What is whole life insurance?
Whole life insurance is a type of permanent life insurance that doesn’t expire — meaning that no matter when you die, your loved ones will receive a guaranteed lump sum of money called a death benefit. Unlike term life policies, whole life includes a cash value savings component you can access while you’re still alive. The cash value earns interest at a fixed rate set by the insurer.
How does whole life insurance work?
Whole life insurance pays a death benefit to your beneficiaries when you die in exchange for the premiums you pay to keep your policy active.
The cost of your premiums remains the same throughout the duration of your policy.
Your policy never expires, which means your death benefit is guaranteed for life.
In addition, whole life has a cash value component that earns interest over time. The interest rate is set by the insurer. Part of your premiums are used to pay for your policy, and the rest goes toward your cash value.
Once you’ve accumulated enough cash value, you can withdraw or borrow from it (though you’ll eventually have to pay taxes on any amount you withdraw). Any cash value you’ve used and haven’t paid back by the time of your death is deducted from the death benefit your beneficiaries will receive.
It can take five to 10 years for a whole life policy to build significant cash value, depending on the type of whole life insurance you buy.
When you die, your beneficiaries only receive the death benefit. The cash value is reverted back to the insurance company.
Some whole life policies pay dividends. Called participating whole life insurance, these policies pay an annual bonus to policyholders if the insurance company generates profits.
Who is whole life insurance good for?
A traditional whole life policy can be a good fit for high-net-worth individuals and people who have long-term financial obligations.
High-net-worth individuals: High earners can use whole life insurance as an additional investment vehicle, especially if you’re already maximizing contributions to traditional investment accounts like a 401(k) or IRA. Whole life can also be used as a buffer against estate tax, as long as your estate is valued at less than $12.92 million. 
People with long-term financial obligations: If you have financial obligations that will last longer than 20 to 30 years — for example, lifelong dependent children, or if you expect to care for aging parents — whole life can ensure they’ll be cared for in the event of your death, no matter when it occurs.
Is whole life better than term life?
The answer depends on your coverage needs. If you’re looking for an affordable, temporary way to provide your family with a financial safety net in your absence, term life insurance can be a good fit. If you have dependents that require lifelong coverage or long-term financial obligations, then a policy that offers permanent protection, like whole life, can be a better option.
The main differences between whole life and term life are:
The length of your coverage: Whole life coverage is permanent, which means it never expires, while term life lasts for a set number of years and then expires.
The cost: Whole life is significantly more expensive than term life.
The cash value: Whole life has a separate cash value account, while term life doesn’t — term only offers a lump-sum payout called the death benefit.
Comparing whole life vs. term life
Term life insurance
Whole life insurance
No — maximum of 30 to 40 years
Cost* ($500,000 coverage amount)
$26/month for a 20-year term
Guaranteed death benefit payout
Guaranteed cash value
Premium cost stays fixed
Yes, in most cases
Yes, in most cases
Pays annual dividends
Yes, in some cases
How much does whole life insurance cost?
A 30-year-old non-smoking female in good health can expect to pay $414.50 for a whole life insurance policy with a $500,000 death benefit payout. A 30-year-old non-smoking male with a similar health profile can expect to pay $487 for a policy with the same coverage.
Average monthly whole life insurance rates
$250,000 coverage amount
$500,000 coverage amount
$1,000,000 coverage amount
What factors affect your whole life insurance rates?
Whole life insurance rates are determined by your age, gender, health, and coverage amount.
Each insurance company has their own guidelines to assess risk and assign your rates.
Generally speaking, the younger you are and fewer health conditions you have, the cheaper your rates will be.
The higher your coverage amount, the more expensive your rates will be.
How do you pay for a whole life insurance policy?
There are several options to pay for whole life insurance. These include:
Regular payments (premiums) up to age 99. You pay premiums on a monthly, quarterly, semi-annually or annually basis until you reach age 99 — essentially, for the rest of your life. This is the most common type of whole life insurance payment. .
Single premium. You pay the full cost of the policy in one lump-sum payment up front.
Limited pay. Instead of paying premiums for the rest of your life, you cover the full price of your policy on a limited payment schedule. Single pay, 10 pay, and 20 pay are all examples of limited pay whole life policies.
10 Pay. You cover the entire cost of the policy over 10 years.
20 Pay. You cover the full price of your policy over 20 years.
Paid up at age 65. You pay premiums on your policy until you reach age 65.
How and where to buy whole life insurance
You can buy life insurance from an independent broker that works with multiple companies, or directly from an individual insurance company. At Policygenius, our agents can help you compare quotes from different insurance companies to find the right coverage at a price that works for you.
Fill out an application, have a phone call with an agent, and then, in most cases, take a medical exam.
Wait for the insurance company to review your application and give you your final rate.
Once you sign the policy paperwork and pay your first premium, you’re covered.
What are the best whole life insurance companies?
The best life insurance company for you depends on a number of factors, including your age, overall health profile, financial needs, and the type of coverage you’re looking for.
Using industry pricing data from Policygenius carrier partners, and ratings from third parties like AM Best and J.D. Power, we selected the best whole life insurance companies on the market. Our independent recommendations will help you get life insurance coverage with confidence.
The 4 best whole life insurance companies of 2023
Pros of whole life insurance
Whole life insurance lasts your whole life. You don’t have to worry about your coverage expiring. This can be especially helpful if you have dependents that require lifelong care or if you have long-term financial obligations.
Whole life earns interest through its cash value component. This can be a good option if you’re already maximizing your contributions to tax-advantaged accounts like a Roth IRA or a 401(k) and are seeking another investment option.
You can use your policy’s cash value while you’re alive. Withdrawing money or taking out a loan from your cash value can be easier and less expensive than taking out a personal loan.
Cons of whole life insurance
Whole life is significantly more expensive than term life. If you take out a whole life policy and then find you can’t afford to keep it, you risk leaving your family without financial protection.
With whole life, penalties can apply if you cancel your policy during the surrender period — but there’s no penalty for canceling term life insurance.
Whole life offers lower rates of return as an investment vehicle than other investment options.
Whole life is a riskier investment option. Tax-advantaged accounts like Roth IRAs, for example, don’t require you to fund them every year, so you have more flexibility. Whole life policies require you to continue paying premiums for your policy to remain active and for your cash value to accumulate.
You might reduce the death benefit your beneficiaries will receive upon your death if you don’t pay back any loans you took against your policy’s cash value.