Benefits of Whole Life Insurance: Pros and Cons

According to a recent study, well over 100 million American adults lack life insurance. If you fall into this category, you should look into taking advantage of the benefits of whole life insurance. It'll provide you with the protection you need for the duration of your life.

So, why buy whole life insurance as opposed to another type of life insurance like term life insurance? There are many reasons for it. You should get a better understanding of the whole life insurance characteristics to see why it might be the superior option for you.

Continue reading to learn more about the advantages of whole life insurance as well as the disadvantages of whole life insurance. It'll enable you to decide if this type of life insurance is right for you.

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Whole Life Insurance Characteristics

As we just alluded to, whole life insurance isn't the only type of life insurance that will be available to you. Term life insurance is another popular option. You can purchase term life insurance policies that will run for 5 years, 10 years, 15 years, or even longer.

But a whole life insurance policy will operate a lot differently than a term life insurance policy will. For starters, it isn't ever going to expire as long as you continue to pay the premiums on it. It'll last for your entire life, which is one of the biggest whole life insurance policy benefits.

There are also other whole life insurance characteristics that set whole life insurance apart from term life insurance. Here are several of them:

  • The premium you pay for a whole life insurance policy will remain the same from the time you first sign up for it
  • A whole life insurance policy will have a tax-deferred cash value that will continue to grow as you get older
  • The death benefit that comes included with a whole life insurance policy will be guaranteed
  • You may have the option to receive dividends with certain whole life insurance policies

Each of these whole life insurance characteristics makes this type of life insurance different from all the rest. The benefits of whole life insurance also become quite clear when you know about its characteristics.

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Things to Consider With Whole Life Insurance

If you're interested in taking out a whole life insurance policy, there will be a few things that you'll need to consider before doing it.

First and foremost, you should consider when you will decide to take out a whole life insurance policy. The younger and healthier you are when you purchase a whole life insurance policy, the best price you will get on your premiums.

You should also consider which life insurance company you decide to purchase a whole life insurance policy from. There are thousands of insurance companies scattered throughout the country, including many that offer life insurance. Your goal should be to find one that you trust to provide you with an excellent whole life insurance policy.

Additionally, you should consider who the beneficiaries will be for your whole life insurance policy. Ideally, your beneficiaries should be your immediate family members so that they're protected in the event that you aren't around anymore to provide them with financial support.

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Whole Life Insurance Pros and Cons

Because a whole life insurance policy isn't going to be your only option, you will need to consider whether it would be the right choice for you. While doing this, you should weigh the whole life insurance pros and cons.

There are a variety of benefits that come with owning a whole life insurance policy as well as some downsides you should consider. Get the inside scoop on the whole life insurance pros and cons below.

Pros of Whole Life Insurance

One of the biggest benefits of whole life insurance is that it's going to provide you with permanent protection throughout your life. From the second you sign up for a whole life insurance policy, you won't ever have to worry about taking out another life insurance policy again.

There are also many other benefits of a whole life insurance policy that you'll come to appreciate. Check out a few of the biggest ones here.

Better Benefits

When you compare a whole life insurance policy to a term life insurance policy, you'll find that a whole life one will be more complicated. But this won't necessarily be a bad thing since a big part of the reason for this will be that a whole life insurance policy will extend better benefits to you.

With a whole life insurance policy, you will get coverage for your entire life, as long as the premiums are paid. This provides peace of mind and financial security for you and your loved ones, knowing that they will be protected no matter when they pass away.

A whole life insurance policy will also build up a cash value at a guaranteed rate. This could make it an ideal type of life insurance for those looking to have retirement benefits wrapped into this policy since you will often be able to withdraw cash from it at different points. The benefits of the whole life insurance cash value simply cannot be overstated.

Tax Advantages

There are a couple of tax advantages when you own a whole life policy. The first has to do with the cash value it builds.

The cash value component of whole life insurance grows tax-deferred, meaning that you do not pay taxes on the investment gains until you make a withdrawal. Additionally, you can take out loans against the cash value without triggering a taxable event, which can be a valuable source of tax-free income in retirement.

