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 provide you and your loved ones with financial security, no matter what happens.
6 whole life insurance pros
1. Guaranteed lifelong coverage & death benefit
2. Locked-in premium rates
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. Translation: The
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
4. Potential tax benefits for your beneficiary
Whole life insurance can be a valuable
5. Potential to earn dividends
Participating whole life insurance policies
6. The option to add riders
Customize your whole life insurance policy with riders, 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 benefitfor 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.
- Disability waiver: If you become completely disabled, this rider waives your premiums.
- Guaranteed purchase/insurability option: A
guaranteed purchase option, available for juvenile policies, allows you to buy a new life insurance policy on future specified dates without a medical exam.
The living benefits of permanent life insurance
4 whole life insurance cons
While there are many whole life insurance benefits, there are some drawbacks—like higher premiums, lack of flexibility, slower growth and potential penalties—that may signal another product is a better fit for your lifestyle.
1. Premiums are generally higher than other types of life insurance
Compared to term life insurance, whole life insurance premiums are costlier, 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
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
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, and a smaller or nonexistent payout of dividends if you have a participating policy.2
Pros & cons of whole life insurance at-a-glance
No, coverage lasts from 10-30 years depending on the term purchased
No, policyholders can adjust their premiums
Yes, with growth at a guaranteed rate
Yes, but not guaranteed
Yes, if your policy is participating
No, as there is no cash value accumulation
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 death benefit, and the tax benefits that come along with it, to your loved ones.
- You want to generate cash value—which increases at a guaranteed rate—to fund your own future expenses, as 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.