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Whole life insurance: Pros, cons & who it’s right for

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Life’s unpredictability is what makes it exciting—but uncertainty also can feel a little daunting when you're trying to plan for the future. While it’s impossible to be prepared for every situation that arises, whole life insurance’s lifelong coverage can help provide you and your loved ones with financial security, no matter what happens.

In this article, we'll delve into the pros and cons of whole life insurance—allowing you to make an informed decision when considering this type of coverage.

What are the pros & cons of whole life insurance?


  • Guaranteed coverage & death benefit
  • Locked-in premium rates
  • Guaranteed cash value
  • Potential tax benefits for heirs
  • Possibility of dividends
  • Optional riders


  • Higher premiums
  • Lack of flexibility
  • Cash value growth may be slower than traditional investments
  • Loans & withdrawals may affect the policy benefits

6 whole life insurance pros

Whole life insurance is a type of permanent life insurance with steady premiums. In addition to paying out a death benefit—the main purpose of any life insurance policy—whole life insurance can act as an investment vehicle, offer tax benefits to your beneficiaries, earn dividends you can propel into more cash or coverage, and be customized to your financial needs with riders.

1. Guaranteed lifelong coverage & death benefit

Unlike term life insurance—which offers coverage for a set period of time, typically between 10 and 30 years—whole life insurance guarantees coverage for the entirety of your life, as long as you continue to pay the premiums and you don’t surrender the policy. By keeping your contract active, your beneficiaries will receive a guaranteed death benefit in the amount of your policy’s face value when you pass away—providing them with financial protection during a difficult time.

2. Locked-in premiums

With a whole life insurance policy, your premiums—which are paid monthly, quarterly, semi-annually or annually—never increase. As long as premiums are paid, the policy will remain in-force, even if your health worsens later in life. And the younger and healthier you are when you purchase a whole life insurance policy, the better your rates will be for life.

3. Cash value accumulation is guaranteed

A differentiating factor between term life insurance and whole life insurance, as well as other types of permanent policies, is the ability to accumulate cash value. When you pay your premiums, a portion is allocated toward building tax-deferred cash value, which is guaranteed to grow, even if the stock market changes or declines. This money can be accessed by withdrawing funds, surrendering the policy or taking a loan against the cash value to pay for your own expenses such as emergencies, education or retirement.2

4. Potential tax benefits for your beneficiary

Whole life insurance can be a valuable estate planning tool. Since your death benefit is generally income tax–free1 (though you should consult with a qualified tax advisor to discuss your individual circumstances), it can be used to cover the estate taxes of other assets you’ve left to loved ones or to equalize inheritances amongst beneficiaries. This helps to preserve and create generational wealth.

5. Potential to earn dividends

Participating whole life insurance policies may earn dividends—the money an insurance company distributes to eligible clients when the company performs better financially than it expected for the year (though it’s never a guarantee). These dividends can enhance the policy’s overall value and offer potential returns on your investment by allowing you to increase your policy’s cash value, purchase additional coverage or receive cash payments.

6. The option to add riders

Customize your whole life insurance policy with riders. Those offer optional coverage you can add to your policy, often for an additional cost. Some riders include:

  • Accelerated death benefit: A standard on all contracts, an accelerated death benefit for terminal illness pays your death benefit if you have a life expectancy of 24 months or less, as certified by your qualified physician.
  • Paid-up additions: Paid-up additions, which only can be purchased with dividends, enhance your coverage by putting additional money into your contract. Each paid-up addition is like a mini life insurance policy with its own cash value—accessed via loan or surrender—and dividend eligibility.
  • Guaranteed purchase/insurability option: A guaranteed purchase option (GPO), available for juvenile policies, allows you to buy a new life insurance policy on future specified dates without a medical exam.
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The living benefits of permanent life insurance

Often, the primary purpose of life insurance is death benefit protection. But there are a variety of ways permanent insurance can be used while you're living.

Explore cash value & other living benefits

4 whole life insurance cons

While there are many whole life insurance benefits, there are some drawbacks—like higher premiums (compared to term life insurance), lack of flexibility, slower growth and potential penalties. Consider these as you choose the best product for your needs and lifestyle.

1. Premiums are generally higher than other types of life insurance

Whole life insurance premiums are typically costlier than those of term life insurance, primarily due to the policy’s built-in cash value accumulation and guarantees. Higher premiums may strain your budget, especially in the early years of the policy. So it’s important to consider your financial capabilities before committing to whole life insurance.

2. Lack of flexibility

Whole life insurance policies have limited flexibility compared to other life insurance products. Death benefit amounts and premiums can’t be changed, so it’s crucial to carefully review the terms and conditions before finalizing a whole life insurance contract.

3. Cash value grows slower than traditional investments

While your whole life insurance policy offers cash value accumulation, the growth rate may be lower than other traditional investments like stocks, bonds, mutual funds and real estate. For individuals with a disciplined savings and investment approach, the opportunity cost of a whole life insurance policy may be a consideration.

4. Loans & withdrawals may impact the benefits of the policy

A big benefit of a whole life insurance policy is the cash value accumulation and the ability to access those funds when needed. But there are some drawbacks to taking a loan against or withdrawing from the policy’s cash value, such as:

  • A decrease or elimination of the death benefit for your beneficiaries.
  • A decrease in the cash surrender value that may cause your policy to lapse.
  • Income tax liability if the contract terminates with outstanding debt.
  • Interest charges.
  • A smaller or nonexistent payout of dividends (if you have a participating policy).2 

Who should buy whole life insurance?

Whole life insurance may be right for you if:

  • You want lifetime coverage where premiums won’t increase over time—even if your health declines.
  • You want to leave a guaranteed (and tax-advantaged) death benefit to your loved ones.
  • You want to generate cash value—which increases at a guaranteed rate—to fund your own future expenses (since cash value doesn’t pass down to your heirs).
  • You want the potential to earn dividends.
  • You want the ability to customize coverage with riders.

A Thrivent financial advisor can work with you to evaluate your financial circumstances and explore whole life insurance, as well as other products that best fit your needs.

1 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.

2 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.

Guarantees based on the financial strength and claims paying ability of Thrivent.

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.

Riders are optional and available for an additional cost. 

Dividends are not guaranteed.

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