Last Updated July 2025

A:Answer  Permanent life insurance is designed to last for the policyholder’s lifetime¹, as long as premiums are paid. Permanent life insurance — a category that includes whole life and universal life — typically has two key features: a death benefit and a cash value that builds within the policy.

Two important aspects of the cash value in permanent life insurance:

• The primary purpose of cash value is to help keep the policy affordable as you age, and it may help keep your policy in force if you are unable to pay premiums for some length of time. If you die while the policy is in force, some types of permanent insurance will pay you only the death benefit amount of the policy, others will pay the death benefit amount plus the cash value.
  
  
• You, as the policy owner, may be able to use your available cash value for other expenses under certain conditions by borrowing  from your policy or surrendering part of it². Surrendering means cashing out some of the cash value, and the surrender value is what you would receive, typically cash value minus any surrender fees. A loan is temporary, you can pay back what you’ve borrowed from your policy, while a surrender permanently reduces the death benefit.

When it comes to permanent life vs. term life insurance, it is permanent’s lifetime duration and cash value that separate the two. Term life carries no cash value and lasts for a specific amount of time. If the insured dies within that period, their beneficiary is paid the death benefit. If you cancel your policy, you don’t get anything back. The cash value of permanent life insurance can help keep the policy in force for life and may also help provide future financial support for beneficiaries. With a lower initial cost but no cash value, term life is more often used for a specific expense that has an endpoint, like helping with college tuition or paying a mortgage.

Permanent life insurance generally costs more to start than term life insurance, because your premiums are intended to build cash value for the future as well as covering current costs.

Types of permanent life insurance

• Whole life. Premiums and the death benefit are guaranteed to stay level, and cash value grows at a guaranteed rate, as long as premiums are paid. This is often considered a conservative type of permanent life insurance.
  
  
• Universal life. More flexible than whole life, universal life lets you choose how much premium to pay, within limits. If you pay more than the current cost of insurance, this additional amount is added to a separate account and can grow as cash value. You can also choose whether the death benefit stays level or increases by the available cash value of the policy, within policy limits. 

There are different types of universal life insurance that build cash value in different ways. Traditional universal life has the insurance company set an interest rate based on the company’s own investing. Indexed universal life allows you to tie the growth of your cash value to market indexes. 

Learn more about the pros and cons of permanent life insurance and other types of life insurance coverage.

FCS-2258-23    07/25