Whole Life Insurance, Explained in Plain English
Not sure how much coverage you need? Our free calculator adds it up in about 2 minutes. It doesn’t ask for your name, email, or phone.
How Whole Life Insurance Works
Lifelong coverage
As long as you pay your premiums, the policy pays out whenever you die.
Premiums on a set schedule
You pay according to the schedule in your policy.
Cash value
Part of what you pay builds cash value over time. In many policies, the cash value is low in the early years and grows later.
Higher cost up front
Premiums are higher at the beginning than they would be for the same amount of term insurance.
Whole life is one kind of “cash value” life insurance. Universal life and variable life are others.
What Can You Do With Cash Value?
- Borrow against it with a policy loan. Any loan you don’t pay back, plus interest, is subtracted from the death benefit.
- Surrender the policy and take the remaining cash value. Coverage ends, and early on you may get back much less than you paid.
- Use it to keep coverage going for a limited time, or to buy a smaller paid-up policy, if you stop paying premiums.
Our free calculator adds it up in about 2 minutes. It doesn’t ask for your name, email, or phone.
Is Whole Life Insurance Worth It?
It depends on what you need the money to do.
Whole life can make sense if you
Want coverage that lasts no matter when you die. Want to cover final expenses or leave money behind, guaranteed. Value predictable premiums and a policy you’ll keep for life.
Term may fit better if you
Mainly need coverage while kids are young or a mortgage is unpaid. Want the most coverage for the lowest price. Might drop the policy within the first several years.
The Downsides of Whole Life
- ! Much higher premiums than term for the same coverage
- ! Cash value builds slowly in the early years
- ! Dropping it early can mean getting back much less than you paid
- ! Loans reduce what your family receives if they aren’t paid back
Compare the two side by side: term vs whole life. Need a smaller lifelong policy for funeral costs? See final expense insurance.
Our free calculator adds it up in about 2 minutes. It doesn’t ask for your name, email, or phone.
FAQs
What is whole life insurance?
Permanent life insurance that covers you for life, as long as you pay premiums, and builds cash value.
How does whole life cash value work?
Part of your premium builds cash value over time. You can borrow against it or take it if you surrender the policy, but loans and withdrawals reduce what your family receives.
Is whole life insurance worth it?
For lifelong needs, like final expenses or leaving money behind, it can be. For temporary needs, term is usually a better value.
What happens if I stop paying my whole life premiums?
Depending on your policy, you may be able to use the cash value to keep coverage for a while, buy a smaller paid-up policy, or surrender it for the remaining cash value.
Can I borrow from my whole life policy?
Yes, against the cash value. Unpaid loans and interest are subtracted from the death benefit.
Our free calculator adds it up in about 2 minutes. It doesn’t ask for your name, email, or phone.
