Does Term Life Insurance Offer Cash Value?

Explore the concept of cash value in insurance and whether term plans include this feature.
Check Life Insurance Policies
3 min
31-May-2025
When choosing a life insurance policy, it is crucial to understand the benefits it offers, especially regarding financial flexibility. One key term you may come across is the ‘cash value’ of a life insurance policy. However, many people are unsure whether term life insurance includes this feature. In this article, explore the concept of cash value, its relevance to term insurance, and how it differs from other insurance types.

What is ‘cash value’ in life insurance?

The cash value of a life insurance policy refers to the savings component available in certain types of life insurance plans, like whole life or universal life insurance. This feature allows policyholders to accumulate money over time, which can be accessed or borrowed against while the policy is active.

This cash value grows tax-deferred and is separate from the death cover. It provides financial liquidity, offering an option for the policyholder to access funds during their lifetime, subject to the terms of the policy.

Does term insurance offer cash value to the policyholder?

Term life insurance policies do not offer cash value. These policies are designed solely to provide a death cover to the beneficiary in case of the policyholder’s untimely demise during the term of coverage.

Since term life insurance focuses on providing high coverage at an affordable premium, it does not include a savings or investment component. This makes it a cost-effective choice for individuals seeking pure risk protection without added financial features like cash value accumulation.

What is covered under term insurance?

Term insurance offers comprehensive protection for the policyholder’s family by providing financial security in the event of their untimely death. It is primarily focused on offering a substantial death benefit at a low cost.

Key coverages under term insurance:

Death cover:

A lump sum amount is paid to the nominee if the policyholder passes away during the policy term.

Terminal illness coverage:

Some term plans include payouts if the insured is diagnosed with a terminal illness.

Accidental death covers:

Optional riders can enhance coverage by adding an extra payout for accidental death.

Disability coverage:

Riders can ensure financial support in case of total and permanent disability.

Critical illness cover:

Certain term plans offer payouts for critical illnesses as an add-on.

These features make term insurance an essential tool for ensuring the financial well-being of dependents.

Difference between term insurance and whole life insurance

While both term and whole life insurance policies provide life cover, their structures, benefits, and purposes differ significantly.

Term insurance:

A straightforward policy providing only a death benefit, with no cash value or savings component. It is valid for a fixed term and offers high coverage at affordable premiums.

Whole life insurance:

Combines life cover with a savings component, allowing policyholders to build cash value over time. It remains active for the policyholder’s entire life, provided premiums are paid.

FeatureTerm insuranceWhole life insurance
Coverage periodFixed term (10-30 years)Lifetime
Cash valueNot availableAccumulates over time
PremiumsLowerHigher
PurposePure risk protectionProtection plus savings
FlexibilityLimitedCan borrow against cash value or withdraw funds


Conclusion

While term life insurance plans are ideal for those seeking affordable and straightforward coverage, they do not offer cash value. If your priority is building savings alongside life cover, a whole life insurance policy might be more suitable. Understanding these differences helps you make informed decisions based on your financial goals and family’s needs. Always evaluate your options carefully to ensure optimal financial security.

Frequently asked questions

Do term insurance policies build cash value over time?
No, term insurance policies do not accumulate cash value. They are designed purely to provide financial protection through a death cover, without including a savings or investment component like whole life or universal life insurance.

How does cash value influence the cost of premiums?
Policies with a cash value feature, like whole life insurance, generally have higher premiums because they include both life coverage and a savings component. Term insurance, which lacks cash value, has significantly lower premiums due to its simplicity and focus on risk protection.

Is it possible to withdraw cash value from a term insurance policy?
No, you cannot withdraw cash value from a term insurance policy because it does not have a cash value component. Term insurance offers only a death cover and does not include savings or investment features.

Show More Show Less

Bajaj Finserv App for All Your Financial Needs and Goals

Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.

You can use the Bajaj Finserv App to:

Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.

Explore and apply for co-branded credit cards online.

Invest in fixed deposits and mutual funds on the app.

Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.

Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.

Apply for Insta EMI Card and get a pre-approved limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on No Cost EMIs.

Shop from over 100+ brand partners that offer a diverse range of products and services.

Use specialised tools like EMI calculators, SIP Calculators

Check your credit score, download loan statements and even get quick customer support—all on the app.

Download the Bajaj Finserv App today and experience the convenience of managing your finances on one app.

Do more with the Bajaj Finserv App!

UPI, Wallet, Loans, Investments, Cards, Shopping and more

Disclaimer

*T&C Apply - Bajaj Finance Limited (‘BFL’) is a registered corporate agent of third party insurance products of Bajaj Allianz Life Insurance Company Limited, HDFC Life Insurance Company Limited, Life Insurance Corporation of India (LIC), Bajaj Allianz General Insurance Company Limited, SBI General Insurance Company Limited, ACKO General Insurance Company Limited, HDFC ERGO General Insurance Company, TATA AIG General Insurance Company Limited, ICICI Lombard General Insurance Company Limited, New India Assurance Limited, Chola MS General Insurance Company Limited, Zurich Kotak General Insurance Co. Limited , Star Health & Allied Insurance Co. Limited, Care Health Insurance Company Limited, Niva Bupa Health Insurance Company Limited , Aditya Birla Health Insurance Company Limited and Manipal Cigna Health Insurance Company Limitedunder the IRDAI composite CA registration number CA0101. Please note that, BFL does not underwrite the risk or act as an insurer. Your purchase of an insurance product is purely on a voluntary basis after your exercise of an independent due diligence on the suitability, viability of any insurance product. Any decision to purchase insurance product is solely at your own risk and responsibility and BFL shall not be liable for any loss or damage that any person may suffer, whether directly or indirectly. Please refer insurer's website for Policy Wordings. For more details on risk factors, terms and conditions and exclusions please read the product sales brochure carefully before concluding a sale. Tax benefits applicable if any, will be as per the prevailing tax laws. Tax laws are subject to change. BFL does NOT provide Tax/Investment advisory services. Please consult your advisors before proceeding to purchase an insurance product. Visitors are hereby informed that their information submitted on the website may also be shared with insurers. BFL is also a distributor of other third-party products from Assistance Services providers such as CPP Assistance Services Pvt. Ltd., Bajaj Finserv Health Ltd. etc. All product information such as premium, benefits, exclusions, sum insured, value added services, etc. are authentic and solely based on the information received from the respective insurance company or the respective Assistance service provider company.

Note – While we have made all efforts and taken utmost care in gathering precise information about the products, features, benefits, etc. However, BFL cannot be held liable for any direct or indirect damage/loss. We request our customers to conduct their research about these products and refer to the respective product’s sales brochures before concluding their sale.

Show All Text