How Much interest does a life insurance policy accumulate?

My aunt died recently, and she had a life insurance policy no one knew about, and my mom is the beneficiary. She wanted me to find out how much interest can be accumulated from a general policy. It was never updated, and it was just sitting there gaining interest since the 1960's. The original amount was $500.

My aunt died recently, and she had a life insurance policy no one knew about, and my mom is the beneficiary. She wanted me to find out how much interest can be accumulated from a general policy. It was never updated, and it was just sitting there gaining interest since the 1960's. The original amount was $500. Does anyone have an estimate of how much it could be worth now? My mom told me if i found out, and helped her, she would give me some money 🙂

Best Answer:

kimberli: Sorry to hear from your loss, but the answer I'm going to give you is going to make you mad. However, it will also be an educational experience for you.

The way life insurance works is that it pays a death benefit upon death of the insured (your aunt) to a beneficiary (your mom). The type of life policy that your aunt has is called a cash value life insurance policy. This is a life insurance plus savings built into one policy.

While your aunt was still living, the interest rate that a person typically gets on the cash value is between 0-4%. When she died, your mom is suppose to get the death benefit plus the savings, right? Well, that's not how life insurance works.

In most cash value life insurance, it only pays out one or the other. If your aunt was living and she wanted to cancel the policy, she would get the savings, but lose the death benefit. Since your aunt is dead, your mom would only get the death benefit. So what happen to the savings? The insurance company keeps it and there's nothing you or your mom can do about it because it says it in the policy.

So to answer your mom's question, you would say "the interest rate is between 0-4%, but we're not going to see that money because the savings isn't ours. But at least we get the death benefit. If you don't believe me, we should read her life policy together."

Other answer:

kimberli:
IF, it was a paid off policy, could have accumulated "some" interest.

My parents took out insurance in the amount of $1,000 when I was a baby. When I turned 21, she transferred the policy over to me. Today, it has a cash value of $3,500. I am age 63, so the amount has accumulated for over 60 years.

Mom needs to contact the insurance company, since she is the beneficiary. They will send her forms to complete and she will need a certified death certificate, and then the insurance will issue the amount of the policy to her.

B:
If it was term insurance and not whole life, it didn't accumulate and is worth $500. If it was whole life, then there would be maybe 50 years of dividends built up, you need to ask the insurance company directly, they will tell you if you are entitled to know this information and they are trained to calculate it properly, not yahoo people
npk:
You are a third party and so have no right to "find out" any policy information. If mom is the beneficiary, she submits a claim to the insurer per their procedures.
Anonymous:
Odds are, the policy cancelled long ago for nonpayment. But, under the slim chance it's in force, likely it's not worth more than $1,000.
Bill:
Each policy is different, if your mother is the named beneficiary she will have to call and inquire. The company will not talk to you if you are not the named beneficiary or legal guardian of the beneficiary.
Rob:
ZERO interest.
Life insurance is paid off on death.
Nothing else
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