Which of the following statements correctly defines inside buildup as it refers to life insurance?
1) During the insured's lifetime, the accumulations of cash value within a policy grow on a tax-free basis.
2) During the insured's lifetime, the accumulations of cash value within a policy grow on a tax-preferred basis.
3) During the insured's lifetime, the accumulations of cash value within a policy grow on a tax-annuitized basis.
4) During the insured's lifetime, the accumulations of cash value within a policy grow on a tax-deferred basis.