What is generally included in the term 'cash value' in life insurance?

In life insurance, 'cash value' refers specifically to the amount available for loan or withdrawal by the policyholder during their lifetime. This value accumulates over time as the policyholder pays premiums, and it grows at a specified interest rate. The cash value can be accessed through loans or withdrawals, providing a living benefit to the policyholder, which distinguishes it from other components of the policy, such as the death benefit.

The distinction is important because while total premiums paid and fees associated with the policy may contribute to the overall costs and management of the policy, they do not represent accumulated savings or value that can be utilized while the insured is alive. Similarly, the total death benefit is the amount payable to beneficiaries upon the death of the insured, but it does not factor into the cash value that can be accessed by the policyholder. Thus, the correct understanding of 'cash value' focuses on its function as a financial asset available for use, making the second option the most accurate representation of what cash value includes.