Whole Life

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Check life insurance off your
to-do list for good

When you purchase whole life insurance, you take the guesswork out of life insurance. You do not have to consider when the policy will lapse. You do not need to worry about increasing premium payments. With level premiums and lifelong coverage, whole life insurance makes up over one-third of the individual life insurance market (Forbes).

What is whole life insurance?

Whole life insurance is permanent life insurance with cash value "living benefits."

Like all life insurance, whole life policies protect your family in the worst of times. The death benefit from your policy can replace lost income, maintain mortgage payments, or fund college expenses. Whole life is a type of permanent life insurance because the policy stays in effect your entire life.

Whole life insurance has the added benefit of a savings component that grows cash value tax-free. Many policies have a guaranteed minimum rate of return for the cash value portion of the policy. This is often referred to as a "living benefit" because it is intended to be accessed during your lifetime.

Learn more about living benefits associated with life insurance.
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How does whole life
insurance work?

When you purchase a whole life insurance policy, you agree to set premium payments and lifelong coverage. Some policies allow for a single premium payment or payments spread over a certain number of years rather than a lifetime.

After your death, most whole life policies pay only the death benefit regardless of how much cash value has accumulated. You can withdraw or borrow against the cash value during your lifetime, but any outstanding loans at the time of your death can reduce the payout to your beneficiaries.

  • Get lifelong coverage with consistent premiums
  • Withdraw or borrow against the accumulated cash value
  • Beneficiaries receive the death benefit, not the cash value

Some whole life policies allow you to purchase riders, or additional policy provisions, that give beneficiaries both the death benefit and the accumulated cash value of the policy. Additional riders or provisions usually increase the amount of your monthly premium.

It is important to understand the specifics of your whole life policy. Our professional agents work with you to answer questions and help you find the policy that works for you.
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Whole life insurance: Pros and Cons

The Pros:
  • Whole life insurance coverage lasts your entire life (often up to age 121!)
  • Your policy can accrue interest through the cash value
  • Many policies build cash value with a guaranteed rate of return

The Cons:
  • Whole life coverage is expensive compared to term life coverage of the same amount
  • Withdrawing from the cash value can incur high administrative fees
  • Traditional investment options (not tied to your life insurance) often provide a higher rate of return

Using your whole life insurance
cash value "living benefits"

Part of every premium payment for your whole life insurance policy goes towards a cash value account that grows over time. The cash value earns interest at a rate determined by your life insurance company. The rate of growth differs from policy to policy.

The cash value of a whole life policy is similar to a 401(k) or IRA because it grows tax-free. You can tap into these funds with a withdrawal or a loan. Choosing a loan means you can access the money tax-free but must pay it back with interest.

If you withdraw funds equal to or less than the cash value of premiums you've paid, the withdrawal is tax-free. Withdrawals of investment gains will be taxed.

Some examples of major expenses that can be lessened by using your cash value:

  • Purchasing or renovating a home
  • Paying for a wedding
  • Funding a once-in-a-lifetime trip

The cash value is there for you to use during your lifetime because many policies do not pass this value along to your beneficiaries. This is why it is often referred to as a "living benefit." But remember, outstanding loans at the time of your death will reduce the amount of the death benefit paid.

It is important to know all the conditions of accessing your money before making any decisions.

Types of whole life
insurance premiums


The cost of whole life insurance

As you age, your insurance company faces an increased likelihood that they will be required to pay benefits in the event of your death. This is why life insurance often becomes more expensive as you age, often increasing by 4.5-9% every year (Source). Whole life policies collect level premiums to make life insurance more affordable in your later years. The premium does not increase because you have overpaid in the early years of the policy.

Age is not the only factor that affects your life insurance premium. Other factors include:

  • Amount of coverage
  • Gender
  • Medical exam
  • Health history and medical conditions
  • Family health history
  • Smoking and substance abuse
  • Credit
  • Criminal history
  • Driving records
  • Dangerous hobbies and occupations

Your premium payments may also increase if you add supplemental coverage to a policy. Whole life insurance can cost anywhere between $55-$136 a month, but premiums change greatly based on the individual.

Our agents can provide you with a quote specific to your unique circumstance.

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Is whole life insurance
worth it?

Sometimes policy owners overestimate their ability to pay premiums for their whole life insurance year after year. Approximately 30% of whole life policies are surrendered within the first three years and 45% are surrendered within the first 10 years (Source).

Because of the high premiums, whole life insurance is usually best for people in special circumstances. Some examples of when you would benefit from whole life insurance instead of other life insurance policies:

  • If you maintain a high income and regularly max out other tax-deferred savings accounts
  • If you have lifelong dependents such as a special needs child
  • If you want to use your life insurance to fund a trust
  • If you wish to help your beneficiaries offset taxes due to the large size of your estate
  • If you are a co-owner of a business and wish to fund your partner or beneficiary's purchase of your shares after your death

Universal life insurance vs
whole life

Universal life insurance and whole life insurance are both examples of permanent life insurance. However, universal life options often allow flexibility in premium payments and death benefit amounts.

Additionally, many universal life options like variable or indexed policies attach their cash value to market performance. These policies often promise a greater rate of return than the traditional cash value of whole life policies.

Learn more about universal life insurance.
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Term life insurance
vs whole life

Term life policies do not offer lifelong coverage or a cash value, but they are often much cheaper for the same amount of death benefit coverage. If you do not see yourself having a need for the living benefits associated with the cash value of a whole life policy, a term policy may be a better fit.

Learn more about our term life coverage.
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What if I no longer need my
whole life policy?

If for whatever reason you no longer need your whole life insurance, there are usually a few options available to you. It often depends on your insurance company and the specific terms of your coverage.

Cash surrender: You can request the cash surrender value be paid to you. This is the cash value of the policy less the surrender charge. This terminates your coverage and will result in income taxes on any investment gains you received.

Reduce coverage based on what you've paid: Your life insurance company may consider what you've already paid towards your policy, calculate the amount of death benefit that sum would permanently provide, and give you a policy of that amount.

Extended-term life insurance: Your life insurance company may consider what you've already paid towards your policy and convert it to a term life policy for the same death benefit amount.

1035 exchange: You may be able to exchange your whole life policy for a different life insurance policy or for an annuity.

Whole life insurance quotes?

Navigating which type of life insurance products are the right fit for you and your family can be difficult. Our agents work with you to explain exactly what companies offer and how your policy works. You can get started by requesting a whole life insurance quote.
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