What happens to the cash value of an insurance policy when you die?

When the policyholder of a life insurance policy passes away, the cash value of the policy is paid out to the policy's beneficiaries, along with the death benefit. However, the amount of cash value paid out depends on whether the policyholder had borrowed against the policy or not. If the policyholder had borrowed against the policy, the outstanding loan balance will be subtracted from the cash value before it is paid out to the beneficiaries. For example, if the cash value is $100,000 and there is an outstanding loan balance of $20,000, the beneficiaries would receive $80,000. If there were no outstanding loans, the full amount of the cash value would be paid out to the beneficiaries in addition to the death benefit. The beneficiaries can use the cash value as they see fit, such as paying off debts, investing, or using it to cover funeral expenses. It is important to note that the cash value of a life insurance policy is not taxed as income for the beneficiaries. However, if the policyholder had borrowed against the policy and the loan is not repaid, the outstanding loan balance plus any interest owed will be subtracted from the death benefit, which could result in a smaller payout to the beneficiaries.