What is the cash value in a whole life policy?

In a whole life policy, the cash value is defined as the amount of money that accumulates over time within the insurance policy, making it accessible for loans or withdrawals by the policyholder. Whole life insurance combines a death benefit with a savings component, which grows at a guaranteed rate. As premiums are paid, a portion is allocated towards building this cash value, which can serve as a financial resource for the policyholder during their lifetime.

This accumulated cash value can be borrowed against or withdrawn, providing a safety net or additional financial flexibility for the policyholder. It distinguishes whole life insurance from term life insurance, which does not build any cash value. The correct understanding of cash value reinforces the significance of whole life policies as both an insurance product and a long-term savings vehicle.