Three factors affect cash value increases:
1. Premium: All premium payments are added to the cash value
2. Expenses: Any insurance and expense charges are deducted
3. Cash Value: The cash value is then credited with monthly interest
It’s important to note that as long as you keep your policy in force, the growth in your cash value is not taxable. However, if the policy is surrendered, or cancelled (as described above), any cash value in excess of the premiums paid is taxable income and reported to the IRS on a form 1099R. Also, the death benefit goes to the beneficiary(s) tax free.