What type of life insurance policy combines life coverage with a cash value accumulation component?

The type of life insurance policy that combines life coverage with a cash value accumulation component is universal life insurance. This type of policy is designed to offer both a death benefit and the potential for cash value growth over time.

Universal life insurance allows policyholders flexibility in premium payments and the ability to adjust the death benefit. The cash value component grows at an interest rate determined by the insurance company and can also be influenced by market performance in some cases. This accumulation of cash value can be accessed by the policyholder through loans or withdrawals, which can be beneficial for various financial needs, such as supplementing retirement income or covering unexpected expenses.

In contrast, whole life insurance also has a cash value component but offers fixed premiums and guaranteed death benefits, making it less flexible than universal life. Term life insurance, on the other hand, provides coverage for a specific period without a cash value accumulation feature. Variable life insurance includes a cash value component, but its value is tied to investment performance, adding a different level of risk and complexity compared to universal life. Thus, universal life insurance is the most accurate answer as it encapsulates the combination of life coverage and cash value accumulation with the necessary flexibility for the policyholder.