First of all, whole life insurance is for what all forms of life insurance are for, to pay a cash benefit to the policy's beneficiaries upon the death of the policyholder. Without getting into the whole term life insurance versus permanent life insurance debate, whole life insurance policies are generally designed to build up what is called "cash value" over the years that the policy is in effect. This cash value may accrue in addition to the face value (death benefit amount) of the life insurance policy. For example, a $100,000 face value whole life policy that has accumulated $10,000 in cash value at the time of the policyholder's death would pay out $110,000. In some cases this cash value can also be accessed by the policyholder or taken out as a loan to be paid back if the policyholder has a need to access this asset.
Another aspect of a whole life policy is that you can fully pay for a whole life policy and have it in effect for the rest of your life with no further premiums required. This may be accomplished with a one time lump sum payment of premium or payment over a specified period of years. This assures the policyholder that they have life insurance protection in their later years when their ability to pay monthly insurance premiums may be severely reduced or even eliminated.
This is in contrast to term life insurance which covers the policyholder for the specified term (time period) of the policy (usually 10, 20 or 30 years) and then ceases to be in effect, has built up no cash value and leaves the policyholder uninsured unless they have made other arrangements. Term life insurance does have the advantage of being less expensive than whole life insurance and other forms of permanent life insurance.
Personally, I believe that people should have a mix of term and permanent life insurance protection in place during the course of their lives but this is a discussion you should have with your financial advisor and insurance agent to determine the best strategy for your needs.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
A whole life policy is designed to last a lifetime. Term life insurance is not. A whole life policy develops cash values which allow the company to charge a level premium. Term insurance is prohibitively expensive even if you keep a policy only to life expectancy (78.9.) The cash value in a whole life insurance policy provides flexibility to meet many of life’s challenges.
That is an excellent question! Each of the two main types of life insurance has a purpose that it was specifically designed for in the way that it protects. In term policies, it's to provide coverage for a period of time, and to make large amounts relatively cheap. For whole life, it's to provide coverage that can't be outlived, and to provide cash options that are not available in the term policies. The need you have should be matched to the purpose that best fits that need. I hope that helps, thanks for asking!
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Another aspect of a whole life policy is that you can fully pay for a whole life policy and have it in effect for the rest of your life with no further premiums required. This may be accomplished with a one time lump sum payment of premium or payment over a specified period of years. This assures the policyholder that they have life insurance protection in their later years when their ability to pay monthly insurance premiums may be severely reduced or even eliminated.
This is in contrast to term life insurance which covers the policyholder for the specified term (time period) of the policy (usually 10, 20 or 30 years) and then ceases to be in effect, has built up no cash value and leaves the policyholder uninsured unless they have made other arrangements. Term life insurance does have the advantage of being less expensive than whole life insurance and other forms of permanent life insurance.
Personally, I believe that people should have a mix of term and permanent life insurance protection in place during the course of their lives but this is a discussion you should have with your financial advisor and insurance agent to determine the best strategy for your needs.