Kontantvärde

Kontantvärde, often translated as cash value, is a component found in certain types of life insurance policies, primarily permanent life insurance such as whole life and universal life insurance. It represents an investment-like feature that grows over time on a tax-deferred basis.

A portion of the premium paid by the policyholder is allocated to the cash value, while the remainder covers the cost of insurance and administrative expenses. The cash value accumulates based on a guaranteed interest rate or a rate tied to market performance, depending on the policy type.

Policyholders can access the accumulated cash value during their lifetime. This can typically be done through policy loans, withdrawals, or surrendering the policy. Policy loans do not require credit checks and can be repaid at the policyholder's discretion, although unpaid loans will reduce the death benefit and can eventually lead to policy lapse if not managed. Withdrawals also reduce the death benefit and may be subject to taxes if the amount withdrawn exceeds the premiums paid. Surrendering the policy means forfeiting the death benefit entirely and receiving the available cash value, less any surrender charges.

The cash value is a living benefit of the policy, providing financial flexibility. It can be used for various needs, such as supplementing retirement income, covering emergencies, or funding education expenses. The growth of the cash value is generally tax-deferred, meaning taxes are not paid annually on the interest earned. Taxes may apply if withdrawals exceed the policy's cost basis, or upon surrender.