Whole Life Insurance offers the level premiums that so many individuals want while providing protection for as long as you live[1]. It also offers a very attractive benefit that makes it so much more appealing for individuals who want long-term life insurance protection in that it offers guaranteed cash value accumulation. In order to provide this added benefit, a whole life insurance policy (considered permanent life insurance as opposed to term life insurance) is comprised of two parts, as are the majority of permanent life insurance plans: a savings, or investment portion and an insurance portion.

Whole Life Insurance imageWhole Life Insurance provides:

  • Lifetime protection for your family
  • Long-term tax-deferred savings
  • Level premiums throughout your lifetime
  • Low-interest borrowing against available cash value
  • No contract year limitation
  • Guaranteed death benefit, regardless of how long the policy has been in force

[1] Generally, there is a maximum age at which the policy will expire, but is generally well beyond established average life expectancies.

Because of the savings feature of permanent life insurance, whole life insurance premiums are higher than term insurance premiums. A portion of the whole life policy premium is placed into a high interest account. Your cash value increases with each premium payment you make. This cash value is earned on a tax-deferred basis. The remaining premium goes towards the cost of insurance. As you age, the cost of insurance actually increases, but your premium doesn’t increase because a portion of the earnings offset the typical increase.

Another advantage of whole life insurance is the ability to borrow against your cash value. In many cases the interest rate offered by the insurer is lower than market rates. Borrowing against your policy’s cash value involves no credit check or other traditional hassle of securing a loan.

Whole life insurance also gives you a little flexibility if you should find yourself unable to pay your premium. As long as you have cash value in the policy, it can be used to cover the premium payments so you can keep your life insurance coverage in force.

Should you ever decide to cancel your policy, you’ll receive any accumulated cash value less any outstanding loans.

Remember: whole life insurance is a permanent life insurance product. It’s designed to help you reach long-term goals, so it’s always best to keep it in force for as long as you live.