Only 15.2% Of American Families Still Own Cash Value Life Insurance. The Typical Policy Holds $12,000

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Many families have a whole-of-life policy a parent bought decades ago that everyone only half-remembers. A statement in a drawer may show a cash value nobody has checked in years. According to the Federal Reserve’s latest Survey of Consumer Finances, these policies belong to a shrinking group. Only 15.2% of families held cash value life insurance in 2025, down from 16.1% in 2022.

Among the families who still have one, the typical policy grew. The median cash value among holders rose from $10,600 to $12,000, a 13% increase, with both figures in 2025 dollars. That’s a modest amount. It’s still real money, though, and it comes with choices a retiree should understand before doing anything with it.

How Cash Value Coverage Differs From Term Insurance

Term life insurance is the simple kind. The owner pays for coverage over a set number of years, and if the insured person dies during that window, the family gets paid. When the term ends, the coverage ends, and nothing remains.

Cash value policies, like whole life, are built to last a lifetime. Part of each premium pays for the insurance, and part goes into a savings component inside the policy called the cash value. That cash value grows over time, and the owner can borrow against it or withdraw it. Those extra features are why these policies cost more than term coverage.

Why the Typical Balance Tells More Than the Average

The Fed also reports the mean, or simple average, cash value. It came in at $61,700 in 2025, up just 2%. That figure stands far above the median because a handful of very large policies, often held by wealthy families, pull the average up. If every holder lined up from lowest to largest, the median would be the policy right in the middle, so it’s a better picture of what a typical family actually has.

Put the figures side by side, and the pattern is plain. Fewer families are holding these policies, and most who do have balances in the low five figures. By comparison, 54.9% of families had retirement accounts in 2025, which is where most households now keep their long-term savings.

Four Options for a Retiree Holding an Old Policy

Keep it. The simplest move is to keep the policy in force for the death benefit. Federal tax law generally excludes life insurance proceeds paid because of the insured’s death from the beneficiary’s gross income, under 26 U.S.C. § 101(a)(1).

Borrow against it. Most owners can take a loan against the cash value. For a standard policy, that loan generally isn’t taxed when you take it. The tax code does treat loans as distributions for modified endowment contracts, a category for policies funded with too much premium too quickly, under 26 U.S.C. § 72(e)(10). The bigger risk shows up later, when a policy lapses with a loan still on it, and we’ve covered how that can trigger a tax bill on money the owner never received.

Surrender it. Cashing out ends the coverage. Under IRS rules, any proceeds above the policy’s cost count as taxable income. That cost is generally the total premiums paid, less refunded premiums, dividends, and unrepaid loans that weren’t taxed, and the insurance company sends a Form 1099-R showing the taxable part. We’ve walked through that math for a retiree considering a surrender.

Exchange it. The tax code lets an owner swap a life insurance policy for another life policy, an annuity, or a qualified long-term care policy without triggering tax under Section 1035, although receiving cash or having a policy loan canceled can create a tax bill. We’ve also covered how a swap into long-term care coverage works for someone who no longer needs the death benefit.

Who Still Gets Real Value From Keeping One

Some owners have solid reasons to hold on. Families doing estate planning use the income-tax-free death benefit to pass money to heirs or cover costs at death (we put the full estate settlement checklist, beneficiary forms, and titling included, in a free guide here). A spouse who depends on the insured’s pension or Social Security can lose part of that income when the insured dies, and the payout can help fill the gap.

A fully paid-up policy is the easiest case. No more premiums are due, and the coverage remains in force, although outstanding policy loans can still accrue interest and reduce the death benefit.

Ask the Insurer for This One Document

Before keeping, borrowing, surrendering, or switching, an owner should request a current in-force illustration from the insurance company. It projects how the existing policy is expected to perform from here, showing values under both the guaranteed rates and the insurer’s current crediting rates or current dividend scale. It also helps answer a basic question: “How has the policy performed?”

With the typical balance at $12,000, the stakes are modest for most families but still worth getting right. The illustration turns a half-remembered policy into numbers a family can use to decide.

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