Whole life insurance

What it is built for

Whole life is the oldest form of permanent coverage. The insurer sets a level premium and, in exchange, guarantees the death benefit for life and a schedule of cash value that builds inside the policy. Some policies issued by mutual carriers may also pay dividends, which are not guaranteed.

It costs more per dollar of death benefit than term, because it is priced to be there whenever the claim comes rather than only during a defined window.

Often a fit when

• Coverage is needed for life rather than for a fixed period
• A predictable, level premium matters more than the lowest possible premium
• There is a legacy, estate, or final-expense goal behind the coverage
• The guaranteed cash value component is genuinely useful to the plan

What to look at closely

• Which values are guaranteed and which are not. Dividends and any projection built on them are not guaranteed.
• How long premiums are payable. Some designs pay to age 100, others are paid up in a set number of years.
• What happens if you borrow against cash value. Loans reduce the death benefit and can lapse the policy if they grow past the value.
• Surrender charges and early-year values. Cash value in the first several years is typically small.

Compare with

If this is not quite the right shape for what you are protecting, one of these probably is.

• Term life — The cheapest way to cover a fixed window — a mortgage, or the years until the children are grown. It expires, and it builds no cash value.
• Final expense — A small permanent policy sized to a funeral rather than to an income. Easier to qualify for with health history, and it does not expire.
• Indexed universal life — Permanent coverage whose cash value tracks an index within a floor and a cap. More moving parts than whole life, and it needs reviewing over time.
• Annuities — Not life insurance — it converts savings into income you cannot outlive. It solves the opposite problem: living a long time rather than dying too soon.