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Unlike term life insurance, whole life insurance policies are permanent. "Permanent" means there are no specific periods for the policy to be in effect. You purchase the policy, pay monthly premiums and have your policy for life. Term life policies require renewal at a higher cost or must be converted to a permanent policy when the term runs out.

When you acquire a whole life insurance policy, your monthly premiums are locked in at one fixed price. They can't be increased during your lifetime if you are careful to make your payments in full and on time. Because the money you pay in is invested, your cash value increases. The profits you get from monthly dividends may either be applied to your account to reduce your monthly payments or you may receive the dividends. The money you receive in dividends is tax deferrable -- meaning you are not required to pay taxes on that income.

You may withdraw from or borrow against the face value of your whole life policy. If the money is not replaced before your death, beneficiaries will receive only the money that is left.

Flexibility is not part of a whole life insurance policy. The insurance company is in charge of investments; and the face value and premiums cannot be altered by your authorization. You do not have the option of lowering monthly premiums or increasing the face value of such a policy.

If you would rather not be involved with choosing investments for any reason and are fine with the original value of your whole life insurance policy, then this is the type of policy you will want to choose. You will receive modest dividends and your loved ones will be taken care upon your death with a whole life insurance policy.

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