Whole life insurance
Permanent life insurance with a savings component that builds cash value.
Full definition
Whole life insurance provides lifetime coverage as long as you pay premiums, and includes a cash value component that grows at a guaranteed rate. You can borrow against this cash value or surrender the policy for its value. Premiums are typically 5–15x higher than term life for the same death benefit. Most financial planners recommend term over whole life for pure income replacement.
Real-world example
A 35-year-old pays $450/month for $500,000 in whole life coverage. By age 65, the policy has built $180,000 in cash value they can borrow against.
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Permanent life insurance with a savings component that builds cash value.
Related terms
- Term life insurance
Life insurance that covers you for a fixed period, typically 10–30 years.