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A Whole-Life Insruance policy pays a death benefit no matter when the insured dies. In most cases, the policy will guarantee the death benefit. The premiums are typically higher than a Term Life Insurance policy and the premium is paid annually.
Whole-Life Insurance policies do have a cash-value, this is because the difference between the policy premium and the actual cost of the insurance is placed into a special account which is known as a cash-value account. The cash-value account may be used to assist the policy holder in paying the annual premium as the policy matures.
The Whole-Life policy, in some cases, may be used as collateral. The policy holder may also receive the cash accumulated in the cash-value account upon cancellation of the policy. However there may be additional charges with borrowing against or cancelling the policy before the death of the insured. The insurance company also has the option of charging interest if the cash-value is borrowed against.
At the time of death of the policy holder, the beneficiary only receives the death benefit of the policy and not the death benefit as well as the cash value of the policy.
Whole-Life Insurance is typically for individuals who want a guaranteed death benefit no matter how long the insured lives.