A viewer asked if the family collects the cash value too, which became a viewer question video on whether beneficiaries get the death benefit and the cash value. The answer isn't a quick yes or no. It depends on the product and the way the policy was designed. Some people use the question to argue that you put money in and the company keeps it, so I'll take it apart. I'll cover the two policies I work with most, whole life and indexed universal life, or IUL.
Whole life first. A whole life policy starts with a death benefit, and the base premiums are priced so the cash value reaches that death benefit by the end of the paying years. On a policy that runs to age 95, a $250,000 policy has $250,000 of cash value at 95. Extra money you add and the dividends, which are a share of the company's profit paid to policy owners and are not guaranteed, build cash value on top of that. The death benefit rises with it. If you built $250,000 of cash value on a $250,000 policy, the death benefit is $500,000, and it pays out tax free as a death benefit. A carrier that simply handed over the cash value would likely create a tax bill, which is why it's paid this way.
The designs differ in how the death benefit starts. In one, the policy begins with a small death benefit and it climbs with each extra premium. In another, the policy blends in term insurance, which is coverage for a set period with no cash value. It starts with a high term amount, and each year some term burns off as paid-up additions replace it. A paid-up addition is a small piece of permanent insurance that dividends or extra premium buy. The death benefit looks level for a while, then rises. Either way, extra money swaps term insurance for permanent insurance, which is why the death benefit doesn't jump right away.
Now IUL. With option A, a level death benefit, your payments are aimed at making the cash value equal the death benefit at the end. The death benefit doesn't grow. The insurance you pay for shrinks every year as cash value builds, until the two meet. Here the cash value doesn't come on top. It replaces the insurance.
Option B is an increasing death benefit. It starts smaller and grows with the cash value, so your beneficiaries receive the original death benefit plus the cash value growth, tax free. I use that option when the goal is cash value.
The confusion comes from looking at the death benefit in one year without asking where it started. That's how detractors make it sound like you never get your cash value back. In the designs I build, you do.
Illustrations are projections and not promises. If a policy loan is outstanding when you die, the balance comes off what your beneficiary receives.