What is a whole life policy?

A whole life policy is a specific type of life insurance that provides coverage for the policyholder’s entire lifetime, as long as premiums are paid. The defining feature of a whole life insurance policy is that it includes a savings component, known as the cash value, which grows over time. This means that along with providing a death benefit to beneficiaries upon the policyholder's death, the policy also accumulates cash value that the policyholder can borrow against or withdraw if needed.

Choosing a whole life policy offers several benefits, including the certainty of permanent coverage and the ability to build a cash reserve over time, making it appealing for long-term financial planning. This distinguishes it from term life insurance, which only covers the insured for a specific period and does not accumulate cash value. The premium payments for a whole life policy are typically level throughout the policyholder’s life, contributing to both the insurance coverage and the cash value accumulation.

While there are policies with predetermined term lengths or specific payment requirements, these do not embody the essence of a whole life policy, which is characterized by its permanence and lifetime coverage.