What characterizes permanent life insurance?

Permanent life insurance is characterized by its ability to accumulate cash value over time. This feature differentiates it significantly from term life insurance, which provides coverage for a specified period without any cash value component. With permanent life insurance, a portion of the premium payments contributes to a cash value account that grows over time, often on a tax-deferred basis. This cash value can be accessed through loans or withdrawals, offering policyholders financial flexibility and benefits beyond just a death benefit.

The accumulation of cash value is an important benefit for policyholders, as it can serve as a financial asset that increases in value over the years, potentially helping with retirement funding or other financial goals. Understanding this key characteristic is essential when comparing different types of life insurance policies, as it influences both the use and long-term financial planning of the insured.