Death Benefit

• The death benefit of a whole life insurance policy is guaranteed by the company. This means the insurer promises that your death benefit will be paid out on your death as long as all required premiums have been paid up to your day of death and your policy does not have any policy loans that have caused the policy to terminate.
  
  

Cash Value

• The cash value of the policy is a cash reserve. This is money set aside by the insurance company to pay for the future death benefit. This money is a savings you may use during your lifetime for any reason. Insurance companies also guarantee the growth rate of this cash value and guarantee that you'll never lose this money.
  
  

Dividends

• Some insurance companies pay dividends. These dividends may be held as cash with the insurer, paid out in cash to you, used to reduce the out of pocket premiums on your whole life policy, or used to buy additional paid-up life insurance. If the last option is chosen, the policy's death benefit increases each year according to the dividends paid. The dividends may be surrendered for their cash value at any time.
  
  

Taxation

• Life insurance death benefits, cash value and dividends are all tax-free as long as the policy remains in force and the dividends paid out to you as cash do not exceed the total of all premium payments you've made to the policy so far. Policy loans taken to access the cash value are income tax-free as long as you do not terminate the policy.