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If by "whole life", permanent life insurance is meant, then there a few types of whole life insurance.

Although many people think of term vs. whole life insurance as the two categories of life insurance, there are many variations.

There is temporary insurance for a specified period of years which expires worthless after the selected period of protection is over, i.e., term life insurance. That was the original form of life insurance, not the whole life insurance.

However, there was also a demand for permanent insurance, partly because of tax and estate planning needs, e.g., to avoid having to sell part of the estate to raise money to pay estate taxes, or to be certain throughout life of a minimum size estate irrespective of business fortunes.

Over the years, some major variations of whole life insurance have developed. Unlike term, all permanent life insurance will pay the death benefit no matter when the insured dies, assuming required premiums are paid.

Traditional Whole Life

Traditional whole life insurance is designed to have an increasing cash value until it equals the amount of the death benefit. Therefore, you are contributing to a built-in savings account in addition to paying for the death protection benefit.

This enables a number of options that temporary term insurance does not have. The progressively higher cash value can be borrowed against. At some point, the whole life insurance policy could be converted to a smaller paid-up policy so no further premiums need to be paid. Alternatively, the whole life insurance policy could be surrendered to receive the cash value. Consequently, the premiums need to be much more than that of temporary term insurance. The premiums are also significantly more than that of universal level premium to age 100, another form of permanent insurance, for the same death benefit.

Ordinary and Limited Pay Whole Life

"Ordinary" signifies that premiums are to be paid on a regular basis for the life of the policy.

"Limited Pay" means that larger payments are to be made over a shorter, or limited, period of time. For example, Ten-Pay Life is paid up over a ten year period. Life-Paid-Up at 65 requires no more premium payments after age 65.

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Universal Whole Life

Universal is another type of permanent life insurance. It can have flexible premiums with an adjustable death benefit. However, there are also universal life policies with guaranteed level premiums to age 100 years that pay the specified benefit at death or age 100, whichever comes first. They will have much lower premiums than traditional whole life insurance because they are designed to build up the minimum cash value to enable the policy to be permanent and are reinsured in a large pool of such policies to allow the guarantee to be made.

Variable Whole Life

Part of the premium pays for the death benefit, and part of the premium payment goes into a "separate investment account". The policyowner decides where the cash value of the account will be invested, choosing from what the insurance company has arranged to be available in conjunction with the policy, e.g., mutual funds, stocks, bonds. Therefore there is no guaranteed interest paid by the insurance company.

Some would say that instead of combining investing with insurance, it is better to buy level premium universal to age 100 and invest the difference independent of the insurance company.

Term vs. Whole Life

The saying "Buy Term and invest the difference" makes no sense. It's nonsense. Temporary insurance and permanent insurance address different needs. You should buy temporary Term if that best fits your needs. You should buy permanent if that best fits your needs. Permanent could be cash value whole life insurance or universal life Insurance with cash value or guaranteed level premium to age 100 (sometimes called "Term to 100" or "Permanent Term"). Buy what fits your needs and preferences. That makes sense.

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¶ Nothing here constitutes advice or recommendation of any nature, whether legal, tax, financial planning or otherwise. The above comments represent only the author's understanding of the subject and may be incorrect or out of date.