What type of life insurance policy generates immediate cash value?

A single premium policy generates immediate cash value because it requires a one-time lump-sum payment for the entire premium upfront. This type of policy is designed to provide instant cash value because the insurer invests the full premium amount right away, allowing the policyholder to access the cash value almost immediately.

In contrast, term policies do not build cash value at all; they provide pure death benefit coverage for a specified term without any savings or investment component. Universal policies, while they do accumulate cash value over time, do not do so immediately after purchase; cash value accrual typically begins after an initial waiting period and requires ongoing premium payments. Variable policies also offer the potential for cash value accumulation, but the cash value is dependent on the performance of selected investment options and may not provide immediate access to cash value like a single premium policy does. As a result, among the options provided, the single premium policy is the only one that allows for immediate cash value generation.