What feature does term life insurance lack compared to permanent life insurance?

Term life insurance is designed to provide coverage for a specific period, typically ranging from one to thirty years. One key characteristic that distinguishes term life insurance from permanent life insurance is the absence of cash value accumulation.

Permanent life insurance policies, such as whole life or universal life, not only provide a death benefit but also build cash value over time. This cash value component allows policyholders to accumulate savings within the policy, which can be accessed through loans or withdrawals. In contrast, term life insurance focuses solely on the death benefit during the specified term without any investment or savings component. Because term life insurance has no cash value, policyholders do not have the ability to borrow against their policy or receive any funds at the end of the term if the insured person survives.

This feature of cash value accumulation is a significant benefit of permanent life insurance policies, providing both a mortality cover and a potential source of funds that can be valuable in financial planning.