What is the characteristic feature of whole life insurance?

Whole life insurance is defined primarily by its provision of lifelong coverage coupled with a cash value component. This type of policy is designed to remain in effect for the insured's entire life, as long as premiums are paid, rather than expiring after a set term like term insurance.

The cash value aspect is particularly significant; as the policyholder pays premiums, a portion of that money is allocated to a savings component, which grows over time at a guaranteed rate. This cash value can be borrowed against or even cashed out, providing financial benefits beyond just the death benefit.

Understanding these features is essential because they uniquely position whole life insurance not only as a protective measure against loss of life but also as a potential financial asset that can contribute to the policyholder’s overall financial strategy throughout their lifetime.