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What is whole life insurance?
Whole life insurance is a form of permanent life insurance, and as the name suggests, provides coverage for your whole life as long as you keep paying the premiums. In addition to providing a death benefit, though, whole life insurance also includes a savings component also known as the cash value.
The Basics of Whole Life Insurance
There are three basic parts of whole life insurance:
Death Benefit – This is a tax-free payment from the life insurance company when you pass away. Your coverage amount is the amount that is paid out.
Beneficiary – A beneficiary is a person or people who receive the death benefit. Typically beneficiaries are spouses, children, a trust, business partner(s), friends, a nonprofit organization or other legal connections and organizations.
Premiums – Premiums are how you pay for the life insurance policy, with payments typically happening monthly or annually.
Additionally, there is a cash value component that comes with whole life insurance that isn’t featured with traditional term life insurance.
Understanding the Cash Value of Whole Life Insurance
When you pay your premium, a certain percentage goes toward a tax-deferred savings component known as the cash value. The cash value earns interest and grows over time. Sometimes whole life insurance and other forms of permanent life insurance are referred to as cash value life insurance policies due to this additional feature. You can typically borrow funds from the total cash value of your policy to help support other financial needs such as a child’s college education or covering medical expenses. Because of this savings capability, premiums for whole life insurance are often higher than that of a term life insurance policy. That being said, your premium on your whole life policy will remain the same as long as the policy is in force.
Navigating the ins and outs of your life insurance options can seem overwhelming, but we can help you sort it all out. We can instantly find and compare personalized quotes from some of the most trusted insurance companies, making sure the policy you choose is right for you.
Whole Life Insurance Coverage
There are varying benefits and considerations when thinking about purchasing whole life insurance. Whole life insurance coverage with a cash value typically only makes sense if you need lifelong coverage and have strong finances in place. If you’re hoping to help cover payments over a set period, such as a mortgage, a child’s education or the general replacement of income, term life insurance might be a better fit considering premium costs will likely be lower due to the shorter timeframe of the policy. We can help you weigh out your options and figure out what kind of life insurance policy would be the best fit for you and your family.
Cost of Whole Life Insurance
Although your premium should never change with whole life insurance, it often costs 10 times more than a term life insurance policy, but it’s our goal to help you find the right coverage for you. For many people, term life insurance is a great way to create financial protection for loved ones at an affordable price, but for some people, whole life insurance is the right option.
Benefits of Whole Life Insurance
There are a number of benefits that come with purchasing a term life insurance policy, but a few include:
- Lifetime Coverage – Whole life insurance provides coverage for a lifetime.
- Set Premium – The premium for whole life insurance never changes. What you pay for the first month is what you’ll pay every month the policy is in force.
- Cash Value – As your premiums accrue, and at a time specified by the insurance company, you can borrow against your policy’s cash value.
- Guaranteed Returns – Your returns can be guaranteed, as the life insurance carrier sets a guaranteed minimum growth rate on the cash value. That being said, the growth can vary wildly from year-to-year. And because your returns have the chance to be guaranteed, your cash value has the opportunity to grow even if other investments lose value.
Frequently Asked Questions (FAQs) about Whole Life Insurance
Do I need whole life insurance?
While term life insurance tends to be sufficient for most individuals, whole life insurance policies can make sense if you’re looking for lifetime coverage and have strong finances in place.
What are the best whole life insurance companies?
There are a number of great insurance companies that offer whole life insurance, and we work with some of the most trusted carriers. Learn more about the insurance companies we work with.
What alternatives are there to whole life insurance?
The main alternative to whole life insurance is term life insurance, which is often 10 times less expensive. With term life insurance, you can choose the policy length that fits your needs and it’s a simple and convenient way to ensure your loved ones are financially protected if anything were to happen to you. Another alternative to whole life insurance is universal life insurance, which is another form of permanent life insurance.
Explore Your Life Insurance Options with SelectQuote
Understanding the complexities of the different types of life insurance can be overwhelming, but we can help. We’ll learn more about your needs and help you decide what kind of life insurance policy is the right fit for you. Then, in just minutes, we’ll provide unbiased quotes from the trusted insurance companies we partner with to find the right coverage for you.
