How Does A Whole Life Insurance Policy Build Cash Value? 
A Permanent insurance policy like a whole life can build a cash value because it was designed to do just that . At the age of purchase your insurance company knows how long you will live by average . The premium they charge for each unit of coverage -LRB- usually per 1000 -RRB- is calculated to cover the mortality costs , company costs and profits , and the reserve build up you know as cash value . At interest , the reserve builds even more because the interest growth is not subject to current income taxation . The actuarial mathematicians at the insurance company have even figured out how to pay the life insurance proceeds if you die without accomplishing any cash value at all . 