How Much Is My Life Insurance Policy Worth?

The value of your life insurance refers to the death benefit paid to beneficiaries. To find the cash value of your life insurance, calculate your total payments and subtract surrender fees. Remember, the value for a sale will be lower than the death benefit to allow the buyer to profit. Contact your policy issuer for the easiest valuation.

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  • Written By
    Christian Simmons, CEPF

    Christian Simmons, CEPF

    Financial Writer, Certified Educator in Personal Finance

    Christian Simmons is a financial writer who has worked professionally as a journalist since 2016. As an active member of the Association for Financial Counseling & Planning (AFCPE), Christian prides himself on his ability to break down complex financial topics in ways that readers can easily understand.

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    Lamia Chowdhury
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    Lamia Chowdhury

    Financial Editor

    Lamia Chowdhury is a financial editor at Lamia carries an extensive skillset in the content marketing field, and her work as a copywriter spans industries as diverse as finance, health care, travel and restaurants.

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    Thomas J. Brock, CFA®, CPA
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    Thomas J. Brock, CFA®, CPA

    Investment, Corporate Finance and Accounting Professional

    Thomas Brock, CFA®, CPA, is a financial professional with over 20 years of experience in investments, corporate finance and accounting. He currently oversees the investment operation for a $4 billion super-regional insurance carrier.

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  • Updated: November 7, 2023
  • 5 min read time
  • This page features 2 Cited Research Articles

Key Takeaways

  • The value of a life insurance policy typically refers to the amount of the death benefit or face value: the payout your beneficiaries receive when you die.
  • Another measure of a life insurance policy’s worth is its cash value, also called its surrender value.
  • The cash value of a life insurance policy allows you to convert the policy into a retirement fund or emergency fund.

How Do I Determine How Much My Life Insurance Policy Is Worth?

There are several different ways to determine how much your life insurance policy is worth. The value of the policy typically refers to the death benefit. The death benefit is the amount that is paid out to your beneficiary when you die.

The easiest way to determine the value is to contact the company that issued it. They should be able to tell you immediately what the value of your policy is.

If your premiums are relatively small, then there is likely not a large benefit connected to your policy. But if you are paying sizeable monthly premiums, then the value of the policy may be sizeable. Factors like your age and health also play a big role.

Remember that your policy’s worth in a sale will be much different from the death benefit amount. If you opt to sell your policy, you may only be able to get as little as 10% of the death benefit’s value.

What Does Accumulated Cash Value of a Life Insurance Policy Refer to?

The cash value, or surrender value, is a savings component included in some life insurance policies that can accumulate cash from premium payments. With an added cash value option, your life insurance policy can help contribute to a retirement nest egg or rainy-day fund for immediate access to cash.

Some life insurance policies have similar processes to accrue cash value. Your life insurance payments are split into three main categories: policy premium payments, insurance company operating costs and cash value. Each time you make a payment on your policy, your money is disbursed into these categories. The more you pay on your premium and the more interest accrues, the more your cash value grows.

A higher percentage of your payment is contributed to your cash value in the beginning of your policy. This allows your cash value to increase quickly. However, as you grow older, most of your payments are allocated toward your actual life insurance.

Read More: Life Settlement FAQs

What Is the Face Value of a Permanent Life Insurance Policy?

The face value of a permanent life insurance policy refers to the death benefit that is paid out to your beneficiary when you die. That amount is often what is considered the value of the policy. The face value and the value of the policy are essentially interchangeable terms.

Remember that face value does not equal the cash value. The face value of a policy can typically only be fully accessed if it is paid out as a death benefit.

The face value of your policy will be used to help determine what your payout would be in a life settlement. Larger face values can result in larger payouts.

How Much Could I Sell My Life Insurance For?

When looking to sell your life insurance policy, it is important to remember that you will not be able to get the full value of the policy.

Typically, the only way to receive the full face value is as the death benefit after you die. If you sell your policy in a life settlement, then you should expect to receive a sum significantly less than the death benefit.

Companies that participate in life settlements do so to make a profit. When you sell your policy, the buyer becomes the beneficiary of the death benefit. So, the lump sum you are offered will be less than the face value but likely more than the cash surrender value.

You may be able to sell your policy for more if you have a shorter life expectancy. There is even a specific type of sale, known as a viatical settlement, available to those who are terminally ill that can be particularly lucrative.

If you are young and healthy, you may have a difficult time selling your policy at all. But if you are older — in your 60s or 70s — then you may be able to sell your policy and receive a sizeable payment.

Example: $100,000 Life Insurance Policy

Say you have a life insurance policy with a $100,000 face value. That $100,000 is what your beneficiary would receive when you die.

If you opt to sell the policy, then you will field offers from different companies interested in buying the policy.

The amount of money you’re offered will vary based on your age and health. If you are older, then you may be able to get a significant chunk of money.

A company may offer you a payout in the range of $10,000 to $30,000, but this can vary from policy to policy. You receive that money as an immediate lump-sum payment.

Then, when you die, the company receives the $100,000 death benefit.

Read More: Life Settlement Options

FAQs About Life Insurance Policy Value

How does face value influence the cost of life insurance?

Typically, the greater the face value of a life insurance policy, the higher its cost. The two are directly proportional. The more you pay for a policy, the more you can expect your beneficiaries to receive as a death benefit.

What can cause face value to change?

Typically, the face value doesn’t change — it remains the amount you bought in the beginning. But you can alter the amount by adding riders, growing the policy’s cash value or taking out a loan against the policy. You might make these changes due to your age, income, debt, medical history, number of dependents or long-term financial goals.

Can I withdraw my cash value from life insurance?

You can withdraw cash value from permanent life insurance by taking out a loan against your policy. You can also withdraw a lump sum or several payments from the cash value, but doing so will typically reduce your death benefit.

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Last Modified: November 7, 2023