How Does Cash Value Of Life Insurance Work? 
In simple terms , permanent life insurance requires premiums higher than what it takes to cover the cost of the death benefit . The surplus premium creates a `` cash value '' that grows over time . The cash value can be comprised of a guaranteed value plus a non-guaranteed component such as excess interest or dividends . The best way to see how cash value might work for you is to ask an agent for an `` illustration '' showing how the policy might work on a year by year schedule . 