Which policy element represents the policy's savings component or living benefit?

Which policy element represents the policy's savings component or living benefit?

• A. Death benefit
• B. Cash value
• C. Face amount
• D. Premium

Answer: (B)

Cash value is the savings component of a permanent life insurance policy. A portion of each premium is allocated to this cash value, and it grows over time, typically on a tax-deferred basis. This living benefit lets the policyowner access funds during life through loans or withdrawals, or use the cash value to help cover premiums. In contrast, the death benefit is the amount paid to beneficiaries when the insured dies, and the premium is simply the ongoing cost to keep the policy in force. Term policies generally don’t accumulate cash value.

Cash value is the savings component of a permanent life insurance policy. A portion of each premium is allocated to this cash value, and it grows over time, typically on a tax-deferred basis. This living benefit lets the policyowner access funds during life through loans or withdrawals, or use the cash value to help cover premiums. In contrast, the death benefit is the amount paid to beneficiaries when the insured dies, and the premium is simply the ongoing cost to keep the policy in force. Term policies generally don’t accumulate cash value.