Is whole life insurance worth it?

There's not much you can be certain of, but there's one thing you can count on: If you were born, eventually you're going to die. And while most of us don't like to think about passing away, planning for that eventuality is crucial. 

One of the best ways to prepare, in a financial sense, is by opening a life insurance policy. If you have children or a partner, buying life insurance can save your family from financial insecurity after you're no longer around to provide for them. 

There are two main types of life insurance: term and whole. The latter has an appealing cash value that can potentially be used by policyholders while alive. But is it worth the higher cost? Below we'll dive further into whole life insurance to help you determine if it's worth it for you.

If you're in the market for life insurance then start by getting a free price quote so you know what to expect.

What is whole life insurance? 

Whole life insurance is a life insurance policy with no expiration date. Term life policies only last for a specific period of time, but whole life policies can last from the moment you purchase a policy until you pass away.

Whole life policies have a built-in cash value, which you can withdraw or borrow against. It usually takes several years for the cash value to accrue. If you withdraw some or all of the cash value, you are not required to repay the amount, but it will be deducted from the death benefit.

The death benefit is the amount your beneficiaries will receive if you pass away while the policy is current. The minimum death benefit is usually $50,000, while the maximum depends on your income. Policies are sold in $50,000 or $100,000 increments. 

You must apply and be approved by a life insurance company to buy a policy. This will usually involve answering questions about your medical history and submitting to an official exam with a blood and urine sample. The insurance company will also review your medical records independently before approving you. You may be able to get a whole life insurance policy without the exam but it will come at a higher cost.

Not sure what it would cost? You can get a free price estimate online now.

Benefits of whole life insurance 

Some consumers use the cash value as a backup emergency fund. They may also use the money to help their children pay for a wedding, a down payment on a house and more. The cash value will grow over time and may also be used to pay for premiums if you're ever hurting financially.

The cash value will increase at a pre-set rate, which will be stated in your insurance contract. The rate is usually between 1% and 2%. As long as you keep making your payments, the insurance policy will remain in good standing. 

Who should buy whole life insurance? 

If you have loved ones who will always rely on your financial support, then a whole life policy may be a better option than term life coverage. High-net-worth individuals often prefer buying whole life policies because the payout will be excluded from estate taxes. Their beneficiaries can then use the life insurance policy to cover any estate taxes without selling off important assets like property or a family business.

Whole life insurance is also best for people who can easily afford the premiums, which can cost hundreds of dollars a month. 

Get a free price quote here to see what it could cost you.

Who doesn't need whole life insurance?

You don't need to purchase a whole life policy if no one relies on your income (although in this case you may not need life insurance at all, regardless of the type). If you're worried about funeral expenses, you can prepay for those in advance so your family doesn't have to cover the cost. 

If you have loved ones that need your income, but you can't afford whole life premiums, you can also buy a term life policy instead. Term life premiums can cost hundreds of dollars less than whole life premiums. 

Once the term expires, you can reevaluate and decide if you need to buy another policy. Term life premiums vary depending on your age and health status, but will remain steady for the entire term.

Ready to get started? You can use the table below to compare some top life insurance providers now.