Whole life insurance is a type of permanent life insurance policy that remains in effect for the insured’s entire lifetime, provided premiums are paid as required. Unlike term life insurance, which covers the insured for a specified term, whole life insurance provides lifelong coverage and includes an investment component known as the policy’s cash value.

Whole life insurance guarantees coverage for the insured’s entire life, ensuring a death benefit payout no matter when the insured passes away, as long as premiums are paid. The premiums for whole life insurance are typically fixed and do not increase as the insured ages.

It can provide a lifetime of financial benefits to the insured as well. A portion of the premium payments is allocated to a cash value account, which grows over time. This cash value can be borrowed against or withdrawn, although this can reduce the death benefit or increase the premium to maintain the same death benefit. The cash value component of whole life insurance can be a form of forced savings, accumulating wealth over time.

Upon the death of the insured, the policy pays a death benefit to the beneficiaries. This benefit is generally tax-free.  The cash value component often grows at a guaranteed rate of interest, and some whole life policies may also pay dividends. If you have dependents who rely on your income, whole life insurance can provide financial security after your death. The predictability of fixed premiums can be advantageous for long-term financial planning.

Having a whole life insurance policy is a great way to leave a financial legacy to your beneficiaries.