How does a cash value life insurance policy differ from term insurance?

A cash value life insurance policy differs from term insurance primarily because it accumulates cash value over time. This means that a portion of the premiums paid into the policy is set aside and grows as savings, which can be accessed by the policyholder through withdrawals or loans. This feature allows the policy to build financial value, which can be beneficial for the policyholder during their lifetime.

In contrast, term insurance only provides a death benefit if the insured individual passes away within a specified term. It does not have any cash value accumulation, making it a pure form of life insurance designed solely to offer protection for a set period. Consequently, once the term expires, the coverage ends, and there is no return on the premiums paid.

The notion that a cash value life insurance policy is cheaper than term insurance is not accurate. Generally, cash value policies are more expensive due to the additional feature of cash value accumulation. Moreover, the statement that a cash value policy provides no death benefit is misleading, as it does indeed provide a death benefit; it's just accompanied by the cash value component.

Overall, the distinguishing characteristic of cash value life insurance is its ability to accumulate cash value, providing financial flexibility for the policyholder throughout their life.