Which of the following is true about the cash value of a whole life insurance policy?

The cash value of a whole life insurance policy is an important feature that distinguishes it from term life insurance. This cash value accumulates over time as the policyholder makes premium payments. One key aspect of this cash value is that it can be borrowed against or withdrawn. This means that the policyholder has the option to access these funds for various needs, which can be particularly useful in financial emergencies or for funding major expenses.

When a policyholder decides to borrow against the cash value, they can take out a loan from the insurance company using the cash value as collateral. This loan does not require credit checks, and interest is typically charged on the borrowed amount. Alternatively, if the policyholder chooses to withdraw funds instead of taking a loan, they can access a portion of the cash value, although this may reduce the overall death benefit of the policy.

Understanding this aspect of whole life insurance is crucial because it emphasizes the policy's dual role as both life coverage and a savings/investment vehicle, allowing policyholders to leverage their cash value in ways that suit their financial circumstances.