How does term life insurance differ from whole life insurance?

Term life insurance is primarily designed to provide coverage for a specific period, typically ranging from one to thirty years, depending on the policyholder's needs. This type of insurance pays a benefit only if the insured person dies within that specified term. Once the term expires, the policyholder may have the option to renew or convert the policy, but there is no payout if the insured survives the term.

In contrast, whole life insurance is structured to provide coverage for the entire lifetime of the insured, as long as premiums are paid. This permanence means that beneficiaries will receive a death benefit regardless of when the insured passes away, making whole life insurance a tool for lifelong financial planning and protection.

The characteristics of these two types of insurance are fundamental to understanding their purposes. Term life insurance typically has lower premiums than whole life because it does not build cash value and is primarily meant for temporary protection, whereas whole life insurance can accumulate cash value over time, adding a savings component to the policy.