What Is Whole Life Insurance, and Is It Right for You?
Whole life insurance combines permanent coverage with a savings account that builds over time. If you can afford the higher premiums, it’s worth considering.
5+ years in insurance and personal finance content
Ashley is a seasoned personal finance editor who’s produced a variety of digital content, including insurance, credit cards, mortgages, and consumer lending products.
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Shopping for life insurance feels a bit like choosing a streaming service — the options are endless, and everyone seems to have an opinion about which is best. If you’re exploring life insurance options, you’re likely considering a whole life policy.
A whole life insurance policy provides coverage that lasts your entire lifetime and builds cash value. It’s different from term life insurance, which expires after a set number of years and doesn’t have a built-in savings component.[1] It also costs more — a healthy 25-year-old might pay around $66 monthly on average for a whole life insurance policy.
Quick Facts
Whole life insurance premiums stay the same for life.
Calculate how much coverage you need by adding your living expenses, debts, and future needs.
As your policy builds cash value, you can draw from it if you need extra cash to cover expenses.
What is whole life insurance?
Whole life insurance is the “forever” version of life insurance. It protects your loved ones financially for your entire life, not just for a limited time. Some people choose whole life insurance over a term life insurance policy because they want coverage that never runs out and the ability to build up savings gradually.
Here are features that make whole life insurance stand out:
Lifelong protection: Your coverage stays in place if you keep paying your premiums.
Cash value growth: Part of your premium goes into a savings account, and you can borrow from it when you need extra cash.
Guaranteed payout: Your beneficiaries receive a death benefit payout whether you pass away tomorrow or decades from now.
Fixed premiums: Your monthly payments stay the same throughout your life.
How whole life insurance works
When you buy a whole life policy, you’ll lock in a premium that stays the same year after year. For example, if you start paying $130 monthly at age 35, your premiums will still be $130 monthly at age 65. These predictable payments help with long-term financial planning since most other expenses tend to increase with inflation.
Your premium payment does double duty. A portion goes toward your death benefit — the amount your beneficiary gets when you pass away. But another portion builds up in a cash value account, becoming a financial resource you can tap into. You could borrow against your policy’s cash value to cover an unexpected expense or pay for college tuition.
Think of It This Way
While term life insurance works like renting (your premiums only buy coverage, and coverage lasts a limited amount of time), whole life insurance is more like buying a house. Each payment builds equity in your policy, giving you protection and a growing financial asset.
Whole life vs. term life: How they differ
Term life covers you for a specific period, typically 10, 20, or 30 years. It also only pays out if you pass away during your coverage period. You’ll need to renew your coverage, usually at a higher rate, to keep your protection after the term ends.
Feature
▲▼
Whole Life
▲▼
Term Life
▲▼
Monthly cost
$64–$300+
$8–$200+
Premium changes
Stays the same
May increase with age
Duration
Lifelong
10–30 years
Cash value
Yes
No
Medical exam
Usually required
Usually required
Types of whole life insurance
Several types of whole life insurance are available. Each type fits different financial situations and goals. Here’s a look at your options:
Traditional whole life: You pay the same premium throughout your life. Your policy builds cash value steadily, and your coverage stays in place as long as you keep up with payments.
Limited payment: Premiums are higher, but you pay for a shorter amount of time. Your payments eventually stop, and your coverage continues for life.
Single premium: You make one large up-front payment instead of monthly or annual premiums.[2]
Joint life: This policy covers two people under one policy, usually married couples. It can pay out after the first death or after both people pass away.
Cost of whole life insurance
You’ll pay more for whole life insurance than term life insurance because your policy builds cash value and covers you for your entire life, not just a few decades. Plus, the insurance company will pay a death benefit with whole life insurance, while most people outlive their term life insurance policies.
