    The total amount of tax that an entity is legally obligated to pay to an authority as the result of the occurrence of a taxable ...
  4. Preferred Stock

    A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shares ...
  5. Net Profit Margin

    Net Margin is the ratio of net profits to revenues for a company or business segment - typically expressed as a percentage ...
  6. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
Trading Center