Back to top


What Is Whole Life Insurance?

Updated: May 2017

Whole life insurance is a type of permanent life insurance. It's also the most common, according to the Insurance Information Institute (III). Like most permanent life insurance policies, whole life offers a savings component, called "cash value," and life-long protection — as long as premiums are paid, whole life provides a death benefit after you die.

Dad having breakfast with kids.

COUNT ON QUALITY COVERAGE.

Get the protection you need and the peace of mind you deserve with Allstate insurance.

Get a quote Find an agent

What Are The Benefits of Whole Life Insurance?

Certain aspects of whole life insurance can make it an appealing choice.

  • Your premiums and death benefit are fixed.
  • You can withdraw funds or take out a loan.
  • You have a guaranteed rate of return.

Fixed Premiums and Death Benefit

In most cases, the premium and death benefit stay constant for the duration of a whole life policy. (A universal life insurance policy, on the other hand, may offer the option to adjust your premiums or death benefit.)

With fixed premiums and a fixed death benefit, you likely won't have to worry about cost increases as you get older, and your loved ones will know the amount of life insurance proceeds to expect when you do pass on.

Cash Value

A whole life policy can serve as a source of emergency funds for you if something goes wrong; you may be able to take out a loan against the policy. That's because a portion of each of your premium payments is funneled into a savings component of the policy called the "cash value."

Over time, the cash value builds, and you're able to withdraw funds or borrow against it. The rules on how and when you can do that vary by company. And there are guidelines to follow, so that you don't inadvertently reduce the death benefit or create a tax burden1.

Guaranteed Rate of Return

The cash value of a whole life policy is guaranteed to earn a minimum amount of interest, according to the non-profit financial planning group Life Happens.

How Much Does Whole Life Insurance Cost?

The cost of a whole life insurance policy depends on several factors, including how much coverage you buy. Additionally, the III says factors such as your age, health and life expectancy may affect the premiums you pay for whole life.

When it comes to paying your premiums, you'll typically be able to make an annual payment for a whole life insurance policy. Some insurers may also offer the option to pay monthly, quarterly or twice a year. Be aware, however, that paying premiums more frequently than once per year may incur additional fees.

Are Whole Life Insurance Premiums Tax Deductible?

According to the Internal Revenue Service (IRS), you cannot deduct premiums you paid for a whole life insurance policy on your tax return.

However, if your beneficiaries receive the death benefit from your whole life policy, they likely would not have to pay federal income taxes on that benefit. (But, any interest earned on top of the death benefit is considered taxable income.)

Who Might Choose Whole Life Insurance?

So, when might a whole life policy make sense for you? Life Happens says a whole life insurance policy might be a fit for someone who likes predictability over time, since whole life offers death benefit guarantees, guaranteed rates of return and fixed premiums.

You may want to talk it over with a local agent and review other options before you make any decisions. That way, you can be confident you've chosen the life insurance policy that's suited just for you.

Related Resources:

This content is for informational purposes only and may not be applicable to all situations.

Life insurance offered through Allstate Life Insurance Company and Allstate Assurance Co., 3075 Sanders Road, Northbrook IL 60062; American Heritage Life Insurance Co., 1776 American Heritage Life Drive, Jacksonville FL 32224. In New York, life insurance offered through Allstate Life Insurance Co. of New York, Hauppauge NY.

Securities offered by Personal Financial Representatives through Allstate Financial Services, LLC (LSA Securities in LA and PA). Registered Broker-Dealer. Member FINRA, SIPC. Main Office: 2920 South 84th Street, Lincoln, NE 68506. (877) 525-5727. Check the background of this firm on FINRA's BrokerCheck website.

1Loans or partial withdrawals can reduce the policy's cash value and death benefit, can increase the possibility of policy lapse, and may result in a tax liability. Consult a tax adviser for additional information on the tax treatment of loans or withdrawals from a life insurance policy.
ECC Monitor: OK