Most families, especially young families, find it hard to save because not much is left after covering immediate needs. The accumulated value in insurance serves as a forced savings because the accumulated value is effectively a savings plan attached to an immediate insurance need.
Accumulated value in insurance refers to the accumulated value in cash value life insurance. Cash value life insurance builds up cash value over time. Many refer to it as "equity" in the policy.
How It Works
The insured pays a monthly premium to the insurance company each month. From this premium, the insurance company has to deduct the cost of insurance, policy administrative expense and any other expenses stated in the insurance contract. What's left over each month is placed in a savings or investment account internal to the policy. That amount plus the compounded interest earned represents the accumulated value or cash value.
Cash value life insurance has many benefits. The accumulated value serves as a "forced" savings account. The owner of the policy can borrow against the savings or accumulated value while keeping the policy in force. If, for whatever reason, the owner of the policy has to cancel the policy, he can "cash it in" for a cash value, although penalties often exist.
Dwight Chestnut has been a freelance business researcher and article writer for over 18 years. He has published several business articles online and written several business ebooks. Chestnut holds a bachelor's degree in electrical engineering from the University of Mississippi (1980) and a Master of Business Administration from University of Phoenix (2004).