Official Guide to Types of Whole Life (Comparisons & More)

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Important Things to Know...

  • Whole life insurance provides permanent coverage as long as you live
  • Term life only lasts for a predetermined amount of time
  • Premiums for whole life are higher but guarantee a death benefit
  • Whole life has an added benefit of acting as an investment and savings plan
  • Whole life is best for families who are financially well-off

Shopping for life insurance can be complicated. It’s not a topic most people like to think about, and it can be confusing knowing where to even begin the buying process.

Life insurance policies are designed to help protect your family and provide them with financial security.

With something as important as your family’s well-being, you want to make sure you have all the information so you can make the best possible decision.

As you shop for life insurance, you’ll come across a wide variety of policies from many companies. Here’s a quick breakdown to help you get started!

Life insurance can be divided into two basic categories: term life insurance and whole life insurance. Term life insurance will provide coverage for a specified time, usually ranging from 10 to 30 years while whole life insurance offers coverage for the insured’s lifetime.

Take the first step in getting covered by comparing life insurance rates using our FREE quote tool above and read through this guide to get all the tools and information you need to help find the best whole life policy for you and your family!

Table of Contents

What is whole life insurance?

So what exactly is whole life insurance? Unlike term life insurance, whole life insurance policies provide permanent coverage. With a whole life policy, you’ll have lifetime coverage as long as your premiums are paid on time.

Upon your death, the insurance company will pay a guaranteed death benefit to your beneficiaries.

For example, if a 45-year-old woman buys a $250,000, 20-year term policy, the policy will expire when she turns 65. If she doesn’t renew the policy and dies after age 65, a death benefit won’t be paid.

It doesn’t matter how many premiums you’ve paid. A death benefit won’t be paid after the term expires. However, if the same woman bought a whole life insurance policy, her beneficiaries would receive a $250,000 benefit upon her death.

The video above provides an overview of whole life insurance.

How Whole Life Insurance Works

Since whole life insurance provides lifetime coverage and a guaranteed death benefit, it’s more expensive than term life insurance policies. Some people view whole life insurance policies as investments because they have a savings component.

Whole life insurance policies can also accumulate tax-deferred cash valuePart of your monthly premium will go into an account that builds cash value. The cash value earns interest at a rate that’s determined by your insurance company.

The cash value gives you the potential to leave behind extra money in addition to your guaranteed death benefit.

You can access the cash value during your lifetime. You can withdraw funds or take out a loan against the cash value. If you have unplanned expenses, such as a high volume of medical bills, you can use the cash value to help you cover the expenses.

If the cash value loans aren’t fully paid back at the time of your death, the outstanding balance will be deducted from the death benefit.

Where do your premiums go?

Life carriers make this idea of level premiums for life possible by adding an investment component into the policy.

Unlike a term life plan, where you are paying for just pure life coverage, you will be paying for a combination of things.

Your whole life premiums include company expenses, cost of pure insurance, premium taxes, and a mortality charge.

The mortality charge is the charge that the company projects divided into monthly charges so that they are able to account for the risk.

So whole life carriers do take on more risk, but they are projecting the cost of the insurance in the beginning so that they can charge the right premium at the onset.

The remainder of your payments will go into a cash account. This account is invested in stocks and bonds that are diversified so that the account can grow.

The money in this account will be used later in your life to offset the cost the insurance as you are older. The level of your benefits will decrease as the level of your cash account grows so that you will always have the same death benefit.

Why is risk so important?

Buying whole life is a major commitment. Not only do you need to set a budget that you can afford for life, you also need to choose a death benefit that will help you meet your financial obligations.

It can help to know what personal factors can affect your premiums before you begin requesting quotes or before you apply for coverage.

Insurance is a product that is all about risk. The insurer must assess mortality and morbidity tables, review your lifestyle, review your medical history and even review your family history to determine how long you have to live. When you are buying permanent life that does not have an expiration date, assessing risk is a bit different.

The company knows that they will be obligated to pay out on a death claim at some time, but their goal is to pinpoint when that payout will be.

The longer the policy is in force, the more premiums the insurer can collect.

This is why there is a very thorough underwriting process when you buy even of a small whole life plan. It is up to you to be as honest as possible before the policy is underwritten so that you receive accurate estimates that will not go up once your records are reviewed.

Who Should Buy Whole Life Insurance

Whole life insurance policies are a good option for people who want permanent, lifelong coverage. There are other groups of people who should consider traditional whole life policies.

Investors should consider buying whole life insurance. Whole life policies offer multiple investment opportunities. Universal and variable life policies offer higher potential investment rewards than other life insurance policies.

Whole life insurance may also be useful in estate planning. If you’re leaving behind a large estate, you’re likely leaving a large tax burden on your beneficiaries.

Benefits from whole life policies are usually tax-free and the death benefit can be used to pay the estate taxes.

Whole policies are also a good option for caregivers. The money collected from a whole life policy can be used to help cover long-term care needs.

Can you cash in your whole life insurance policy?

To answer this question, first, let’s revisit the cash value aspect of a whole life insurance policy.

Whole Life & Cash Value

Although there are different kinds of whole life, they all accrue cash value. This makes them different from term insurance.

The cash value of whole life is cash you can potentially access while you are still alive. You do not need to kick the bucket to access this value. With a term policy, it only pays anything upon the demise of the insured.

However, it does take some time to accrue cash value. This is not a situation where you buy it one day and the next day it magically is worth big bucks. But, if you have had it a few years, it likely has accrued some cash value.

It May Look Like a Lot of Money

Depending on various factors, such as how long you have had it and how high the premiums are, the cash value can be quite substantial. And, yes, you can potentially cash it out.

If you get into a pickle financially, this cash value can look very tempting. You can think “This is the answer to my problems!”

