In the early years of the policy, most of that monthly premium pays the death benefit and administrative costs. There are many variations on the permanent life insurance policy, including whole life, universal life and variable universal life. A whole life policy credits your account with a fixed amount of accumulation every year, regardless of the insurance company's investment experience. A universal life policy's cash value will fluctuate along with the insurance company's fortunes in the bond market. A variable policy invests the cash value in the stock market.
Cash value builds on a tax-deferred basis, much like a retirement account.
Most people prefer permanent life insurance when they reach a certain age, usually about 50, at which term insurance is no longer attractive.