What is the difference between term and whole life insurance?

Term life insurance and whole life insurance are fundamentally different in their structure and purpose, which is clearly articulated in the correct answer.

Term life insurance is designed to provide coverage for a specific, limited period, such as 10, 20, or 30 years. If the insured passes away during the term, the beneficiaries receive a death benefit. However, once the term expires, the policyholder typically has no further coverage unless they choose to renew or convert the policy. This type of insurance does not accumulate cash value, as its focus is solely on providing death benefit protection for a designated time frame.

In contrast, whole life insurance is intended to provide insurance coverage for the lifetime of the insured, as long as premiums are paid. Additionally, a prominent feature of whole life policies is the cash value component. This cash value grows at a guaranteed rate over time and can be borrowed against or withdrawn by the policyholder, making whole life a financial asset as well as an insurance policy.

While other options may mention aspects of both types of insurance, they do not accurately capture the key distinctions. For instance, it is not true that whole life requires higher premiums without additional benefits, as the cash value is indeed an important benefit. Similarly, term life does