Whole Life Insurance – Is This the Best Option for You?

Is whole life insurance right for you? This guide will help you decide.

Whole Life Insurance Overview

Get the Pros and Cons of this type of life insurance policy before you spend your money!

Term vs Whole Life

Comparisons should look at the cost of coverage and the benefits and features of each type of life insurance policy.

When choosing between term life and whole life insurance, start by deciding why you need life insurance in the first place.

After that, you can break down your life insurance needs into shorter vs. longer-term ones.

At that point, we can look at which type and how much life insurance is best to meet your needs.

Do you need coverage for your spouse? We’ll ensure the coverage you receive is best for both of you.

If your spouse will receive a pension someday, check out this guide on pension maximization. Whole life may be an option.

Term life insurance is temporary and provides low-cost death benefit protection for a specified term from one to forty-year term life.

During the term period, your premium remains level.

A good term life policy will provide a conversion privilege where you can exchange your policy for whole life insurance later.

Additional factors like getting up to $500k of life insurance with no exam (or more) give term advantages over many whole life companies requiring paramed exams, checking the MIB, and waiting two months for approval.

Whole life insurance is permanent coverage.

It provides you with lifetime protection, plus the potential to accumulate cash values.

You can borrow against cash values, surrender it, use it to supplement retirement income, or get a survivorship life insurance policy for estate planning.

Another type of permanent policy that should be compared to a whole-life policy is universal life insurance.

That’s why each type of life insurance policy has its own pluses and minuses.

If you need help understanding the application process, check out our Life Insurance 101 guide.

Whole Life Companies

These companies offer whole life:

  • AIG
  • American National
  • Assurity
  • Foresters
  • Gerber
  • Guardian
  • Kemper
  • Mass Mutual
  • Nationwide
  • New York Life
  • Northwestern Mutual
  • Penn Mutual
  • Protective Life
  • United of Omaha

Whole Life Insurance Policies – What to Look for When Buying

Different types of policies are available.

Choices include single premium, limited pay, guaranteed issue, interest-sensitive, and participating whole life policies.

Traditional death benefit settlement options such as lump sum, life income, and fixed amount death benefits are available with whole life.


Life insurance riders are available with many companies, including:

Accidental Death Rider – Provides an additional death benefit should your death occur due to an accident.

Child Rider – Many policies allow you to add a small death benefit for your children for a low price.

You may exchange the rider for an individual policy at a later date.

Overloan Protection Rider – Protects your policy from lapsing should you access the cash values of your policy.

This is a good rider to have because a lapsed policy may create a tax issue for you.

Spouse Rider – You may be able to add life insurance for your spouse as a rider.

Surrender Value Enhancement – Increases your policy’s cash value should you decide to surrender the policy.

Cash Values

Your whole life insurance policy has the potential to build cash value over many years.

Once your policy has accumulated enough cash value, it may be accessible to you via policy loans, as mentioned below.

While you may borrow against a policy, it’s complicated, as Mass Mutual’s disclaimer explains.

Access to cash values through borrowing or partial surrenders will reduce the policy’s cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.

Mass Mutual

Ask for illustrations showing future withdrawals to give you a better idea of what to expect.

If you are an employee of a company that is taking out a keyman life insurance policy on you, make sure you negotiate to have the future rights of the policy at retirement, leaving the company, etc.

Whole life insurance can also be used for SBA life insurance loan requirements.

Policy Loans

One of the features of cash value whole life insurance policies is the ability to access your cash value using policy loans.

Cash values accumulate on a tax-deferred basis, not a tax-free basis.

The appeal of the cash value savings component of your whole life is that you may accumulate cash.

Policy loans can be used on whole life insurance for senior citizens, but be careful.

As long as the cash is accessed via a loan and the policy hasn’t lapsed, there is no taxation on the cash you receive.

If you lapse the policy, you may trigger a significant taxable event for yourself.

Always consult your CPA, as we don’t give tax advice.

Policy loans are different than, say, a business loan, where your lender would require an assignment of life insurance to lend you money.


When your whole life insurance policy pays dividends, it is called a “participating” policy.

The IRS defines dividends as a return of the excess premium you paid into the policy and therefore are not taxable.

(consult your tax advisor for full details regarding taxation).

Dividend Options

Some policies give you a choice regarding how your dividends are used.

  • Reduce the premiums you pay
  • Purchase Paid-Up Additions (PUA)
  • Dividends get paid to you.
  • Reduce Loan Balances
  • Apply to Loan Interest

At year-end, the company adjusts the policy based on actual performance vs. assumed performance.

The company then declares its dividend rate for your whole life insurance policy.

Your dividends are not guaranteed.

Request multiple illustrations showing different dividend scenarios.

Guaranteed Acceptance Whole Life Insurance

Some companies offer guaranteed acceptance policies if you want a life insurance policy of $25,000 or less.

These are mainly used as life insurance for seniors.

We have guaranteed acceptance policies from AIG, Kemper, United of Omaha, and Gerber Life.

The death benefit is graded during the first few years of the policy.

Most of these types of policies require little, if any, medical underwriting.

Do you use tobacco products? If you smoke cigars, chew tobacco or smoke pipe tobacco, we can get you non-smoker rates with the right companies.


What is whole life insurance?

Whole life insurance lasts your lifetime and may provide cash value accumulation and dividends.

What is the difference between term and whole life insurance?

Term life insurance is temporary, providing you with protection for a specified term length.

Whole life insurance lasts for your lifetime and may provide cash value for you to access during your lifetime.

How does whole life insurance work?

With whole life insurance, your premiums purchase death benefit protection.
Whole life also offers the potential to accumulate cash values that can be accessed later via surrenders or policy loans.

Final Words

Ask lots of questions. If you don’t understand how the policy works after your agent explains it, you shouldn’t buy it.

Please take a few minutes to submit your quote request today. Thank you.

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Michael Horbal - Author

Michael J. Horbal

Owner of RiskQuoter

Too many people overpay for life insurance because they have the wrong life insurance company, agent, or both. That’s why I started RiskQuoter – To help you get the best life insurance rates available.

As an independent insurance agent, I’m licensed in all 50 states and the District of Columbia and offer 40+ life insurance companies to ensure you get your best rate!

By Michael Horbal – Updated on 02/15/2023

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