AccuQuote makes choosing Whole Life Insurance easy by offering expert guidance and access to top-rated carriers. With guaranteed lifetime coverage, fixed premiums, and growing cash value, Whole Life policies provide long-term protection and financial stability.
What is Whole Life Insurance?
Whole Life Insurance is the gold standard of life insurance policies. This type of permanent life insurance is one of the most misunderstood financial products on the market today. By the end of this section, you will better understand how whole life insurance works, who benefits from it, and why people buy this type of policy. You will also see how other insurance products contrast with whole life coverage, so you’ll feel confident choosing the policy that’s appropriate for you.
In addition to a guaranteed lifetime death benefit and level premiums, whole life insurance builds guaranteed cash value that grows each year. This value can be accessed by the policyholder and is often enhanced by annual dividends. While whole life costs more than term, its long-term value can be significant.
As with any purchase, price plays an important role in the decision-making process. However, true value lies in the balance between cost and what you receive in return. Ultimately, no one wants to pay more than necessary for the coverage or service they need.
Premiums can be structured to stay level for as long as you live. Or, if you wish, they can be paid over a shorter period, such as 20 years, 10 years, or even a single premium for a lifetime of guaranteed coverage.
For customers who want the best of everything, whole life insurance is truly an amazing financial instrument.
How Whole Life Insurance Works
Part of your Whole Life premium builds tax-deferred cash value over time. You can borrow against this amount or receive it if the policy is surrendered.
If you cancel the policy, you’re entitled to its cash value — not the full death benefit. The cash value is a portion of the total face amount, not in addition to it.
Borrowing Against Cash Value
When you borrow from a Whole Life policy’s cash value, the death benefit is reduced until the loan is repaid with interest. While premiums are higher than term insurance, Whole Life offers long-term benefits, including a built-in savings component that can help you accumulate funds over time.
For many, it may become a significant personal savings source beyond home equity.
Whole Life vs. Term Life Insurance
Whole Life insurance is designed to stay in force until you die, with no increase in premiums. In contrast, Term Life Insurance is designed to provide temporary coverage for a set duration of time, typically 10, 15, 20, 25, 30 or 35 years. A Whole Life policy lasts for a lifetime, while Term Life insurance ceases, or becomes ridiculously unaffordable, after the specific policy’s term ends, leaving you with no coverage. A Whole Life policy accumulates cash value throughout the life of the policy, which can be borrowed against. By contrast, a Term Life policy accumulates no cash, so there’s no available cash value to borrow against.
Participating vs. Non-Participating Whole Life Insurance
Some Whole Life insurance policies are issued by mutual insurance companies. These are typically known as “participating” or “par” policies, which means policyholders may be eligible to receive dividends. Unlike publicly traded companies, mutual insurers do not have shareholders. Instead, any excess profits the company earns can be distributed to policyholders in the form of dividends. While dividends are not guaranteed, they can enhance the policy’s overall value over time.
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Participating Insurance
A Participating Whole Life insurance policy may pay dividends to policyholders, reflecting a share in the insurer’s surplus earnings. While dividends are not guaranteed, they are generally not subject to income tax. In mutual insurance companies, policyholders are considered owners, similar to shareholders in a publicly traded company, which entitles them to a portion of any excess profits in the form of dividends. These dividends can be:
- Paid in cash
- Used to reduce your premium payments
- Left to accumulate at a specified interest rate
- Used to purchase paid-up additional insurance, which will increase your coverage’s face amount.
(Note: Dividends are not guaranteed to be paid)
Non-Participating Insurance
A Non-Participating Whole Life policy receives no extra dividend payments. Unlike a Participating Whole Life policy, the policyholder is not sharing in the surplus earnings of the insurance company. However, this type of policy still has a level premium and face amount during the entire life of the coverage.
Premium Options
Limited Payment
Limited Payment Whole Life Insurance offers lifetime protection with premiums paid over a shorter period. You pay higher premiums upfront — either over a set number of years (like 10 or 20) or until a certain age (such as 65 or 85) — allowing you to fully fund your policy faster than with traditional whole life coverage.
Level Premium
Level Premium Whole Life Insurance (sometimes referred to as “ordinary whole life”) provides a lifetime death benefit and level premiums for the life of the policy (until the death of the insured).
Single Premium
Single Premium Whole Life Insurance is a limited payment policy funded by one upfront premium at the time of issue — no further payments are required. It provides immediate cash value and loan availability and is often used more as an investment vehicle than traditional life insurance.
