Whole Life Insurance Coverage for Your Lifetime

When you purchase a whole life insurance policy, you will pay a premium, typically on a monthly or annual basis, to the insurance company. A portion of the premium will go towards the death benefit, which is the amount that will be paid out to your beneficiaries in the event of your death. The remainder of the premium will go towards the cash value component of the policy. Find out more about how whole life insurance works.

The cash value is an investment account that is managed by the insurance company. It earns interest over time and can be used for a variety of purposes, such as paying premiums, borrowing against the policy, or even surrendering the policy for its cash value. Find out more about cash value life insurance.

While both whole life and term life insurance provide death benefits as long as premiums are current, term life insurance doesn’t guarantee the death benefit for a lifetime. Instead, you purchase term life insurance to cover a specific term, often 10 to 30 years. When the policy expires, the benefit expires. If you want to continue coverage, you must buy another term and pay higher premiums.

Deciding which type of life insurance to choose will depend on your financial situation, the type of protection you and your family need, and how a life insurance policy might fit into your investment portfolio.

If you’re relatively young and anticipate your need for life insurance will grow over time, it could make sense to purchase a whole life policy while you can lock in a low premium rate for a higher benefit amount. As you and your policy age, you’ll be able to watch your policy build cash value over time and then leverage that value as needed.

Often, people nearing retirement age will purchase a whole life policy for an amount that will ensure their final expenses will be paid and provide their adult children with an inheritance to use to start their own savings.

If you’re looking for a less expensive life insurance policy or only need coverage for a fixed time, a term life insurance policy might be the preferred choice. Term policies can also be easier to get, especially for older people with health issues who prefer to forego a medical exam. While it won’t guarantee coverage over your entire life, term life insurance offers peace of mind for a limited time.

Whole life insurance is a sound choice for anyone seeking long-term protection for their family, guaranteed savings, and on-demand liquidity. Young adults, individuals in mid-career, and those readying for retirement have all found reasons to pursue whole life insurance.

Your policy’s cash value is, in essence, a savings account that accumulates value based on a portion of your premiums. If you decide to cash out your whole life insurance policy, you don’t get all of the money in premiums back. Rather, you receive the full value of the policy when you cash it out, which will be some portion of the premiums you paid plus interest earned and minus fees.

Surrendering your policy may help you gain immediate access to cash, but it’s usually not recommended. While you can cash out your account if you prefer, you might consider taking a withdrawal or a policy loan instead. A withdrawal will reduce the payout amount while keeping the policy in force, while a loan — which also keeps the policy in force — can be paid back.

In some circumstances, policyholders make their premium payments from the accrued cash value of their policy, keeping the death benefit intact while lowering or eliminating their premium payment.