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Policy Types

Whole life insurance financial benefits

While whole life insurance may not be right for all, there are financial planning benefits to purchasing this type of permanent or cash value policy.

If you've been considering a whole life (permanent/cash value) insurance policy, you understand that unlike term life insurance (which provides coverage for a specific time period), a whole life policy is permanent,* and is designed to provide coverage for your entire lifetime. However, what you may not know is that there are many financial benefits contained in a well-designed whole life insurance policy that stretch beyond the death benefit protection it provides.

When selecting life insurance, you should consider all your available options. To be helpful, we've put together a short list highlighting just a few of the financial features associated with a quality whole life policy.**

1. Whole life insurance protection

The cash value that your whole life policy accumulates isn't subject to stock market volatility.

2. Cash value growth

Regardless of how stock markets perform, your cash value grows at a fixed rate. Over time, your policy builds cash value that is not subject to stock market declines.

3. Additional income

Under IRC Section 1035, a whole life policy can be exchanged without tax penalties for an annuity, which can provide you with additional income for life. Be sure to consult a qualified financial advisor or tax professional to assess your specific scenario. 

4. A source of cash

There may be times when you need additional financial resources to help fund certain expenses. Your whole life policy can be a source of funds to help you meet these needs and other financial obligations. Unlike 401(k)s and IRAs that penalize you for accessing your money prior to reaching age 59 1/2, a whole life policy would allow you to borrow from available cash value for any reason and pay it back. However, interest will accrue and both the death benefit and cash value will be reduced by any outstanding loan balance.

5. Dividends

Some whole life policies pay out annual dividends (money paid to you off the insurer's profits). This cash can be used to purchase additional life insurance (paid-up additions) that increases both the total death benefit and cash value of your life insurance policy. Keep in mind that dividends are not guaranteed.

The primary purpose of any life insurance policy is to provide financial protection for your loved ones when you die. For some, this could be term life insurance, while others find whole life insurance (or a combination of policy types) a better fit. However, before you decide to buy any type of life insurance, make sure you fully understand the key benefits and features of each and how they can benefit you and your family.


* As long as required premiums payments are timely made.

**It's important to note that not every insurance company or whole life policy offers all these benefits and features and that this is not an all-inclusive list.



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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective or its subsidiaries.

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