Definition
Permanent life insurance that lasts your whole life and builds cash value, at premiums many times higher than term coverage for the same death benefit. The cash value grows slowly and surrendering in the early years often returns less than the premiums paid.
Why it matters
Whole life is heavily marketed as an investment, but for most families the same protection costs far less as term insurance, freeing the difference to be invested directly. It earns its keep mainly in niche estate-planning and lifelong-dependent situations.
Example
A healthy 35-year-old is quoted about $450 a month for $500,000 of whole life, versus roughly $30 a month for a 20-year term policy with the same benefit. Choosing term and investing the $420 difference builds a six-figure sum over the term, owned outright.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.