The premium amount is fixed throughout the life of the policy and is due in regular intervals. The payment, though, tends to be higher than the premiums associated with term policies. Part of the premium pays for the death benefit coverage, commissions and fees. The rest is invested in the insurance company's investment portfolio. This investment is called the cash value of the policy.
Cash value accumulates on a tax-deferred basis until withdrawal or lapse of the policy.
The cash value provides a guaranteed minimum rate of return. Variable life insurance Variable life insurance is similar to whole life, in that it offers coverage for life and fixed premiums for a specific term or the life of the contract. The difference between whole and variable life insurance is the treatment of the cash value portion of the premium. Instead of the insurance company investing your money in its investment portfolio at a guaranteed rate, you hold the purse strings. This type of life insurance allows you to invest the cash value portion of the premium into a separate account and to direct where this portion of your premium is invested.