What is the main distinction between term life insurance and whole life insurance?

The main distinction between term life insurance and whole life insurance is that whole life insurance offers a savings component. Whole life insurance not only provides a death benefit to beneficiaries but also accumulates cash value over time. This cash value grows at a guaranteed rate and can be borrowed against or withdrawn during the policyholder's lifetime. In contrast, term life insurance only provides coverage for a specified period and does not build cash value; it generally delivers a death benefit if the insured passes away within the term.

While factors such as costs and premiums vary between the two types of policies, the defining characteristic that sets whole life apart is that it combines insurance protection with an investment component, enabling policyholders to benefit from both life coverage and a savings element.