What happens to the cash value of a whole life policy at death?

The cash value of a whole life insurance policy generally reverts back to the insurance company when the insured person dies.

But many universal life insurance policies offer a choice of what kind of death benefit your beneficiaries will receive. Three common options are:

1. Open 1: Total face amount – Beneficiaries receive the policy “face value” (minus any partial withdrawals and any outstanding loans and the loan interest accrued).
2. Option 2: Total face amount plus cash value value – Beneficiaries receive the “face value” plus the cash value.
3. Option 3: Total face amount plus premiums paid – Beneficiaries receive the face value plus the amount of premiums that had been paid (minus any withdrawals or loans and loan interest). This is much like getting a refund on premiums paid.