What is the primary difference between whole life and term life insurance?

The primary difference between whole life and term life insurance is that whole life accumulates cash value, while term life does not. Whole life insurance is designed to provide coverage for the insured's entire life. It has a savings component that allows the policy to build cash value over time, which can be accessed through loans or withdrawals, or can be paid out as part of a death benefit. This cash value grows at a guaranteed rate set by the insurance company, making whole life a form of forced savings in addition to providing a death benefit.

In contrast, term life insurance provides coverage for a specified period, such as 10, 20, or 30 years. If the insured dies during this term, the beneficiaries receive the death benefit. However, once the term expires, there is no payout, and no cash value accumulates; the policy simply terminates at the end of the term unless it is renewed. This makes term life simpler and often more affordable than whole life.

The other options do not appropriately reflect the characteristics and functions of these insurance types, particularly regarding premiums, coverage duration, and complexity.