Age/Gender
▲▼
Monthly Cost of $250,000 Policy
▲▼
Monthly Cost of $500,000 Policy
▲▼
25-year-old man
$64
$113
25-year-old woman
$69
$130
45-year-old man
$145
$265
45-year-old woman
$124
$219
55-year-old man
$209
$328
55-year-old woman
$178
$328
Source: Insurify partner SelectQuote provided these averages based on whole life policies from one or more of the companies SelectQuote represents. Rates are for men and women in excellent health. Premiums may vary depending on individual health, issuing company, and other factors.
Pros and cons of whole life insurance
Before you commit to a whole life insurance policy, consider the pros and cons. It requires you to spend more money over a longer period than term life insurance, so understanding both sides can help you make the right choice.
Pros
Coverage never expires
Cash value grows over time
Premiums remain the same for life
Cons
Higher premiums
Can be difficult to understand
Cash value may be slow to build
Who should consider whole life insurance?
Whole life insurance makes the most sense if you want more than temporary coverage. It’s especially valuable if you have a child with special needs — you can funnel the death benefit payout into a special needs trust for financial support long after you’re gone. Business owners might opt for whole life insurance to help with succession planning.
If you mainly want to protect your family while your kids grow up or until you pay off your mortgage, term life insurance might be a better fit. For example, young families can benefit from term coverage and plan to invest the cost difference in a retirement account or college fund.
How much whole life insurance do you need?
To calculate your ideal coverage amount, start by adding up your financial footprint — annual income, outstanding debts, and future expenses you want your policy to cover, like college tuition or retirement funds for your partner.[3]
Remember to include less obvious expenses you might overlook — who would handle childcare, housekeeping, or home maintenance if you’re not around? How long would your family need financial support to maintain their lifestyle?
For a more precise number, try an online life insurance calculator from a trusted organization like Life Happens. Most life insurance companies also offer online calculators on their websites.
Alternatives to whole life insurance
Not everyone needs whole life insurance. Before committing to a policy, explore other options that could better fit your needs and budget. Here are some alternatives to consider:
Term life
Term life provides coverage for a specific period (10–30 years) at a lower cost than whole life insurance. It’s a great option if you need coverage only while raising kids or paying off a mortgage.
Mortgage protection insurance
Mortgage protection insurance pays off your remaining mortgage balance if you die. It’s ideal if your main concern is keeping your family in their home.
Pre-paid funeral plan
This helps you plan and pay for funeral arrangements in advance, sparing your family from making difficult decisions and handling funeral costs.
Self-funded savings
Invest the money yourself instead of paying premiums. This works well if you’re disciplined about saving.
Whole life insurance FAQs
Here are answers to the most asked questions about whole life insurance to help you make sense of it all.
What is a whole life insurance rider?
A whole life insurance rider adds extra features to your basic policy. It’s like adding premium channels to your streaming services — you’ll pay more but get additional benefits, like accelerated death benefits or long-term care coverage.
Can you cash out whole life insurance?
Yes. You can withdraw or borrow from your policy’s cash value once it builds up. You could also surrender your whole life policy, which cancels your coverage and provides you with its surrender value.
Which is better, term life or whole life?
It depends on your needs. Neither term life or whole life is “better.” Term life insurance works well for temporary coverage at a lower cost, while whole life insurance offers lifelong protection plus a savings component.
What happens when a whole life policy reaches its maturity date?
Most policies mature when you reach age 100 or 121. If you live that long, the insurance company will hand over the full cash value of your policy, and your coverage will end.
Is whole life insurance worth it?
Whole life insurance makes sense if you want permanent coverage and built-in savings. If you only need temporary protection or prefer to invest separately, term life might be better.
Amy is a personal finance and technology writer. With a background in the legal field and a bachelor's degree from Ferris State University, she has a talent for transforming complex topics into content that’s easy to understand. Connect with Amy on LinkedIn.
Amy has been a contributor at Insurify since September 2023.
5+ years in insurance and personal finance content
Ashley is a seasoned personal finance editor who’s produced a variety of digital content, including insurance, credit cards, mortgages, and consumer lending products.
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