What defines a whole of life policy?

A whole of life policy is characterized by providing coverage for the entire lifetime of the insured, which means that as long as the premiums are paid, the policy remains in force, regardless of the age at which the insured passes away. This type of policy not only offers a death benefit but often includes an investment component, allowing cash value to accumulate over time. This means that a portion of the premiums goes towards building savings, which can be accessed by the policyholder during their lifetime.

This combination of life-long coverage and cash value accumulation distinguishes whole of life policies from other types of insurance, particularly term insurance, which only covers a specific period but does not offer any return or investment. Policies that only provide death benefits or have a maximum payout limit do not encapsulate the full nature of whole life insurance, which integrates both protection and potential cash growth.