paying more then face value on a modified whole life policy

The face value of a whole life policy is what your beneficiaries receive upon your death. It is known as the death benefit. The premiums that you pay allocate towards this benefit. If you pay over that amount your policy builds up cash value. The cash value is in excess of the face value and does not pay out upon your death.

So if you have say $500 dollars of cash value on your policy it will stay with the insurance company when you die. The $5,000 face value will go your beneficiaries. So paying over the face value does not stop the need to pay premiums. The only thing that happens if you pay over the face value is you build up cash value.

Cash value does give you the option to borrow funds. If you have a cash value attached to your policy you can borrow against that value. Cash value loans do not have to be repaid and can be pulled out for any reason any time you want. You can also get the full amount of cash value by cashing in your policy. If you cash in your policy it does negate your death benefit.

If you choose to borrow against you cash value be warned. Although you do not have to repay the loan the company will take the amount out of your face value when you die. Luckily, cash value loans do not accrue much interest so they are a lot easier to pay off then traditional loans. If you do not want your $5000 reduced, however, you will need to pay the loan back before you die.

You do not have to do anything either. If you do not plan on using the cash value you can just let it sit there. I would refrain from overpaying, however, as your beneficiaries will never get a penny of that money.