What characterizes 'whole life insurance' in terms of cash value?

Whole life insurance is characterized by its ability to build cash value over time, which is a fundamental feature of this type of policy. As the policyholder continues to pay premiums, a portion of those premiums is allocated to the cash value component. This cash value grows at a guaranteed rate, as well as potentially earning dividends if the policy is eligible for them.

The accumulation of cash value allows policyholders to access funds through loans or withdrawals, while still maintaining the death benefit for their beneficiaries. This unique feature distinguishes whole life insurance from term insurance, which typically does not offer a cash value component and focuses solely on providing a death benefit.

In summary, the defining characteristic of whole life insurance regarding cash value is that it builds cash value over time, offering both a savings mechanism and a death benefit, thereby providing policyholders with a dual-purpose financial product.