Understanding Whole Life Insurance: Benefits, Costs, and Long-Term Value
The decision to purchase life insurance can be a complicated and overwhelming one, but for many people, it brings a sense of relief and comfort to know their loved ones will be protected if they pass away. There are a few items to consider when picking the right policy to fit your family’s needs, and whole life insurance may be a good choice.
What is whole life insurance?
Before we break down the value of whole life insurance, it’s important to understand what it is. Whole life insurance is a type of permanent insurance that stays with you throughout your entire life if monthly set premiums are paid into it. Whole life insurance can accrue cash value, meaning it can also be used as a type of tax-deferred savings account or an asset to borrow loans against, in case of emergency.
An illustration is provided by the insurance carrier to show you how the cash value available to you changes over the lifetime of the policy, which is based on the premiums collected and the guaranteed minimum interest rate. Upon your death, your beneficiaries are guaranteed to receive the death benefit amount purchased, minus any outstanding loans against the policy.
Whole life insurance provides guaranteed protection for life’s many circumstances. It offers several key benefits depending on your unique needs:
Protection for Families
It supports your family by covering mortgage loans, education, funeral costs, bereavement needs, and everyday living expenses.
Disability Protection
Some whole life policies continue coverage even if you become disabled and can’t pay premiums due to illness or injury. Additionally, many policies offer cash benefits during terminal illness or incapacitation to ease your family’s financial burden. Always review the policy details to understand added benefits and how they apply in different situations.
Protection Against Liability
Many states protect whole life policies from creditor claims, shielding your assets during financial hardship or legal action.
Business Protections
Whole life policies help fund retirement plans, buy-sell agreements, stock-redemption plans, and loan repayments for small businesses. These protections can strengthen your business strategy and create long-term stability for owners and employees.
Estate or Charitable Planning
If you don’t have beneficiaries, you can plan your estate or support a charity, leaving a lasting legacy.
Tailored to the Policyholder
Each policy is tailored based on factors like coverage needs, benefit options, and mortality risk—no two policies are identical.
What Affects Premiums?
According to Forbes Advisor, whole life premiums often reflect age, tobacco use, health history, hobbies, credit, and lifestyle choices.
Underwriting Process Options
Traditional underwriting requires a health exam and lab work, but offers competitive premiums for healthy individuals. However, simplified issue policies—requiring only a medical questionnaire—are faster, easier, and often similarly priced. Those with great health might save more through traditional underwriting, though simplified options still provide affordable, quality coverage.
How much does whole life insurance cost?
Though whole life insurance is more expensive than term life insurance, the lifelong benefits may justify the costs. Since age and health weigh heavily on life insurance rates, purchasing earlier in life provides a guarantee the premium will not increase to become unaffordable in the future. As we mentioned earlier in the article, whole life insurance lasts your entire life or a set age such as 100 years and beyond. There’s guaranteed cash value growth, and many plans allow flexible tax-deferred investment options.
When weighted against the cost of a plan, many consider it a worthwhile trade for their life needs, especially for younger families wanting to leave behind flexible financial options for their loved ones.
The table below takes a look at the average cost of whole life insurance by age and gender.
Age | Avg. Monthly Rate for Men | Avg. Monthly Rate for Women |
30 | $193.00 | $172.00 |
40 | $297.00 | $240.00 |
50 | $475.00 | $380.00 |
Is whole life insurance worth it?
The value of a whole life insurance plan depends entirely on your long-term needs and the needs of your loved ones long after you’re gone. Take a look at the following examples to help determine if whole life insurance is right for you.
Whole life may be for you if: | Whole life may not be for you if: |
You want a guaranteed death benefit with premiums that will not rise if your health fails you. | You have short term life insurance needs, such as, coverage until your children become adults, or you plan to use it to cover a specific debt that will terminate in a set time period. |
You want life insurance that double-functions as an emergency fund or a specialized yet flexible financial asset. | The premiums are unaffordable. In which case, there are other options like term life insurance available that provides coverage for a specific timeframe. |
You have dependents, such as a spouse or children, and want to ensure their financial security. | |
You want to establish an Estate or Charity to leave a legacy behind. |
If you’re unsure if a whole life insurance policy is a good fit for you, it might be helpful to compare plans or speak with a certified insurance expert. Contact Enrollment First, Inc. at (866) 816-6786 Monday through Friday from 8am-7pm EST to inquire about our upcoming EMC National Whole Life insurance benefit options.
The above content is purely informational and is not comprehensive.
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