Disability Waiver / Rider
Some Whole Life insurance policies include a disability waiver rider, which ensures your premiums are paid if you become disabled. Can you name another financial product where, if you can’t continue contributing due to disability, the institution steps in and pays on your behalf?
Whole Life Insurance Offers
- Beneficiaries receive the policy’s death benefit no matter when the insured dies
- Predictable, fixed premiums for the life of the policy (in most cases)
- Cash value that can be withdrawn or borrowed against (in some cases)
- Safe, predictable, and positive growth
- Policy cash value that’s tax-deferred
How Much Life Insurance Do I Need?
How much life insurance you need depends on your personal financial situation, goals, and family needs — so relying on a general “rule of thumb” may not be the best approach. That’s why we encourage you to visit our Get A Free Quote page. By answering a few quick questions, you can connect with a licensed agent who will help you estimate the right amount of coverage based on your specific circumstances.
Pros and Cons of Whole Life Insurance
| Pros | Cons |
|---|---|
| Lifelong protection that stays in force for as long as you keep paying premiums. | Generally more expensive than many other life insurance options. |
| Premiums are guaranteed to remain level and predictable over the life of the policy. | Cash value tends to build slowly in the early years of the policy. |
| Policy builds cash value over time that you can tap through loans or withdrawals. | Taking loans or withdrawals can reduce the policy’s death benefit if not repaid. |
| Provides a guaranteed payout to your beneficiaries, as long as the policy stays in force. | Dividends are not assured, even on participating whole life policies, and may vary over time. |
| Helpful for long-term planning, including legacy goals, estate strategies, and lifelong financial stability. | Less flexible than policies that allow you to adjust premiums or coverage amounts. |
Get the Best Quotes for Whole Life Insurance
Call AccuQuote today at (800) 442-9899 and we’ll help you figure out what kind of policy makes the most sense for your needs. You can also visit our Get A Free Quote page to get started today.
Whole Life Insurance: FAQs
Does whole life insurance build cash value?
Yes. A portion of your premium goes into a cash value account that grows tax-deferred at a guaranteed rate. Over time, this cash value can become significant and may be used for emergencies, retirement income, or other financial needs.
How is whole life insurance different from term life insurance?
Whole life insurance lasts for your entire lifetime, while term life covers you for a specific period. Whole life policies also accumulate cash value that you can borrow against or use later in life. Term life insurance is generally much more affordable but does not build savings.
What are the benefits of whole life insurance?
Whole life insurance offers several advantages:
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Lifetime protection
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Guaranteed premiums that never increase
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Cash value growth you can access while alive
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Potential dividends (with participating policies)
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A reliable tool for long-term financial and estate planning
This combination of insurance and savings makes whole life a versatile asset for many families.
Can I borrow money from my whole life insurance policy?
Yes. You can take out a policy loan using your cash value as collateral. Loans are typically tax-free and do not require credit checks. However, unpaid loans and interest will reduce your policy’s death benefit if not repaid.
Are whole life insurance premiums guaranteed to stay the same?
Yes. One of the biggest advantages of whole life insurance is that your premiums are locked in for life. They will never increase due to age or changes in health.
What can I use the cash value for?
Cash value can be used for:
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Supplementing retirement income
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Paying medical bills
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Funding education
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Covering emergencies
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Helping pay premiums
It’s flexible money you can access while you’re alive.
Do whole life insurance policies pay dividends?
Some whole life policies, known as participating policies, may pay annual dividends depending on the insurer’s financial performance. Dividends can be used to reduce premiums, increase cash value, buy additional coverage, or be taken as cash.
Can I cancel or surrender my whole life insurance policy?
Yes. You can surrender the policy and receive the cash surrender value, which is the accumulated cash value minus any fees or loans. However, surrendering the policy also means losing the death benefit.
Is whole life insurance a good investment?
While whole life insurance is not a traditional investment, it does offer guaranteed growth, predictable returns, and risk-free accumulation. It may be a good long-term financial tool for people looking for stability, tax advantages, and lifetime protection. However, it’s not designed to replace traditional investment accounts.
Can I have both term life and whole life insurance?
Absolutely. Many people use a hybrid strategy, combining affordable term insurance for high-coverage needs with a smaller whole life policy for permanent protection and cash value growth. This approach balances cost, flexibility, and long-term security.
