Whole life insurance is permanent coverage designed to last your entire life, with guarantees built in.
How it works
You pay a premium that’s typically fixed for life. In return, you get a guaranteed death benefit as long as premiums are paid, plus cash value that grows at a guaranteed rate set by the insurance company. Cash value grows tax-deferred, and you may be able to borrow against it.
Some whole life policies are “participating,” which means they may pay dividends when the insurance company performs well. Dividends aren’t guaranteed, but they can be used to buy more coverage, reduce premiums or be taken as cash.
Who it may suit
- People who want lifelong coverage with predictable, guaranteed values
- Those planning to leave a legacy or cover final expenses
- Business owners planning for succession or key-person needs
- Conservative savers who value guarantees over growth potential
What to watch for
- Premiums are much higher than term for the same death benefit.
- Cash value grows slowly in the early years.
- Surrendering early can mean getting back less than you paid.
- Unpaid policy loans reduce the death benefit.
The bottom line
Whole life trades a higher price for lifelong guarantees. It works best when you want permanent coverage and can comfortably afford the premiums for the long haul.
Wondering if permanent coverage fits your plan? Get your Wealth Report Card.
For educational purposes only. Guarantees are based on the claims-paying ability of the issuing insurance company. Dividends are not guaranteed. Policy loans and withdrawals reduce cash value and death benefit and may have tax consequences.