Which type of life policy typically grows in cash value over time?

Whole Life insurance is designed to build cash value over time, which is a key characteristic that differentiates it from other types of life insurance policies. With Whole Life, a portion of the premium payments is allocated to a cash value component, which grows at a guaranteed rate set by the insurer. This cash value can be accessed by the policyholder through loans or withdrawals, providing a financial resource in addition to the death benefit.

This growth in cash value occurs on a tax-deferred basis, meaning the policyholder does not pay taxes on the growth until they access the funds. The guaranteed nature of the growth adds a layer of security for policyholders seeking long-term stability in their investment.

In contrast, Term Life insurance does not accumulate any cash value, as it provides coverage for a specific term in exchange for a premium, without any investment component. Universal Life and Variable Life policies can also contain cash value components, but their growth is tied to varying interest rates or market performance, making them more flexible and less predictable than the consistent growth seen in Whole Life policies.