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. One of the defining features of whole life insurance is its dual nature: it not only pays a death benefit to the beneficiaries upon the insured's passing, but it also includes a savings component, often referred to as the cash value. This cash value accumulates over time and can be borrowed against or withdrawn by the policyholder, making it a valuable financial asset.

The combination of lifelong coverage and the savings element differentiates whole life insurance from other types of insurance, such as term insurance, which only provides coverage for a specific period without any cash value. Whole life policies are designed to be stable and predictable, typically characterized by fixed premiums and guaranteed benefits, which appeals to individuals seeking long-term financial planning and security.