How does term life insurance differ from whole life insurance?

Term life insurance is designed to provide coverage for a specific period, such as 10, 20, or 30 years. During this term, if the insured passes away, the beneficiaries receive a death benefit. However, if the insured outlives the term, no benefit is paid, and the policy simply expires.

In contrast, whole life insurance provides coverage throughout the insured’s entire life, as long as premiums are maintained. One key characteristic of whole life insurance is its cash value component, which accumulates over time. This cash value can be borrowed against or withdrawn, providing both a death benefit and a savings feature built into the policy.

The significant difference in these two forms of insurance lies in the duration and the potential for cash value accumulation with whole life policies. This distinction allows individuals to choose based on their financial planning needs, whether they require coverage for a certain time frame or prefer a lifelong policy that builds cash value.