What is cash accumulation in the context of life insurance?

Cash accumulation in life insurance refers to the growth of cash value within certain types of policies, primarily whole life and universal life insurance. This cash value builds over time as the policyholder makes premium payments. Over the life of the policy, it can accumulate tax-deferred, allowing it to grow without incurring immediate tax implications.

The cash value is distinct from the death benefit, which is the amount paid out at death. Instead, it serves as a financial asset that the policyholder can access during their lifetime. This accumulated value can be used for various purposes, such as borrowing against it, withdrawing funds, or even as a source of emergency cash. This characteristic of cash value growth is what defines the concept of cash accumulation in life insurance, making it a valuable aspect of permanent life insurance policies.