What does the cash value of a whole life insurance policy represent?

The cash value of a whole life insurance policy represents the amount that funds policy loans and accumulates interest. This feature distinguishes whole life insurance from term life insurance, as whole life policies not only provide a death benefit to beneficiaries but also build cash value over time. The cash value grows at a guaranteed rate, and policyholders can borrow against it. When a policy is in force, the cash value can be used for various financial needs, providing flexibility for the policyholder.

In contrast, the total amount paid in premiums over the policy term is not an accurate representation of the cash value, as it does not account for the growth and earnings on the cash value within the policy. The death benefit is a separate financial consideration that is paid to beneficiaries upon the policyholder's death, independent of the cash value. Lastly, the projected value of the policy at maturity refers to the estimated cash value when the policy endows but does not directly represent the cash value available for borrowing or other uses during the life of the policy.