Which type of life insurance builds cash value over time?

Whole life insurance is designed to build cash value over time while providing a death benefit to beneficiaries. This type of policy combines a death benefit with a savings component, allowing policyholders to accumulate cash value that grows at a guaranteed rate. The cash value can be accessed during the policyholder's lifetime through loans or withdrawals, making it a flexible financial tool.

In contrast, term life insurance provides coverage for a specific period and does not accumulate cash value. Its primary focus is to provide a death benefit, typically at a lower premium, but there is no savings aspect involved.

Universal life insurance also offers a death benefit and a cash value component, but its cash value growth is subject to variable interest rates and can be adjusted by the policyholder. This introduces more flexibility but does not guarantee a specific cash value accumulation like whole life insurance does.

Variable life insurance allows for investment options within the cash value component, enabling the policyholder to allocate funds to various investment vehicles. However, the cash value can fluctuate based on market performance, adding a degree of risk that is not present in whole life insurance.

The stability and guaranteed cash value growth are key features that make whole life insurance a preferred choice for those looking for both life coverage and a savings component.