Understanding Whole Life Insurance-Build Your Own Bank

Updated: Feb 28

Whole life insurance offers the benefit of permanent protection as long as you maintain payments on time. And while payments may be higher than term life, whole life earns cash value at a set, fixed rate.

Whole life insurance policies also offer the ability for you to access your cash value through loans for future needs. But be aware that any unpaid loan will reduce the cash value and death benefit of the policy.

  • Level premium payments

  • Guaranteed death benefit coverage

  • Guaranteed cash value accumulation

  • Cash value grows tax-deferred

  • A fixed interest rate

Limitations of whole life insurance:

  • Whole life can be more expensive than other types of life insurance policies.

  • The amount of your premiums and the face value of your whole life policy are not adjustable should your financial needs change.

  • Depending on your situation, you may not need this level of coverage for your entire life and could overspend for coverage you don’t need.

  • Whole life may not be a good choice if you will need access to money in the short term. Often, whole life policies come with a surrender charge period, during which you would pay a penalty if you surrender your policy.

  • Your policy may need to reach a minimum value before loans are allowed.

Is whole life insurance right for you?

There are a few simple questions that can help you determine if a whole life insurance policy will meet your needs:

  • Do you want a life insurance policy that will last a lifetime?

  • Do you feel the potential for earning cash value over time is worth the additional premium?

  • Do you have a family history of health concerns that might make it difficult for you or a loved one to secure affordable coverage later in life?

  • Do you think cash value could be a future benefit for liquidity, retirement, or estate planning?

  • Do you need money to cover funeral expenses or to offset the cost of inheritance or estate taxes?

If you answered yes to any of these questions, then a whole life insurance policy may meet your needs for locking in permanent coverage and benefits for the future.

**Policy premiums must be made in order for policy to remain active.

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