What are some pros and cons of whole life insurance? (2024)

FAQs

What are some pros and cons of whole life insurance? ›

A more complex product than term life insurance. Higher premiums than term life insurance. Could be costly if coverage lapses early.

A more complex product than term life insurance. Higher premiums than term life insurance. Could be costly if coverage lapses early.

But whole life insurance also features a cash value component, which is where things can get complex. These policies earn interest in a tax-advantaged account and offer guaranteed returns, but they're expensive and not suitable for most people.

Whole life insurance allows you to pursue cash value growth that is not subject to market risk. Whole life insurance has guaranteed cash value growth¹ that builds at a steady, dependable pace. That allows it to complement fixed-income investments in your portfolio.

Cons of Whole Life Insurance

Whole life is more expensive than term life, and you will receive a lower death benefit than you could get with the same amount of money with a term policy.

A potential drawback is that premiums for whole life insurance policies are usually higher than those for term life insurance. (That's because of the longer coverage period and additional policy features, such as cash value accumulation).

If you have a permanent life insurance policy that has accumulated cash value, then yes, you can take cash out before your death.

30 to 60 years old

Whole life or universal life policies, if you can afford permanent coverage, can provide more financial security for your loved ones. But if you have a lot of debt, you may opt for a high-value term life insurance policy until the debt is paid down.

If you're a whole life insurance policyholder, you might be wondering whether it's possible to completely pay off a whole life insurance policy. The simple answer is yes, it's possible. However, it's not guaranteed, so if you're looking to do this, there's important information you should know beforehand.

Yes. A whole life policy has cash value that grows over time. You can cash it out to help pay for retirement, or borrow against it at any time, for any reason.

How long does it take for whole life insurance to build cash value? ›

A whole life insurance policy will begin building cash value as soon as you pay your first premium, and it will continue building throughout the life of the policy as long as there are funds in the account.

Cash value? The pros and cons of term and whole life insurance are clear: Term life insurance is simpler and more affordable but has an expiration date and doesn't include a cash value feature. Whole life insurance is more expensive and complex, but it provides lifelong coverage and builds cash value over time.

Core Ramsey Teaching: You only need life insurance while you have people depending on your income. Buy a 10–20-year term policy worth 10–12 times your annual income. Since life insurance is only for the short-term, you should only buy term life insurance. (Hence the name.)

Core Ramsey Teaching: You only need life insurance while you have people depending on your income. Buy a 10–20-year term policy worth 10–12 times your annual income. Since life insurance is only for the short-term, you should only buy term life insurance. (Hence the name.)