What is Whole Life?
Much like term insurance, whole life insurance is meant to provide your loved ones a degree of financial security by way of a death benefit. It is, after all, a life insurance policy. If you were to die unexpectedly, your whole life insurance policy could help the beneficiaries pay for thing such as final expenses, medical bills, living expenses, mortgage payments, and other debts.
However, unlike term life insurance, whole life insurance is considered a type of permanent life insurance. Instead of the policy expiring when a specific term is up (10, 20, or 30 years) or in some cases when a specific age is attained, whole life insurance provides coverage for your entire life as long as you continue to pay your required premiums on time. Whole life insurance also includes a component that can accumulate cash value. It's this cash value that is one of the key elements of whole life insurance.
Because whole life insurance is designed to be permanent and can earn cash value, premiums will typically be higher than with term life. However, you may find that these two benefits are worth the extra premium. Some additional key benefits to whole life include:
- A fixed monthly premium that will never increase as long as required premiums are made on time
- A guarantee that your beneficiaries will receive at least the death benefit value of the policy*
- Not having to replace your life insurance policy after a specific term of level premiums with a new policy, and face potentially higher premiums based on your current your age or health status
- The potential to build cash value that you can use while you are living through policy loans or other withdrawal options*
Who should buy whole life insurance?
Just about anyone who is looking for a life insurance policy that is designed to be permanent, and feels that the potential for earning cash value will be worth the additional premium should consider whole life insurance.
In addition, you may want to consider buying whole life insurance or another type permanent life insurance policy if:
- You have a family history of specific health concerns that at some point, may make you high-risk for a life insurance company to be able to offer you affordable coverage (or offer you coverage at all)
- You think that the potential cash value earned may be beneficial to you at some point in the future for emergencies, retirement, or any other reason
- You want to lock into a premium rate for life
*Access to cash value through borrowing or partial surrenders will reduce the policy's cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.