What Does Whole Life Insurance Mean?
Whole life insurance is a type of life insurance that provides coverage for the entirety of the policyholder’s life and has a savings component. It pays out a death benefit upon the policyholder’s death, and it accumulates cash value over time that the policyholder may withdraw for personal use or borrow against. It contrasts with term life insurance, which only provides coverage for a set period, and does not include a savings component.
Whole life insurance is also commonly known as ordinary life insurance or straight life insurance.
Insuranceopedia Explains Whole Life Insurance
Because whole life insurance offers permanent coverage, or coverage during the policyholder’s entire life, the premium is much higher than that of other types of life insurance, but they also never increase. Moreover, the money in the savings component also grows at an agreed upon interest rate. The insured can withdraw money and even cash it in upon reaching a certain age. As a basic type of cash-value life insurance, this policy allows the insured to build wealth, with interest and dividends accruing on a tax-deferred basis.