Whole Life Insurance: Pros & Cons
Whole life insurance—also known as permanent insurance—is life insurance for people who want a zero-risk policy. With whole life insurance, the pros may outweigh the cons. That is, if whole life insurance is the right type of insurance for you. Find out how much whole life insurance costs, compare rates free. With whole life insurance, the insurer is expected to guarantee the monthly charge for life. A whole life insurance policy’s cost would not increase or decrease throughout your life, which has both costs and benefits to you:
- You pay the same premium for life.
Pro: If there is a widespread epidemic that severely lowers mortality rates, thus resulting in exorbitant insurance costs, your whole life insurance policy isn’t affected and you continue paying the lower rate.
Con: If modern medicine finds a cure to cancer or some other life-threatening disease, lowering the average insurance cost, your whole life insurance policy would obligate you to pay the higher, guaranteed charge.
- The higher premium
Con: Whole life insurance can be more expensive than other insurance policies, especially the lower-cost term insurance policy.
Pro: It’s more expensive because some of the money is put into a “savings program.” The longer you’ve had an active whole life insurance policy, the more money you’ve paid and the more interest and/or dividends the money has earned, tax-deferred. So if you live, you can get this money back by cashing in your whole life insurance policy or borrowing against it. You can usually get back more than what you spent on your premium.
- It’s a fixed policy.
Con: In a whole life insurance policy, you lose the option to change the death benefit amount, and the option to vary or suspend your premiums.
Pro: Whole life insurance offers fixed mortality costs, expenses and there is no cash value investment risk.
- The long haul
Con: If you want a policy that yields a reasonable return, you may have to invest in your whole life insurance for more than just a few years. Think more like 20 years or more.
Pro: With whole life insurance, the insurance company takes all the risks, and you’ve got a no-risk policy. And the longer you’ve had the policy, the more money you’ve accumulated in the “savings program.” Depending on your policy, and if you’ve been with it for a long time, you might even be able to stop paying your premium after you’ve reached a certain age.