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

• A. Term life provides coverage for a specific period; whole life lasts for life and includes cash value.
• B. Term life lasts for life and includes cash value; whole life has no cash value.
• C. Term life builds cash value; whole life does not.
• D. Term life coverage is government-supported; whole life is not.

Answer: (A)

The main idea here is how long the coverage lasts and whether there’s a cash-value component. Term life provides coverage for a defined period—10, 20, 30 years, for example—and if you die during that term, the beneficiaries receive the death benefit. If the term ends, the policy ends (though some plans offer renewals or conversions) and there’s usually no cash value built up. Whole life insurance covers you for life and includes a cash value that grows over time. Part of the premium goes into this cash value, which accumulates tax-deferred and can be borrowed against or used to help pay premiums later. Because it combines lifetime protection with a savings element, whole life generally costs more upfront than term life.

The other statements mix up duration or cash value (term life doesn’t last for life or build cash value, and whole life does have cash value). Also, term coverage isn’t government-supported; it’s provided by private insurers.