What is the difference between whole life and term life insurance policies?
Whole life builds cash value, which you can borrow at anytime. If you die while the policy is still enforced, you will lose the cash value. If you missed any premiums, your cash value will be automatically used to pay it. Loan interest on the cash value will accumulate and you will have to pay this back. If the cash value is depleted, you will lose coverage. Because of the cash value feature, it is said that whole life policies are expensive. With term insurance, it does not build cash value. Therefore, term insurance are inexpensive. Since it is inexpensive, you can save your money in savings accounts, CDs, money markets, mutual funds, 401k, or your own IRA. Most term policies are renewable, which means no proof of insurability is required.
