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How to use whole life insurance as an investment

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Life insurance typically is purchased for its death benefit—that is a policy’s primary purpose, after all. But in addition to providing your loved ones with financial security after you pass, a whole life insurance policy also offers the ability to accumulate cash value, positioning it as an investment tool and savings account you can tap into while you’re still living.

Read on to learn more about the features of whole life insurance and how you can maximize the investment in your policy.

How whole life insurance works

Whole life insurance is a type of permanent life insurance, meaning it will provide coverage for your whole life as long as you continue to pay your premiums. The premium amount remains the same for the life of the policy, regardless of your age or health. It’s a great savings vehicle, as it accumulates tax-deferred cash value each year.

Despite the benefits of whole life insurance, there are a couple of downsides to consider: It’s more expensive than a term policy due to the built-in cash value. There’s also less flexibility with whole life insurance when it comes to modifying coverage and choosing how to invest the cash value part of your policy.

Is whole life insurance a good investment?

Whole life insurance can’t be compared “apples to apples” with traditional investment vehicles. Unlike investments like stocks, bonds or mutual funds, the cash value of a whole life insurance contract does not fluctuate with market changes. Each year, the policy’s cash value is guaranteed to increase, tax-deferred, and can be accessed without incurring any taxable gain. Whole life insurance policies even may be eligible for an additional dividend.

4 ways to use whole life insurance as an investment

There are a variety of ways to maximize your investment in a whole life insurance product, such as using the cash value of a policy for loans, withdrawing for income in retirement, creating generational wealth and more.

1. Withdraw or take a loan on the cash value

The most straightforward way to leverage your whole life insurance policy is to tap into the cash value to pay for major expenses, like college, a down payment on a house, an emergency fund or retirement income. If you have accumulated a significant cash value and no longer need the full death benefit, you can opt to receive regular payments from the policy’s cash value. This income may be tax-free, since there is no tax liability on partial surrenders of non-modified endowment contracts until you have received all your premiums back.

You also can take out a loan against a portion of or all of the contract’s cash value, which is used as collateral. You can pay the loan back at your own pace or not at all, though that comes with potential drawbacks like causing your contract to lapse if you don’t maintain a sufficient cash value, paying interest to your insurer and reducing your death benefit so your heirs won’t receive the full face value.1

2. Create generational wealth

When working on your estate plan, you likely want to leave the full value of assets—whether it be investments, real estate or a family business—to your heirs. Unfortunately, the federal estate tax means this inheritance could be reduced by up to 40% if your total taxable assets are larger than the filing threshold the year of your death ($13.61 in 2024—though this number is scheduled to reduce to $5 million after 2025 due to the sunset of the Tax Cuts and Jobs Act).

One way to help your heirs navigate this is to create an irrevocable life insurance trust (ILIT). Death benefit proceeds from a whole life insurance policy owned by an ILIT may pass to your heirs outside of your taxable estate, so your heirs can use it to cover any estate taxes and continue creating wealth for generations to come with the assets you’ve left them.

3. Collect dividends

Not all whole life insurance contracts offer dividends—the money an insurance company distributes to eligible clients when the company performs better financially than it expected for the year—but if your policy does, there are a couple ways you can use them to get the most out of your investment.

  • Credit your dividend toward your premium to reduce out-of-pocket payments.
  • Pay yourself directly in cash with a check for the dividend amount.
  • Credit the dividend to your life insurance contract to earn interest.
  • Pay back any loans you’ve taken out against your contract.
  • Purchase paid-up additional insurance to increase your contract’s cash value and death benefit.

How paid-up additions work

Using the dividends from your whole life insurance policy, you can purchase paid-up additional insurance (PUA). Each PUA has its own death benefit and cash value, and earns dividends, so you can think of it like a mini life insurance policy you can obtain without medical underwriting or increasing your premium payment. Access the PUA cash value the same way you would tap the cash value of your main whole life insurance policy: Take out a loan against the PUA or surrender it.

4. Surrender the policy (but only if you no longer need it)

If you no longer need your whole life insurance policy, you can surrender it and receive the accumulated cash value, minus any fees and outstanding loan balances. Before making this decision, understand that a full surrender of the cash value may create a taxable event depending on the amount of earnings in the contract at the time of surrender.

You also should consider the consequences of giving up the death benefit attached to your life insurance. Death benefits are generally income tax–free for beneficiaries2—unlike some other taxed forms of inheritance—who can use the money to pay down debts, cover funeral costs, replace your income and create generational wealth.

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Thrivent's record-breaking year of dividends

We are proud to be providing an all-time high of $542 million in dividends and policy enhancements to our eligible clients in 2024. Learn more about our history of dividends.

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When whole life insurance may not be a good investment

While whole life insurance offers many benefits to policyholders, it’s not a one-size-fits-all product, and there are some instances where it may not be a good investment for you:

  • If you only need a death benefit for a specific timeframe and don’t care to accumulate cash value, consider a term policy instead.
  • Cash value is modest and can be slow to grow, so if you’re comfortable taking on more risk in exchange for potential higher investment returns, traditional investments—like mutual funds—may be more appropriate.
  • If you need to tap into the cash value sooner than anticipated, the cash value may be less than the premiums paid into the contract in a given year, resulting in a financial loss.
  • The insurance company that holds your whole life insurance contract chooses where to invest the cash value portion of your policy, so if you’d like to be more hands-on with the investment strategy, consider other options.

Does a whole life insurance policy make sense for you?

Whole life insurance may be right for you if:

  • You want a stable life insurance option where premiums won’t increase over time.
  • You want to leave a guaranteed death benefit to your loved ones.
  • You want to generate cash value—which is guaranteed to increase each year—to fund your own future expenses, as cash value doesn’t pass down to your heirs.

A Thrivent financial advisor can work with you to evaluate your financial circumstances and explore whole life insurance as a potential investment and savings tool.

1 Loans and surrenders will decrease the death proceeds and the value available to pay insurance costs which may cause the contract to terminate without value. Surrenders may generate an income tax liability and charges may apply. A significant taxable event can occur if a contract terminates with outstanding debt. Contact your tax advisor for further details. Loaned values may accumulate at a lower rate than unloaned values.

2 The federal income tax treatment of life insurance is unclear in certain circumstances. A qualified tax advisor should always be consulted with regard to the application of law to individual circumstances. Thrivent does not make any guarantee regarding tax treatment (federal, state or local) of any contract or of any transaction involving a contract, particularly after insured age 100. Life insurance proceeds may be subject to federal and/or state estate and/or inheritance taxes.

Dividends are not guaranteed.

Thrivent and its financial advisors and professionals do not provide legal, accounting or tax advice. Consult your attorney or tax professional.

If requested, a licensed insurance agent/producer may contact you and financial solutions, including insurance may be solicited.

Life insurance contracts have exclusions, limitations and terms under which the benefits may be reduced, or the contract may be discontinued. For costs and complete details of coverage, contact your licensed insurance agent/producer.

Investing involves risk, including the possible loss of principal. The mutual fund prospectus contains more information on investment objectives, risks, charges and expenses, which investors should read carefully and consider before investing. Available at