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Is whole life insurance worth it?

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Life insurance can serve as a valuable financial vehicle to care for your loved ones after your death. If you’re wondering which type of life insurance is best for your needs, whole life insurance may be worth considering. In addition to protecting your loved ones financially, whole life insurance can serve as a useful investment vehicle.

In this article, Bankrate’s insurance editorial team details what whole life insurance is and whether it might be right for you.

What is whole life insurance?

Whole life insurance is a type of permanent life insurance, which means as long as the policyholder pays their premiums, they’ll be covered for the rest of their life. It can also serve as an investment vehicle.

Under whole life insurance, your premium payments go toward funding your whole life insurance policy’s death benefit and paying administrative costs, but a portion also gets tucked into a savings account where it grows throughout the policy’s life. This amount is called the cash value account. You can borrow against this money during your life, use it to pay your premiums, and even withdraw it from your account.

Is whole life insurance a good investment?

Is whole life insurance worth it? Is it a good investment? The simple answer is that it depends. Before purchasing a whole life insurance policy, you may want to look carefully at your financial goals and think about what the cash value portion of the policy could help you achieve.

Term life insurance may be a better option for people who just want a life insurance policy that pays a death benefit and nothing more. Term life insurance is typically less expensive, easier to get and protects you for a term of years that you choose. The money you save on premiums can be invested elsewhere as you see fit, taking into account your comfort level with risk.

Whole life insurance, on the other hand, typically costs three to four times more than term life insurance. However, the added cost may be worth it if you’re interested in using the policy’s savings component and want a policy that won’t expire. Your money will have been invested in low-risk, low-return funds, so the interest likely won’t be as high as if you invested in the stock market or another more volatile option over the long term.

If you’re financially conservative with your investments, whole life insurance can be a good option. However, returns are typically capped, so if you’re hoping to grow your money, you may want to consider alternative investment vehicles.

Pros and cons of whole life insurance

Pro Con
Provides death benefit for your beneficiary Policies are more expensive than term insurance
Stays with you your entire life (as long as you pay the premium) Taking a loan reduces death benefit unless you pay it back
Premium rates are guaranteed Cash value accrues slowly, with low interest
Able to borrow from cash value of policy on tax-deferred basis More complex than term insurance
Forced savings component builds wealth Equity not available for first decade or so
Can be one part of a balanced financial portfolio

Who should consider whole life insurance?

Whole life insurance may not be the right choice for everyone. The cost makes it prohibitive for many, and those looking for an aggressive investment vehicle could be disappointed in the returns they get from their whole life policy.

You may want to consider whole life insurance if you:

  • Have a high net worth: Wealthy individuals searching for a way to defer taxes while accessing the policy’s value may be interested in purchasing a whole life insurance policy as part of their financial plan.
  • Have trouble saving money: If you have trouble saving money by traditional means, putting money into the cash value portion of whole life insurance can help you. The regular premiums become a kind of “forced” savings, with money building up almost without you noticing.
  • Want to ensure a death benefit is available for your family after your death: As long as you pay your premiums and comply with certain requirements, your policy will remain in effect for the rest of your life, and your loved ones will receive the death benefit. Term life insurance will also pay a death benefit, but only if the policy is still in effect when you pass away.
  • May need an influx of cash down the road: If you have children and will need to pay for education expenses like college tuition in 15 years or so, whole life insurance could help. By that time, you may have built enough equity in the policy to pay off some of those college bills.

Alternatives to whole life insurance

If whole life insurance doesn’t fit in with your financial plans, several other life insurance options are available for you.

Term insurance

You may be wondering about the differences between term and whole life insurance. Term life insurance is a great option for those who want to leave a death benefit to their heirs without a cash value account. This policy type is typically inexpensive, and you can choose just how long you’d like the policy to remain in force. Some folks may see the lack of a cash value account as a drawback. In addition, once the predetermined term ends, you won’t have coverage unless you purchase a new policy or convert your existing policy, both of which could cost more money as you age and your life circumstances change.

Universal life

Like whole life, universal life is a type of permanent insurance that stays in force as long as you pay the premium. There are a couple of different types of universal life, based on how the cash value is allocated. Indexed universal life is tied to a market index and will fluctuate accordingly. Guaranteed universal life is a low-risk option that protects your investment. Variable universal life is similar to indexed but allows you to diversify your investment through money market accounts.

Guaranteed issue life insurance

Most life insurance requires you to take a medical exam when you apply, but guaranteed life does not. This makes it a good option if you are older or have health concerns. Like other permanent policies, it pays a death benefit, and there is a cash value that builds over time. It generally has a low maximum death benefit, often around $25,000.

Final expense insurance

Also known as burial insurance, final expense insurance is a type of guaranteed policy that does not require a medical exam and is intended primarily for your heirs to be able to pay for the costs of your funeral and other post-mortem bills. Final expense insurance can be hugely beneficial to family members, considering that the median cost of funerals in the U.S. is $7,640. Like other forms of guaranteed policies, it has a low payout cap that’s generally around $25,000.

Frequently asked questions

Is whole life insurance worth it?

Is whole life insurance worth it? Whether or not whole life insurance is worth it depends on your circumstances. If you’re looking for lifelong coverage and a cash value account that can build value over time, whole life insurance may be the best option for you.

Can I surrender my whole life insurance policy after a period of time?

Yes. However, whole life insurance isn’t meant to be used as a short-term investment vehicle. If you surrender your policy within the first 10 or 15 years, you’ll typically face high surrender fees.

Can I sell my whole life insurance policy if I decide I don’t need it anymore?

Policyholders may decide they no longer need their whole life insurance policy if their spouse passes away before them or their children grow up and become financially stable. If this is the case, you may be able to sell your life insurance policy. You won’t receive the full death benefit amount, but you could receive more than just the cash value portion of the policy.

How much life insurance do I need?

How much life insurance you’ll need depends on your financial goals. If you have young children who will have expenses such as college, a spouse with a mortgage, or a business partner who would fail if you passed away, you may want to purchase more life insurance than a single person with fewer financial obligations. Talking to insurance agents from some of the top life insurance companies may help you decide how much you’ll need.

Written by
Mary Van Keuren
Insurance Contributor
Mary Van Keuren has written for insurance domains such as Bankrate,, and The Simple Dollar for the past five years, specializing in home and auto insurance. She has also written extensively for consumer websites including and Slumber Yard. Prior to that, she worked as a writer in academia for several decades.
Edited by
Insurance Editor