Final answer:
The cash value in a universal life insurance policy grows on a tax-deferred basis, meaning it accrues interest and earnings without immediate tax consequences.
Step-by-step explanation:
The cash value of a universal life insurance policy accumulates on a tax-deferred basis. This means that the money within the cash value account grows without being taxed on the interest or investment earnings each year.
You normally would have to pay taxes only upon withdrawal, and if done following the policy rules, it can often be done in a tax-favored manner. The cash value can be used for a variety of purposes, such as borrowing against it or to pay policy premiums.
The cash value of a universal life insurance policy accumulates on a tax-deferred basis, meaning that the growth of the cash value is not subject to immediate taxation.
For example, if you invest $10,000 in a universal life insurance policy and it grows to $20,000 over a period of time, you will not owe any taxes on the $10,000 of growth until you withdraw the money.
Once you do decide to withdraw the cash value, it may be subject to taxation depending on your specific circumstances.