What impact does cash value have in whole life insurance?

Cash value in whole life insurance plays a crucial role as it acts as a savings component that accumulates over time. Policyholders can build cash value through their premium payments, which are partly allocated towards the cash value account. This accumulated cash value can offer various benefits, including the ability to borrow against it, withdraw funds, or use it to pay premiums.

The accumulation happens on a tax-deferred basis, meaning that the growth in cash value is not taxed until it is accessed, making it an attractive feature for policyholders looking for both protection and savings. This dual function of providing life insurance coverage while also acting as a savings tool adds significant value to the whole life insurance product over its lifespan.