Why is whole life insurance often more expensive than term life insurance?

Whole life insurance tends to be more expensive than term life insurance primarily because it includes cash value and savings elements. Unlike term life insurance, which provides coverage for a specified period, whole life insurance combines life coverage with a savings component that builds cash value over time. This cash value accumulates on a tax-deferred basis and can be accessed by the policyholder during their lifetime, either through borrowing against it or through withdrawal.

This dual nature of whole life insurance—offering lifelong protection and accumulating cash value—requires a higher premium. The premiums paid not only cover the cost of insurance but also contribute to the savings component, which is not a feature of term insurance. Thus, the inherent value in the lifelong coverage and the investment aspect justify the higher cost associated with whole life policies compared to term life policies, which simply offer coverage without any savings or investment element.