What is whole life insurance?

Whole life insurance is a type of permanent life insurance that provides both a death benefit and a savings component. This means that when a policyholder pays premiums, a portion of that money goes toward a cash value account, which can grow over time at a guaranteed rate. This aspect of whole life insurance distinguishes it from term life insurance, which only provides coverage for a specified period and does not build cash value.

With whole life insurance, coverage is guaranteed for the policyholder's entire lifetime, as long as premiums are paid. This lifetime coverage aspect ensures that beneficiaries will receive a death benefit, regardless of when the insured individual passes away, provided that the policy is in force. The inclusion of a savings component not only adds a financial benefit but also allows policyholders to potentially borrow against the cash value or withdraw funds, enhancing its utility as a financial planning tool.

Thus, the defining features of whole life insurance—its lifelong protection and built-in savings aspect—are accurately captured in the correct choice.