Whole life insurance is a permanent life insurance type that typically provides set benefits and an investment fund that provides cash value.

 What is Whole Life Insurance?

Unlike “term life insurance,” whole life insurance covers you until death or a certain age (such as 100 years old). Where term coverage pays out set benefits in the case of death over the duration of the policy, whole life pays out less benefits because it also includes an investment fund.

  • Understanding the investment fund is the key to understanding whole life policies.
  • Investment funds are funds managed by the insurer, the policy holder, or both (depending upon the variation of whole life policy you choose).
  • Investment funds build “cash value” over time. The longer you hold the policy, the more cash value it accrues. In the early years of the policy, premiums go toward fees. However, more of your premium goes toward investments the longer that you hold the policy.