What happens to the cash value of a whole life policy over time?

What happens to the cash value of a whole life policy over time?

• A. It decreases over the life of the policy
• B. It remains constant from the start
• C. It accumulates and increases as years go by
• D. It becomes unavailable after the insured reaches age 50

Answer: (C)

The cash value of a whole life policy is designed to accumulate over time, reflecting the insured's investment in the policy. With each premium payment, a portion goes towards building the cash value, which grows at a guaranteed rate set by the insurance company. This accumulation is especially beneficial for policyholders, as they can access or borrow against the cash value during their lifetime, providing financial flexibility. The growth of the cash value is typically slow initially but accelerates as the policy ages, rewarding the policyholder for maintaining the policy long-term. This characteristic is a defining feature of whole life insurance, distinguishing it from term policies, which do not have a cash value component.

The cash value of a whole life policy is designed to accumulate over time, reflecting the insured's investment in the policy. With each premium payment, a portion goes towards building the cash value, which grows at a guaranteed rate set by the insurance company. This accumulation is especially beneficial for policyholders, as they can access or borrow against the cash value during their lifetime, providing financial flexibility. The growth of the cash value is typically slow initially but accelerates as the policy ages, rewarding the policyholder for maintaining the policy long-term. This characteristic is a defining feature of whole life insurance, distinguishing it from term policies, which do not have a cash value component.