Benefits of Whole Life Insurance

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Key Takeaways

  • Whole life insurance provides lifelong coverage and a fixed death benefit for beneficiaries, as long as premiums are paid.
  • Whole life insurance offers a cash value component, allowing policyholders to build savings.
  • Whole life insurance provides tax advantages, including tax-free death benefits and potential tax-free growth on cash value and loans.
  • Premiums for whole life insurance remain fixed throughout the policy, offering stability and protection against increasing costs.
  • Some whole life insurance policies may pay dividends based on the insurer's performance, which can be used to offset premiums, reinvest, or receive as cash.

Whole life insurance is a common form of permanent life insurance that’s popular for the many benefits it offers to people of all ages and life stages. If you’re seeking a way to guarantee the security of your loved ones after you pass away, a whole life insurance policy can be a good addition to any financial or estate planning portfolio.

Below, we cover the most significant benefits of owning a whole life insurance policy, point out potential drawbacks and offer information about how you can tap into further resources to explore which whole life insurance product best suits your particular needs.

Whole Life Insurance Builds Cash Value

Whole life policies can do more than pay a death benefit to your beneficiaries. They may also offer a living benefit to you in the form of a cash value component.

Whole Life Insurance Has Tax Advantages

Beneficiaries don’t generally pay income taxes on the death benefits they receive. Additionally, you typically don’t owe income taxes on any gains from building cash value as long as you keep your policy. This also includes taking a loan from your cash value.

Whole Life Insurance Premiums Remain The Same

Once you’re approved for a whole life insurance policy at a certain premium, that premium is locked in the life of the policy. The premium amount is guaranteed to remain the same regardless of life risks.

Whole Life Insurance Doesn’t Expire

Whole life insurance is a type of permanent life insurance. That means the policy will stay in force for your entire lifetime as long as you pay the premium. Unlike a term life insurance policy, whole life insurance has no expiration date.

Beneficiaries Receive Fixed Benefits

When you purchase a whole life insurance policy, your designated beneficiaries will receive a fixed amount upon your death. While the amount of coverage is determined by the terms of your particular policy, this guaranteed death benefit will be paid out in full according to your wishes as long as you pay the premiums during your lifetime (assuming there was no partial surrender or outstanding loan on the policy).

Potential Dividend Payments

Some whole life insurance policies may pay out dividends if your insurance company shows a good financial performance. These policies are often referred to as “participating” whole life policies because customers share in the benefits of the insurer’s success.

Dividends received from a participating whole life policy can be used in different ways. Some policyholders choose to offset part of their premium payments with any dividends received. Others reinvest the dividend payments into the policy to add to its overall cash value. The policyholder can also choose to receive the dividend payments to use at their discretion.

What is the Main Disadvantage of Whole Life Insurance?

While there are a lot of advantages to owning a whole life insurance policy, there is one potential downside.

Whole life insurance costs are generally going to require higher premiums than term policies, which expire after a set number of years. But most people — when considering term vs. whole life — find that the benefits of owning a whole life insurance policy make it a sound investment.

How to Know if Whole Life Insurance is the Best Option For You

Determining whether a whole life insurance policy is the right financial planning tool for you depends on several things, including:

  • Your life stage
  • The purpose for the policy
  • How much current life insurance coverage you have
  • Whether you're looking to supplement an existing policy with additional insurance

For example, if you’re a young adult, you might want to choose a whole life policy to protect your current or future spouse and children in the event of your death. Purchasing a whole-life policy while you’re young and in good health — when premiums will be lower — lets you lock in a low rate for life.

If you’re an older adult, you might seek out a whole life policy to ensure that you’ll be able to provide an inheritance to your children and grandchildren. You might also want to ensure that your loved ones have enough to cover all your medical bills and final expenses.

You might even be considering purchasing a whole life insurance policy in the name of a child or grandchild as a way to lock in a low premium for their entire life.

The whole life insurance financial professionals at Western & Southern are prepared to walk you through your options and answer all your questions to help you find the best life insurance policy for your particular circumstances and budget.

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Information provided is general and educational in nature, and all products or services discussed may not be provided by Western & Southern Financial Group or its member companies (“the Company”). The information is not intended to be, and should not be construed as, legal or tax advice. The Company does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.