What is whole life insurance?

Whole life insurance is a type of permanent life insurance that offers coverage for the insured's entire lifetime, as long as the premiums are paid. This means that it not only provides a death benefit to the beneficiaries when the insured passes away, but it also accumulates cash value over time. This cash value can be borrowed against or withdrawn by the policyholder during their lifetime, making it a valuable financial asset. Whole life insurance typically has fixed premiums and guarantees a death benefit, which contributes to its appeal for those seeking lifelong coverage.

The other options describe different elements of insurance that do not accurately reflect the nature of whole life insurance. For example, temporary insurance is typically associated with term life insurance, which provides coverage for a specified period. A policy that solely pays dividends or offers no cash value does not fit the characteristics of whole life insurance, as it indeed offers both cash value accumulation and potential dividends depending on the performance of the issuing insurance company.