Whole life insurance is designed to last you your whole life. This coupled with the added component of having the potential to accumulate cash value over time, is generally what makes whole life more expensive than other types of life insurance. And if you're willing to pay more, you might find these features worth the extra dollars.
How whole life insurance works
When you pay your whole life premiums, part of your payment goes toward insurance costs, while another portion goes into a cash value component of your policy that begins growing at an established interest rate. This feature of whole life insurance accounts for some of the price difference compared to a term policy.
Another factor in why whole life policies can be pricier, is the simple fact that they offer coverage that is meant to be with you for the rest of your life. For this reason, insurers figure that there is a greater likelihood of paying out a death claim at some point on a whole life policy, compared to a term life policy.
There are many factors that go into setting life insurance premium rates and every insurance company has their own set of life insurance products, underwriting guidelines, and policy fees. Before you make a decision on whether or not whole life is right for you, make sure that the cash value and permanence of the policy justify the higher premiums you may be paying. Consult with an insurance professional or company representative who can explain the benefits and features of various life insurance products so that you can select the policy that best meets your individual needs
*As long as required premium payments are timely made.