The Pros and Cons of Whole Life Insurance

Last Updated on May 11, 2023 by Lily Connel

Whole life insurance provides a guaranteed death benefit to the policyholder’s beneficiaries, which can provide peace of mind to the policyholder. However, this type of insurance can be expensive, especially compared to other types of life insurance policies, such as term life insurance.

Overview of Whole Life Insurance

Whole life insurance is a type of permanent insurance that can stay with you for your entire lifetime. It provides a death benefit to your heirs as well as a cash value component that can build up over the years. However, it is typically more expensive than term life insurance, which expires after a certain number of years. While whole life insurance has many benefits, it may not be the right choice for everyone.

On the positive side, whole life insurance offers predictable premiums that stay the same throughout the life of the policy. Additionally, the cash value of the policy can grow over time and become a valuable asset that can be used for retirement planning. Whole life insurance also comes with several tax advantages that can help maximize the policy’s value. However, it is also more complex than term life insurance and can be more expensive. It’s important to fully understand the pros and cons before deciding if whole life insurance is the right choice for you and your family.

Pros of Whole Life Insurance

Whole life insurance is a type of permanent insurance that can last for your entire lifetime. It is typically more expensive than term life insurance, but its advantages are significant. Here are some of the pros of whole life insurance:

  • Fixed Premium: Unlike term life insurance, your whole life premium stays the same for life. This means that the premium you pay when you take out your policy never increases. The younger and healthier you are when you take out your whole life coverage, the lower your rates will generally be – for life.
  • Cash Value: A whole-life policy has a tax-deferred cash value that grows at a guaranteed rate every year. You can borrow against this cash value or withdraw the money if you decide to give up or surrender your policy.
  • Guaranteed Death Benefit: With whole life insurance, your policy is guaranteed to pay out at least the face value. If you purchase whole life insurance from a mutual company like Guardian, you may also receive dividends.
  • Permanent Coverage: As long as you pay the premiums and don’t cancel your policy, the policy will pay a death benefit. This means that you won’t have to worry about losing coverage as you get older.
  • Estate Planning: Whole life insurance can also be an important part of estate planning, serving as a way to transfer wealth to your heirs while minimizing estate taxes.

Cons of Whole Life Insurance

Whole life insurance policies come with a savings component, but this doesn’t come cheap. In fact, whole life insurance is notably more expensive than term policies. Here are some of the cons to consider before choosing a whole-life policy:

  • High cost: Whole-life policies require a higher premium, which can be difficult for some to pay consistently.
  • Lower returns: While the savings component of a whole life insurance policy carries a guaranteed interest rate, these rates are generally lower than what you might earn in a more aggressive investment.
  • Less flexibility: Unlike term policies, which can expire at a set date and have flexible premiums, whole-life policies don’t offer as much flexibility. Once you purchase a whole-life policy, you can’t simply stop making payments to lower your premium, as you would be risking your coverage.
  • Low cash value gains: The cash value of a whole life policy can grow over time, but this growth is often slow, especially compared to other investment options.

Types of Whole Life Insurance

When it comes to permanent life insurance options, whole life insurance is the most popular. However, there are also other types of whole life insurance policies you should be aware of:

  • Universal Life Insurance: This type of policy offers more flexibility than whole life insurance but fewer guarantees. The premiums are variable, allowing policyholders to raise or lower their payments within limits. The cash value growth is tied to the policyholder’s investing decisions, which can result in growth or erosion of value. Although this policy has fewer guarantees, it still offers tax benefits.
  • Indexed Universal Life Insurance: This policy ties the cash value growth to the performance of an index, such as the S&P 500. The gains are capped at a certain rate, and the downside risk is usually less severe than the stock market itself.
  • Guaranteed Universal Life Insurance: This policy offers no cash value or savings account but provides permanent coverage with lower premiums than whole life insurance. The death benefit is guaranteed as long as the policyholder pays the premiums.

How to Choose the Right Whole Life Insurance Policy

  • Assess Your Insurance Needs: Determine the amount of coverage you need to protect your loved ones and provide for them in case of your untimely death.
  • Evaluate Your Budget: Whole life insurance premiums are generally higher than those of term life insurance policies. Consider your financial situation and choose a policy that you can afford.
  • Decide on the Type of Policy: Whole life insurance comes in different types such as traditional whole life, universal life, variable life, and survivorship life. Research and compare the features and benefits of each type to determine which one suits your needs best.
  • Look for a Reputable Insurance Company: Choose an insurance company with a solid reputation and a strong financial rating. Check the company’s history, customer service, and online reviews before making a decision.
  • Understand the Policy’s Features: Read and understand the policy’s fine print, including the death benefit, cash value, premium structure, and other benefits.
  • Consider Additional Riders: Riders are add-ons to a whole life insurance policy that provide extra benefits such as accelerated death benefit, long-term care coverage, and disability waiver of premium. Evaluate if you need any of these additional riders and how much they will cost.
  • Seek Advice from a Financial Advisor: Consult a financial advisor to help you make an informed decision based on your financial goals and situation.


In conclusion, whole life insurance is a valuable type of insurance policy for some individuals, but it may not be the best fit for everyone. Before purchasing a whole life insurance policy, it’s important to carefully consider the pros and cons and consult with a financial advisor to determine the best course of action.