What is a characteristic of a whole life insurance policy?

A whole life insurance policy is characterized by its ability to build cash value over time. As policyholders make premium payments, a portion of those payments goes into a cash value component, which accumulates on a tax-deferred basis. This means that over the life of the policy, the cash value can grow, and the policyholder can access it through loans or surrendering the policy if needed.

The cash value feature distinguishes whole life insurance from term life insurance, which only provides coverage for a specified term without any cash value accumulation. Whole life policies also tend to be more expensive than term life policies because they offer lifelong coverage and a savings component. The requirement of documentation for whole life policies can vary, and it is typically not less than other insurance types.

In summary, the characteristic of building cash value over time encapsulates the essence of whole life insurance, showcasing a long-term savings aspect alongside the death benefit.