Which type of life insurance accumulates cash value?

Whole life insurance is unique because it provides both a death benefit and the ability to accumulate cash value over time. The premiums paid into a whole life policy are structured to remain level throughout the policyholder's life, and a portion of those premiums goes into a cash value account. This account grows at a guaranteed rate, which means that policyholders can access this cash value through loans or withdrawals if needed.

The cash value component serves multiple purposes: it can act as a savings mechanism, help cover premiums in the future, or be utilized for emergencies. Additionally, the policyholder benefits from the cash accumulation on a tax-deferred basis until it is withdrawn.

In contrast, other types of life insurance, such as term life insurance, provide only death benefits and do not accumulate cash value, making them less flexible in terms of cash access. While universal life insurance and variable life insurance also offer cash value accumulation, they do so with different mechanisms and may involve varying degrees of investment risk or adjustable premiums, which are features more specific to those policies rather than the standard guaranteed growth found in whole life insurance.