Does Term Life Insurance Have a Cash Value?

• The cash value of term insurance is zero because these policies don’t include a savings or investment component.
• Premiums only pay for coverage during the selected term, such as 10, 20, 25, or 30 years.
• When the term ends, the policy expires unless renewed or converted to a permanent policy (if the policy allows).
• Permanent coverage like whole life policies or universal life policies include a cash value component that grows over time.
• The main benefit of term insurance is affordable, straightforward protection for your family.

No, term life policies don't build cash value. When you buy a term policy, your premiums only cover the cost of insurance for a set number of years. There’s no savings or investment portion accumulating in the background.

That simplicity is part of what makes term life policies so affordable. You’re paying strictly for coverage during your chosen term; nothing more and nothing less. If you outlive the policy, it simply expires, and your premiums don’t get refunded unless you’ve purchased a special feature called return of premium term life insurance, which comes with higher costs.

Term life coverage is designed to provide protection only during a specific period, not to accumulate money over time. Each premium payment goes toward the cost of your coverage and administrative expenses, not into a savings account.

That structure keeps premiums lower than permanent life policies, but it also means you don’t build savings within your policy. The goal of term insurance is straightforward: provide a death benefit to your loved ones if you pass away during the policy term.

What Happens to My Premiums When My Term Policy Ends?

When your term policy ends, coverage stops unless you renew or convert it to a permanent policy. Your premiums don’t roll over or return to you since they’ve already been used to provide protection during the term.

However, it’s important to know that some insurers do offer return of premium term policies, which refund part or all of what you’ve paid if you outlive the term. These plans can be appealing but typically cost significantly more, and not all carriers offer them.

Read: How Long Does It Take For a Beneficiary To Receive Money

If you want cash value life insurance, you’ll need to look at permanent life insurance rather than term coverage. Permanent policies last your entire life as long as premiums are paid and include a built-in savings feature that grows over time.

Common types of policies include:

• Whole life insurance: Offers guaranteed cash value growth at a fixed rate set by the insurance company. It also includes level premiums and a guaranteed death benefit.
• Universal life insurance (UL): Provides flexible premiums and adjustable death benefits. The policy's cash value grows based on interest rates or market performance, depending on the subtype:
• Fixed Universal Life insurance (UL): Also called traditional UL. Credits a fixed interest rate declared by the life insurance company, offering steady but modest cash value growth.
• Indexed Universal Life insurance (IUL): Ties cash value growth to a market index, with both a floor and a cap on returns. Money isn’t directly invested in the stock market, but performance partly determines how much interest your policy earns.
• Variable Universal Life insurance (VUL): Invests the cash value in sub-accounts similar to mutual funds, which can yield higher returns but also carry greater risk.

Each of these permanent insurance policies cost more than term life but offers long-term value accumulation and flexibility for those who want protection as well as savings potential.

Read: Best Life Insurance Companies for Young Adults (2025)

Should I Get Life Insurance With Cash Value?

It depends on your goals and budget. If you want lifelong insurance coverage or a policy that builds savings over time, a permanent plan might be right for you. If you mainly want affordable protection for a specific period, term coverage is often the simpler, lower-cost choice.

Even though term life policies don’t accumulate cash value, they still deliver important financial value through affordable protection. The main advantage is cost. You can secure a large amount of coverage for much less than a permanent policy. That affordability lets many families protect their income, mortgage, or other major expenses during their working years.

You can also create your own version of “cash value” by investing the money you save on your life insurance premiums. Some people use separate savings or retirement accounts to build long-term wealth while keeping their term policy for pure protection. This approach gives you flexibility without locking money into a policy.

If your needs change later, most carriers, including Ethos partners, offer the option to convert term life into a permanent policy that does include cash value savings. Conversion availability and timelines vary, so review your policy details early to make sure that option remains available.

Read: Death benefit and Life insurance

Life insurance policies vary in how they handle cash value. Some build savings that can be accessed during your lifetime, while others focus entirely on protection. The examples below highlight what happens to your premiums and potential savings under different approaches.

A term life policy may not grow cash value, but it can still deliver lasting financial security. Its simplicity and affordability make it one of the easiest ways to protect your loved ones during key stages of life. You get peace of mind knowing your family could stay financially stable if something unexpected happens.

Read: Types of Whole Life Insurance

Ethos makes it simple to compare coverage options, apply online, and find a policy that fits your goals and budget. You can choose from flexible term lengths or explore conversion options later if your needs change.