The Facts of Whole Life

Whole life insurance plans are the Cadillacs of the life insurance world. They offer unparalleled, lasting life insurance protection and cash value accumulation, but they are also the most expensive form of life insurance. On this page, we'll explain all of the basic facts of whole life insurance to help you as you shop for coverage.

Whole Life Coverage Is Permanent

Unlike a term life policy, a whole life insurance plan will stay with you for the rest of your life. Whole life plans do not expire, so the coverage will be in force until you die as long as you pay your premiums on time. Whether you die at age 27 or age 97, your whole life policy will still provide your beneficiaries with the proceeds of your policy. In fact, the older you are when you die, the larger the benefit your beneficiaries will receive because of the cash value accumulation we'll discuss in the next section.

Whole Life Policies Build Cash Value

A whole life insurance plan has cash value in addition to the normal death benefit. Whole life insurance policies are able to build cash value because your insurer invests a portion of your premiums. The investment portion of your premiums is typically devoted to an array of securities, such as mutual funds, bonds, etc. Most whole life plans have guaranteed minimum cash value accumulation, so your policy will build a certain amount of value each year regardless of how these investments perform. As the cash value of your whole life policy grows, you can take out loans against your policy, but this will reduce the death benefit of your coverage.

Whole Life Premiums Never Rise

One disadvantage of whole life insurance plans is that their premiums are initially fairly expensive. However, the premiums you pay when you first purchase the policy will never change. You'll pay the same premiums every year until you die. You will not have to submit to any further medical exams or renew your policy. You will simply continue paying the same rates you did when you originally purchased the coverage. In this way, a whole life insurance plan can actually save you money long term by sparing you from rising life insurance premiums.

Whole Life Plans Have More Options

Whole life plans come in a variety of forms from which policyholders can choose. Universal life and variable life are two examples of variations of standard whole life coverage. Some life insurers allow whole life policyholders to structure their policy to help with retirement investing, while others allow policyholders to choose how their premiums are invested. A whole life insurance plan can provide a multitude of options to accommodate your specific needs.