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Whole Life Insurance: A Lifetime of Guarantees

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Whole life insurance is a offers permanent protection and cash value growth.

Term life insurance is what the doctor ordered for most people; however, whole life insurance could be a lifesaver for families with permanent needs.

Below, we’ll discuss the basics of whole life insurance and what sets it apart from other types of life insurance policies to help you decide if it’s worth the extra cost.

What Is Whole Life Insurance?

Whole life insurance is the simplest to understand of all the permanent policy options.

It can be broken down into three basic parts:

  • Premiums
  • Cash value
  • Death benefit

As long as you make regularly scheduled premium payments, your beneficiaries will receive the policy’s tax-free death benefit in full when you pass away, no matter your age.

You also get access to a cash value account, which grows at a low, albeit guaranteed interest rate.

How Does Whole Life Insurance Work?

Once your application for whole life insurance has been approved, you’ll be given a premium rate, which will stay the same for the duration of the policy.

Part of each of your payments will fund the cash value, with the remainder contributing to the policy’s face amount.

At the beginning of the policy, more money will go towards the cash value, but as you age and your risk increases, the cash value grows more slowly, with the majority of premiums put towards the policy.

Here are a few details on how the cash value does, and doesn’t, work:

  • Accessibility: You can draw from the cash value when you’re alive; however, any remaining cash value funds will be returned to the company rather than your beneficiaries when you pass away, though they could bump up the death benefit amount.
  • Repaying loans: If you fail to fully pay back any loans borrowed from the policy by the time of your death, that amount will be subtracted from the death benefit your loved ones receive.
  • Policy surrender: You can also surrender your policy, in which case you would be returned at least a portion of the cash value minus any taxes and surrender fees.
  • Paying for the policy: If there is enough in the cash value for the interest gained annually to exceed the cost of insurance, the policy can be considered paid up, meaning you can stop paying in, leaving the policy on autopilot until you pass.

You also have the potential to earn dividends with whole life insurance, depending on what company you purchase the policy from.

Who Needs Whole Life Insurance?

Most life insurance shoppers’ needs can easily be met with term life insurance.

That’s because the most common life insurance needs are temporary, like replacing income, paying for your kid’s tuition, or covering the mortgage.

However, whole life insurance can provide crucial protection for financial obligations that will be present whether you pass away tomorrow or more than 30 years from now.

Whole life insurance could be the right call in the three scenarios below:

  • Estate planning: If your assets exceed the estate tax threshold set by the IRS, your loved ones could face estate taxes up to 40%. A whole life policy could help cover the expense.
  • Special needs dependent: If your spouse, child, or anyone else has special needs that will require long-term care, permanent life insurance could be vital to ensuring their livelihood.
  • Final expenses: With the average funeral costing over $9,000, many people purchase small permanent burial policies to cover their final expenses.

How Much Does Whole Life Insurance Cost?

With all of its guarantees, it’s no surprise that whole life insurance is the most expensive form of protection you can purchase.

In fact, you’ll pay an average of ten to fifteen times more for whole life insurance than term life insurance.

For instance, a healthy applicant in his 30s would pay around $280 a month for a $250,000 whole life policy, while he could secure three decades of the same amount of term coverage for under $25.

With such high costs, many policyholders must resort to surrendering their policies, which may not recover much of what they’ve invested in the policy.

Whether you apply for whole or any other type of life insurance, your premiums will be determined by the factors below:

  • Policy details: The size and type of policy you choose, and the company you buy it from, will determine the cost of coverage.
  • Age: One of the chief factors in setting your rates is your age, with policies becoming more expensive and sometimes harder to be approved for as you get older.
  • Health: Your height and weight, medical conditions, and other measures will be used to assess your overall health, which has a major impact on rates.
  • Family history: Not only does your health come into play, but also your immediate family’s as underwriters will look for conditions like heart disease, diabetes, or cancer.
  • Driving records: A clean history behind the wheel can help your case, while a reckless driving record indicates to underwriters that you’re riskier to insure.
  • Occupation and hobbies: Dangerous jobs can equate to higher life insurance rates, as can any risky hobbies which increase your odds of dying.

Whole vs. Universal Life Insurance

If you need lifelong coverage, you’ll be faced with choosing between whole and universal life insurance.

Another form of permanent life insurance, universal coverage comes with a death benefit and cash value component and can last for the policyholder’s entire life.

Whereas whole life insurance solidifies your premiums, face amount, and cash value growth at the onset of the policy, these features can be altered with universal life insurance.

That flexibility appeals to many individuals, giving them the ability to mold their coverage to fit their changing needs while still securing a permanent policy.

Cash value can also accumulate differently depending on the type of universal policy you choose.

For instance, indexed universal policies can be tied to popular stock market indices.

With fewer guarantees, universal life insurance is less expensive than whole life insurance, making it a suitable fit for many budget-conscious families with permanent coverage needs.

Is Whole Life Insurance Worth the Cost?

Whether or not whole life insurance is a good investment ultimately depends on your family’s unique situation and needs.

Term life insurance is a much more prudent purchase for most families, providing sizable amounts of coverage for far less money.

That being said. if you do need permanent coverage, consider the following:

  • Policy conversion: Most providers allow you to buy a term policy and convert it into permanent coverage later, only paying the high cost of whole life insurance when you absolutely have to.
  • Ladder policies: If you have smaller permanent financial obligations but you also need temporary coverage for large expenses like income replacement and debt repayment,  buy separate policies. You can save by getting just enough whole life insurance to cover your lifelong expenses and a more affordable term policy for the rest.
  • Invest elsewhere: Consider the cash value as icing on the cake, but don’t get roped into a permanent policy for the savings component alone. You’ll likely find far higher returns with other types of accounts, and you can play a more active role in investing.
  • Get quotes: Not all life insurance companies excel in the whole life insurance niche. Compare quotes to ensure you get the best life rates from a dependable provider specializing in whole life insurance.


Jason Fisher

Jason Fisher is the founder and CEO of, LLC. and a multi-state licensed life insurance agent who has helped over a million Americans seek out affordable coverage, compare quotes, or get their family and businesses covered.

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