Cash-value life insurance pays a beneficiary upon the death of the policyholder, and accumulates a cash value during the policyholder’s lifetime.Bob just turned 40. To celebrate, he went out and bought a cash-value life insurance policy from ABC Insurance. He wants to save for his future and protect his family in the event of his death. He pays $25 a month. ABC uses part of Bob’s premium for the policy’s death benefit, which will go to Bob’s wife when he dies. Another portion of the premium covers ABC’s costs and profit. A third part goes to a cash-value account. That money is invested and grows, as long as Bob makes his payments. The interest and earnings on Bob’s cash-value account are not taxable. Bob can also pass the account to his family when he dies, or borrow from it to pay future premiums. As Bob ages, the percentage of his premium that goes toward the cash value shrinks. Cash–value policies come in three types: Whole life policies provide guaranteed cash value accounts that grow according to a formula the insurance company sets. Universal life policies accumulate cash value based on current interest rates. Variable life policies are invested in subaccounts, which grow or fall based on their performance. Critics contend that a cash-value policy’s investment options are limited. Cash-value policies also cost more than term-life policies -- which only last a set time, for example, 30 years -- because cash-value premiums cover the death benefit and the investment.