Final answer:
Single Premium life insurance policies create immediate cash value as they involve a lump sum payment that accumulates value from the start, which can be accessed by the policyholder.
Step-by-step explanation:
The type of life insurance policy that generates an immediate cash value is the Single Premium life insurance policy. Unlike other types of policies, such as Continuous Premium or term policies (Level Term and Decreasing Term), a Single Premium policy involves paying a lump sum amount upfront. This payment not only provides a death benefit but also starts accumulating a cash value right away, which the policyholder can access during their lifetime for various needs. It differs from Continuous Premium policies, which build cash value over time, and from term policies, which do not build any cash value at all and simply provide a death benefit for a specific period.