How does term life insurance primarily differ from whole life insurance?

Term life insurance primarily differs from whole life insurance in that whole life insurance includes a cash value component. This cash value component acts as a savings element that accumulates over time, allowing policyholders to build equity within the policy. As the cash value grows, it can be borrowed against or withdrawn, providing policyholders with financial flexibility.

In contrast, term life insurance is purely a death benefit policy that provides coverage for a specified period, typically ranging from one to thirty years. If the insured person passes away during the term, the policy pays a death benefit to the beneficiaries. However, if the term expires and the individual is still alive, there is no payout or cash value accumulation. This fundamental difference outlines the purpose and benefits of each type of insurance, highlighting how whole life insurance serves as both a protective measure and a potential savings vehicle.