Whole life insurance combines insurance and an investment component for policyholders.Suppose Mary buys a whole life insurance policy to protect her family. It will pay a stated amount to her beneficiaries when she passes away many years later. The policy also invests Mary’s money and builds up a cash value, tax-deferred, from which she can withdraw or borrow funds, like a savings account. She uses this investment to help pay for housing and other bills during her retirement. Whole life insurance premiums are high, but they usually don’t change. The policy remains in effect as long as premium payments are made. In contrast, term life insurance only offers the death benefit. It usually has increasing premiums and lasts for a specified term. Make sure to research an insurance company and be comfortable with its guarantees before purchasing its whole life insurance policy.
