What Does Liquidity Refer To In A Life Insurance Policy? 
With permanent life insurance there is a cash value accumulation component . Not so with Term insurance , so in the case of Term insurance liquidity does not apply . Within the category of permanent life insurance , Whole Life generally has the best cash value component . Once your policy has developed cash value , and that generally takes a few years due to the cost of providing the insurance component of the policy , -LRB- all the risk is on the insurance company -RRB- , then that cash value becomes a liquid asset that you have access to . Ask your insurance agent to explain what the options are associated with your policy . 