What is Add to Cash Value Option

Add to value cash option is a universal life insurance feature that allows you to use your proceeds from your life insurance policy to build up cash values. This cash value is then invested by your life insurance company and could offer more returns depending on the result of the investment. Add to cash value option is one way to increase the face value of your life insurance plan.

Pros

  1. It increases the death benefit

In the event of death, a death benefit is normally paid to surviving dependents. However, when you use the add to cash value option, the death benefit and cash value is paid to your beneficiaries. To make this clearer, let’s assume your life insurance policy is worth $500,000 with a cash value of $100,000. Without the add to cash value option, your loved ones will only get $500,000 when you die. But if your policy has the add to cash value option, your family will receive $600,000.

  1. It provides an additional source of money

With your add to cash value option, your life insurance policy can also be a source of funding for your future projects. Your life insurance company can allow you borrow from your cash value as long as it has sufficient funds.

Cons

  1. It is expensive

When you choose add to cash value option, you should expect to pay premiums higher than that of other life insurance. This is one reason why universal life insurance are generally costly than the other types of life insurance.