Whole life insurance builds cash value through a combination of premium payments and the investment component of the policy. A portion of the premium goes towards the death benefit, while the remainder is allocated to a cash value account. This cash value grows over time through interest, dividends, and potential investment gains. The policyholder can access this cash value through withdrawals or policy loans, providing a source of funds that can be used for various purposes. The cash value also has the potential to earn tax-deferred interest, making it an attractive feature for long-term financial planning. It's important to note that the growth of cash value is subject to the performance of the insurance company's investments and the specific terms outlined in the policy contract.