What factor increases the premium of whole life insurance compared to term life?

The significant factor that increases the premium of whole life insurance compared to term life insurance is the ability to borrow against the cash value. Whole life insurance policies are designed to provide both a death benefit and a cash value component that grows over time. This cash value can be accessed by the policyholder, allowing them to borrow against it or utilize it for other financial needs.

The cash value accumulation represents an investment aspect of whole life insurance, which adds to the overall cost of the policy. The premiums for whole life insurance are generally higher than those for term life insurance because they not only cover the insurance risk but also contribute to this cash value accumulation. The ability to borrow against the accumulated cash value provides financial flexibility and is a key benefit not found in term life insurance.

Other factors, such as payment structure and death benefits, do not directly contribute to the higher premiums of whole life compared to term. Whole life policies typically require higher premiums due to their comprehensive nature, which includes both insurance coverage and cash value accumulation.