Whole Life Insurance

What Does Whole Life Insurance Mean?

Whole life insurance is a type of life insurance that offers coverage for the policyholder’s entire lifetime and includes a savings component. It pays a death benefit to beneficiaries upon the policyholder’s death and accumulates cash value over time, which the policyholder can withdraw for personal use or borrow against if needed. This differs from term life insurance, which provides coverage only for a specified period and does not include a savings component. That’s why term vs. permanent life insurance is one of the first decisions buyers face when shopping for coverage.

Whole life insurance is also commonly referred to as ordinary life insurance or straight life insurance.

Insuranceopedia Explains Whole Life Insurance

Because whole life insurance provides permanent coverage throughout the policyholder’s entire life, its premiums are significantly higher than those of other types of life insurance, though they remain constant over time. What a buyer actually pays depends mostly on age and health at the time of purchase, and this guide on how much whole life insurance costs shows typical price ranges. Additionally, the funds in the savings component grow at a specified interest rate. The policyholder can withdraw funds and even cash out the policy upon reaching a certain age.

As a fundamental form of cash-value life insurance, whole life insurance allows the policyholder to build wealth, with interest and dividends accruing on a tax-deferred basis.