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Whole Life stipulates a lifetime premium that must be paid when billed and, in return, provides a guarantee that the policy will be in force no matter when the insured dies (subject only to the financial viability of the insurer). As the graphs below demonstrate, Whole Life policies consist of guaranteed amounts of gradually increasing cash value and correspondingly decreasing net amount at risk. The net amount at risk is always the exposed portion of the death benefit that exceeds the cash value. The death benefit of a Whole Life policy consists of the cash value and what the insurance company calls its net amount at risk. These excess premiums accumulate each year and essentially earn the insurance carrier's contractually guaranteed rate of return, building a reserve for risk charges that will be substantially higher than the level premium in the insured's later years. Cash value is created by the payment of a level premium that, in the early years, is significantly higher than the underlying cost of the yearly risk of death. Perhaps the least understood aspect of Whole Life - and indeed of permanent life insurance in general - is the purpose of the policy element called cash value.

Dividends can be taken in cash, can reduce the currently due premium, or can purchase additional permanent amounts of life insurance. Every element of the policy is guaranteed except, in the case of a participating policy, the refund of a portion of the premium called a dividend. As seen below, the payment of a fixed and stipulated premium will provide lifetime coverage with a guaranteed annual increase in cash value. Whole Life is often portrayed as permanent or cash value life insurance, even though there are other forms of life insurance that suggest both permanence and contain elements of cash value. Whole Life integrates all the mathematical elements of life insurance: premium, cash value, investment returns, expenses, and mortality charges.