Which statement is true regarding the cash value of a life insurance policy?

The cash value of a life insurance policy is designed to grow over time and provides significant benefits to the policyholder while they are still alive. Specifically, it accumulates on a tax-deferred basis, meaning that the policyholder does not have to pay taxes on the gains until they are withdrawn. Furthermore, the policyholder can access this cash value through various means, such as taking a policy loan or making a partial withdrawal. This can be particularly useful in providing liquidity for emergencies, financial needs, or other investments without needing to surrender the policy entirely.

The other options present misunderstandings of how cash value works. Accessing the cash value is not limited to after the policyholder's death; it can indeed be accessed during their lifetime. Additionally, cash value policies can be borrowed against, providing another means for the policyholder to utilize the accumulated cash value. Lastly, cash value typically increases over time with regular premium payments and as the policy matures, rather than decreasing. Thus, option C accurately reflects the functionality of cash value in life insurance policies.