How does the cash value in a whole life insurance policy typically grow?

The cash value in a whole life insurance policy typically grows through a fixed interest rate or dividends. This growth mechanism means that, as long as the policy is in force, the cash value will accumulate over time, providing a savings component to the policyholder.

Whole life insurance policies often have a guaranteed interest rate set by the insurance company, which assures policyholders that their cash value will grow at a predictable rate. In addition, many whole life policies may also participate in the company's profits, which can be paid out as dividends. These dividends can be used to enhance the cash value further, increasing the overall growth potential of the policy.

While the cash value does grow based on these factors, it is important to note that it does not grow indefinitely in the event of the policyholder's death. Instead, the death benefit is paid to the designated beneficiaries, and the cash value does not continue to increase after that point, which is why this aspect of growth is distinct and not applicable post-death.

Overall, the combination of a guaranteed interest rate and potential dividends contributes to the steady growth of the cash value in whole life insurance policies, ensuring that policyholders have an asset that builds over time.