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

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

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, first 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 determine which type and how much life insurance best meets 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.

Importantly, a good term life policy will provide a conversion privilege, allowing you to 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 lifetime protection and 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.

Additionally, you should compare universal life insurance, another type of permanent policy, to a whole-life policy.

That’s why each type of life insurance policy has its 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

Several of the above companies also provide group life insurance policies to employers.

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.

Furthermore, traditional death benefit settlement options such as lump sum, life income, and fixed amount death benefits are available for 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.

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

As Mass Mutual’s disclaimer explains, borrowing against a policy can be complicated even though you may do so.

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 policy is the potential to accumulate cash.

Senior citizens can take out policy loans on whole life insurance, but they should be cautious.

If you access the cash through a loan and the policy hasn’t lapsed, you won’t be taxed 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 differ from business loans, where your lender would require an assignment of life insurance to lend you money.


A whole life insurance policy that pays dividends 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

Certain policies allow you to choose how to use your dividends.

  • 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.

Afterward, the company 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, Wellabe, United of Omaha, and Gerber Life.

Initially, 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 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 insurance can potentially accumulate cash values that you can access later through 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.

Just ensure you have coverage so your family doesn’t end up with a GoFundMe life insurance campaign.

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

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