What does "cash value" mean in whole life insurance?

In whole life insurance, "cash value" refers to the savings component that accumulates over time as part of the policy. This cash value is built up through the premiums paid and can grow at a guaranteed rate, depending on the specific terms of the policy. As the policyholder makes payments, a portion of those premiums goes towards building this cash value, which can be accessed during the policyholder's lifetime. The policyholder may borrow against this cash value, withdraw funds, or even surrender the policy for the cash value amount, depending on their needs.

This aspect of whole life insurance differentiates it from other types of life insurance, such as term insurance, which does not accumulate cash value. The growth of cash value is often tax-deferred, making it an advantageous component for long-term financial planning.