It can also be an effective tool for estate planning, as the death benefit is paid out tax-free to the policy's beneficiaries. This can help minimize the tax burden on your estate and ensure that your loved ones are provided for after your death.

If you rely on leaving behind an individual retirement account or a tax-deferred annuity for a loved one, the IRS is going to step in and take a sizeable cut from it before everything is all said and done. It could result in you leaving your beneficiaries a lot less money than you planned to.

Better Premiums

Generally speaking, the premiums that come along with whole life insurance policies will be higher than the premiums associated with term life insurance policies. But at the same time, you'll love that the premiums you pay will never increase and will remain the same throughout your entire life.

Payment options for premiums are also very flexible. Depending on the policy, you can pay off the policy in 10 or 20 years, with no more payments due after that while guaranteeing coverage for your lifetime.

In addition, depending on the type of whole life policy, if there is a dividend option for the cash value that builds, sometimes those dividends can be used to pay the premium, making the policy pay for itself.

Although whole life insurance premium payment options tend to be more expensive than term life insurance policies, they come with the added benefit of lifelong coverage and the accumulation of cash value over time.


After reading about all the benefits of whole life insurance, you might wonder why people would choose to go in any other direction. It seems as though it would make all the sense in the world to go with this type of life insurance.

There are, however, a few disadvantages of whole life insurance that you should keep in mind before proceeding with this type of life insurance. Let's take a closer look at the cons of whole life insurance here.

More Expensive

The cost of life insurance is obviously going to be a concern for most people purchasing it. One of the few drawbacks of choosing whole life insurance is that it's going to be more expensive than term life insurance in almost all cases.

Because it provides you with protection for life and because there is a cash value attached to it, you will need to spend more on a whole life insurance policy versus a term life insurance policy. In some instances, this cost can be significant depending on how old you are when you take out a whole life insurance policy.

If you're on the younger side when you take out a whole life insurance policy, you might be able to get it for under $100 per month. But as you get into your 50s, you might find that it'll cost well over $500 per month on average if you wait until then to secure a policy.

You will be able to take some control over how much whole life insurance will cost you by shopping around for the right policy. Obtaining a policy through one life insurance company might cost you a lot less than getting it through another one.

But no matter which life insurance company you decide to go with, there is a good chance they'll charge you higher premiums for whole life insurance than they would for term life insurance. You'll need to make sure you have enough room in your monthly budget to secure this kind of policy.

More Complex

Term life insurance policies are typically very easy to understand. They don't have a cash value, and they don't last for the length of your life. Therefore, you'll be able to comprehend the terms associated with this type of life insurance.

The complexity of whole life insurance lies in the fact that the premiums paid by the policyholder are split between the death benefit and the cash value component, which is invested by the insurance company. Additionally, the cash value component of whole life insurance may have tax implications that can be complicated to navigate. For example, if you surrender the policy or take out a loan against the cash value, you may be subject to taxes on any gains earned on the investment.

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How Does Whole Life Insurance Compare to Other Insurance Policies?

Prior to purchasing a whole life insurance policy, make sure you compare it to your other life insurance options. It'll give you an opportunity to see how it stacks up.

When you do this, you will discover that whole life insurance is going to cost you more than other types of insurance policies in many cases. You'll also find that it'll be a little more difficult to wrap your head around whole life insurance and all that it entails.

But at the same time, you'll see that whole life insurance will provide your beneficiaries with a much better death benefit, as well as possible tax advantages for you. It's going to make investing in a whole life insurance policy well worth it.

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Why Buy Whole Life Insurance?

As long as you're able to afford a whole life insurance policy at your age, it would be well worth considering it. You'll sleep so much better at night knowing that your beneficiaries will get access to a great death benefit with this type of life insurance.

You'll also rest a lot easier knowing that all the money you're spending on a whole life insurance policy will help increase its cash value. It'll give you options later on in life if you'd like to take money out of your policy.

This can provide advantages for seniors who would like to use some of the money they've paid for a whole life insurance policy over the years to improve their quality of life.

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Our content is created for educational purposes only. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Everdays encourages individuals to seek advice from their own investment or tax advisor or legal counsel.


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