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What is whole life insurance?

When it comes to life insurance, there are two main types of policies: permanent life insurance and term life insurance. Whole life insurance is considered permanent, which means the insured person is covered for the duration of their life, when premiums are paid on time. It also offers a savings component called “cash value,” much like other permanent life insurance policies.

Do I need a whole life insurance policy?

Whole life insurance is the most common type of permanent life insurance, according to the Insurance Information Institute (III). This is likely due to the benefits of this policy, which make it an appealing choice for many families.

  • Your premiums and death benefit are fixed and will not go up, regardless of market conditions.
  • Your death benefit is guaranteed if the required payments are made.
  • You may be able to withdraw funds or take out a loan, since this policy builds cash value.

How much does whole life insurance cost?

A variety of factors, such as your age, health and how much coverage you buy, can determine the cost of a whole life insurance policy. Typically, there is a fixed annual payment for your premiums, although some life insurance companies allow you to pay monthly, quarterly or twice a year. However, paying premiums more frequently might incur additional fees.

How to apply for whole life insurance

It only takes a few steps to get whole life insurance:

  1. Call to get a quote and personalize your policy.
  2. Answer some questions about your health and lifestyle, which may also involve taking a medical exam.
  3. Sign off once the coverage has been bound, make your payments, then sit back and relax.

Whole life vs. term life insurance

Whole life and term life insurance policies each have pros and cons. The former has a fixed death benefit that lasts your whole life, while the latter is only for a set number of years you elect when you apply for the policy. A benefit of whole life insurance is the guaranteed rate of return, which basically means the cash value of a whole life policy is guaranteed to earn a minimum amount of interest. This cash value is a separate savings component you may be able to access while you’re still alive. As for term life insurance, you get the same death benefit amount at a lower cost, because the payout is only guaranteed for the time you hold the policy and doesn’t build a cash value. Learn more about term life insurance.

Is whole life insurance worth it?

Different policies fit different lifestyles, but the unique benefits of whole life insurance can be appealing to a variety of people. The cash value component of the policy makes it an alternative investment, especially for those who’ve maxed out their retirement accounts, or have a lifelong dependent, such as a child with a disability. It’s also appealing to those who are looking for coverage for life as well.

Whole life insurance FAQs