How does the cash value in whole life insurance grow?

The cash value of whole life insurance grows at a guaranteed rate, which is a fundamental characteristic of this type of policy. This means that policyholders can expect their cash value to increase steadily over time, irrespective of market fluctuations. This growth occurs because part of the premium paid contributes towards the cash value, which is accumulated on a tax-deferred basis.

Additionally, the cash value can be borrowed against by the policyholder, providing a source of funds for emergencies or expenses without needing to cancel the policy. This borrowing feature allows policyholders to access the value they've accrued while still maintaining their life insurance coverage, albeit with some implications for the policy's death benefit if the loan isn't repaid.

This mechanism of growth and access makes whole life insurance appealing to individuals looking for both life coverage and a conservative investment component. The guarantees associated with the cash value growth provide stability and predictability that many policyholders find beneficial.