What is Whole Life Insurance?

Whole life insurance is a type of permanent life insurance that provides coverage for the insured's entire lifetime, as long as the premiums are paid. It offers both a death benefit (which is paid out to beneficiaries when the insured person dies) and a cash value component that builds up over time.

Key features of whole life insurance include:

Lifetime Coverage: Unlike term life insurance, whole life insurance covers the insured for their entire life, not just a specific term.

Cash Value: Part of the premium paid into the policy accumulates as cash value, which grows tax-deferred. The policyholder can borrow against this cash value or sometimes withdraw it. However, withdrawing or borrowing can reduce the death benefit.

Fixed Premiums: Premium payments are usually fixed and remain level throughout the life of the policy.

Guaranteed Death Benefit: The death benefit is guaranteed, meaning it will be paid to beneficiaries as long as the policy is in force and premiums are paid.

Higher Premiums: Whole life insurance is generally more expensive than term life insurance because of the lifetime coverage and cash value component.

Whole life insurance is often chosen by individuals who want both lifelong coverage and a way to build savings through the policy's cash value. It can be useful for estate planning or for those who want a guaranteed benefit for their heirs.