Cash-value policies can be thought of as a kind of forced savings that accumulates over a lifetime. While the cash value accumulates, only the face amount of the policy will be paid upon the death of the insured. Prior to death, the insured can borrow all or part of the cash value of the policy, or cash in the policy for its accumulated value, thereby canceling the coverage. If you borrow against the policy, you must repay with interest. If you die before the debt is repaid, the amount owed will be deducted from the face amount.
Coverage lasts a lifetime as long as the premiums are paid.
The cash value grows slowly in the early years, then more rapidly as the policy reaches maturity. Once a cash-value policy is purchased, it never needs to be renewed, nor must insurability be proven again. Universal life insurance was introduced in 1979 to satisfy consumer demands for payment of higher rates of interest on the savings portion of the policy than were previously available from traditional cash-value policies. The insurance companies share more of their investment yield with their policy holders than they do with traditional cash-value policies. In addition to a potentially better return, universal life also offers greater flexibility.