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What is Whole Life Insurance
Whole life insurance is a type of life insurance policy that provides coverage for the entirety of the policyholder’s life, as long as the premiums are paid. It is also known as permanent life insurance, as opposed to term life insurance, which provides coverage for a specific period of time.
Whole life insurance policies typically have a fixed premium that is paid regularly over the lifetime of the policyholder. A portion of the premium goes toward the death benefit, which is the amount that is paid out to the policyholder’s beneficiaries upon their death. The remainder of the premium is invested by the insurance company, and the policyholder may receive dividends or other forms of investment income.
In addition to providing a death benefit, whole life insurance policies also have a cash value component. As the policyholder pays premiums and the insurance company invests the money, the cash value of the policy grows over time. The policyholder may borrow against the cash value of the policy or withdraw the cash value as a lump sum or annuity.
Whole life insurance policies can be more expensive than term life insurance policies, as they provide coverage for the entirety of the policyholder’s life and have a cash value component. However, they can also offer additional benefits such as tax-deferred growth and estate planning advantages.