Whole life insurance is a popular type of permanent coverage. It can last your entire life, has a guaranteed death benefit and provides guaranteed cash value growth. Whole life is more expensive than term life insurance, which covers you for a fixed number of years only and doesn't build cash value.

Definition of whole life insurance
Whole life is a type of permanent life insurance. It pays out regardless of when you die and includes a cash value that grows over time. When the policy has built enough cash value, you can withdraw or borrow against the funds while you're still alive. Unlike other types of permanent coverage, the cash value in a whole life policy is guaranteed to grow at a set rate.

Whole life insurance premiums stay the same throughout the length of the policy and the death benefit is guaranteed. If there are no outstanding cash value loans or withdrawals when you die, your life insurance beneficiaries receive the full death benefit.

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Nerdy Tip
If you want permanent insurance without the bells and whistles, whole life may be a good fit. However, due to its guarantees, the cost of whole life insurance is typically higher than that of other permanent policies.

Whole life policy features: Definitions
We've defined a few key features below to explain better how whole life insurance works.

Guaranteed death benefit: The death benefit for whole life insurance is guaranteed; it won't decrease or change over time as long as you pay your premium. Though whole-life policies are considered lifelong, many mature upon the insured person reaching a certain age, such as 100. When the policy matures, the death benefit is paid to the policyholder or coverage can be extended, usually until age 120. Therefore, even if you outlive the policy's maturity date, the death benefit may still pay out.

Guaranteed cash value: The cash value in a whole life insurance policy is guaranteed to grow at a fixed rate set by the insurance company. A portion of your insurance premium is allocated to  the policy's cash value, which grows over time. You can withdraw or borrow against the funds while you're still alive. But keep in mind that withdrawing or borrowing against the policy's cash value without paying it back will reduce the death benefit — the amount your beneficiaries receive when you die.

Fixed premiums: Whole life premiums are typically fixed, which means they remain level throughout the length of the policy. If you miss a premium payment, your coverage can lapse. However, many whole life insurance policies have “automatic loan” provisions allowing the insurer to borrow the money to pay the premium from the cash value.  

Dividends: When you buy a participating whole life insurance policy from a mutual company — one owned by its policyholders — you may receive dividends if the company performs well. Dividends typically aren't taxed as income. Depending on the terms of your policy, you may be able to use the dividends to increase the death benefit or pay your premiums.

» MORE: Buying life insurance as an investment

More about whole life insurance
Learn more about whole life insurance and find the best policy for you.

How does whole life insurance work?

The cost of whole life insurance and why it's so high

Is whole life insurance a good investment?

Best whole life insurance companies

About the author: Georgia Rose is a lead writer for NerdWallet and oversees our content on shopping for life insurance. Her work has been featured in The New York Times, The Washington Post, The Independent and ABC News. Read more