The Reason People Get Whole Life

But, cashing in your whole life policy is basically the same thing as canceling the policy. This potentially leaves your loved ones without the financial protection you wanted for them when you chose to get the policy.

If the cash value is substantially less than the coverage value of the policy, this may a bad trade, so to speak. You may be throwing away guaranteed funds that your loved ones will need later for short term gain.

After all, the primary purpose of whole life is to make sure you stay covered. That is the main reason it gets chosen over term life.

Term coverage is typically less expensive but does not stay in force for your whole life. It ends when the term of coverage ends. The fact that whole life stays in force your whole life is where the name of it comes from.

So, while cash value is nice, it isn’t really the reason people purchase whole life. Guaranteed coverage is the reason they purchase it. As you get older, this gets both harder to find and more expensive to get new.

Borrowing is an Option

If you do not actually want to cancel the policy, borrowing may be a better option for you. So, let’s talk a bit about how borrowing against your policy works.

It’s Sort of Like a Savings Account

Did you know that you can basically borrow at will from your cash value amount? It’s true. It is your money and you don’t need anyone’s approval for using it.

Borrowing against the cash value is a bit like taking money out of your savings account. You just need to fill out forms stating you want to borrow it, just like you would fill out forms at the bank to withdraw money from savings. But there is no approval process.

Unlike most loans, you do not need to explain to anyone why you want it. You do not need to justify borrowing it. No one will judge you.

Having Your Cake and Eating It Too

So, if you are considering cashing in your policy due to a short-term cash flow problem, borrowing against it may be a better option for you. That way the policy is still in force, thus you still have life insurance coverage should the worst come to pass.

There is no repayment schedule. You will need to stay on top of how much you owe and some other details. The interest rate is typically pretty low.

You should learn more about borrowing against the cash value before you do so, but it is usually going to be a better answer than outright cashing in the policy. It will let you access the cash value while keeping the policy so you still have coverage.

Other Options

If borrowing does not make sense, there may be other options that do make sense. For example, you may want to trade the policy for a long-term care policy.

This may make sense if you are in the draw down phase. In other words, if you are seriously ill and going through all your assets due to serious health problems, you may be expecting to apply for Medicaid in the near future.

In such circumstances, turning your whole life policy into a long-term care policy may be the best decision.

You may also be able to trade it for an annuity or sell it to a life settlement company.

Do your research and find out all possible options before you decide to simply cash it in. Once you cash it in, it is gone.

That is not the time to find out there was some other option that would have made more sense for you and your loved ones.

When in Doubt, Ask Someone

Insurance is complicated stuff. It can confuse anyone, no matter how smart or educated.

So, if you really do not understand all your options, it might be wise to talk to an expert. It is better to ask questions before you make any decisions or take any actions rather than after.

The exact details of your situation will significantly impact what the best answer is for you personally. Thus, talking to an expert may be the single best thing you can do.

That is the best way to stumble across an answer to a question you didn’t even know you needed to ask. if they know their stuff, they will know what questions to ask you to get at the heart of the matter.

The Cash-Out Process

If you do decide to cash out your policy, the process is simple enough. You may already have the form you need in with your insurance policy. If you do not, you can request one from the company.

Types of Whole Life Insurance

Though whole life and term life are the two major forms of life insurance, there are multiples types of whole life insurance to choose from. Whole life insurance is available in the following forms:

  • Traditional
  • Universal
    • Traditional
    • Indexed universal
    • Guaranteed universal
  • Variable
    • Traditional
    • Variable universal

Keep reading to learn more about the types of whole life insurance and determine which one is the best fit for you and your family.

Universal Life Insurance

Universal life insurance combines the flexibility of term life insurance with the cash value of whole life insurance policies. Any overages from premium payments that are above the current cost of insurance are credited to the cash value of the policy. The cash value is credited every month with interest.

Universal life cash value grows at a fixed rate.

There are three types of universal life insurance: traditional, indexed, and guaranteed.

The video below provides an overview of universal life insurance.

Let’s take a closer look at the different types of universal life insurance, how these policies work, and who should consider buying a universal life policy.

What is universal life insurance?

Universal life insurance policies offer more flexibility than traditional whole life policies. Universal life policyholders have the option to change their coverage amounts and the frequency of their premiums.

If you have a universal life policy, you can also pay your premium in a lump sum.

Your policy will stay in effect as long as the cash value of the policy covers the cost of insurance. You can use the cash value to help pay for premium payments, but this can come with a risk. Your policy will lapse if the cash value falls to zero, so always be sure to keep an eye on the cash value.

Universal life policies have a maturity date, usually between 85 and 121 years old. If you live past your maturity date, you’ll receive a payment equal to the policy’s cash value.

Setting a maturity date for a policy can be tricky. If you live past the maturity date, you won’t have coverage and you’ll have very little money returned to you.

Types of Universal Life

Traditional universal life insurance is cash value life insurance. Any amount over the current cost of insurance is credited to the cash value of the policy.

Indexed Universal Life

Indexed universal life policies have a minimum guaranteed interest rate that’s based on an index that you choose. These policies give you more flexibility than traditional universal life premiums because you get to choose how to invest your premiums.

The cash value of indexed universal life policies is put into an index account such as the NASDAQ-100 or the S&P 500. Your interest rate is based on how the indexes perform rather than a rate set by the insurance company.

You can decide how much you want to be allocated to your fixed and indexed accounts. Some indexed universal life policies will give you the option to temporarily invest in a more traditional savings account instead of the index.

The value of the chosen index is recorded at the beginning and end of every month. If the index has increased, interest is added to the cash value.

For example, if the index went up by 4 percent, that 4 percent is multiplied by the cash value. That interest is then added to the cash value. If the index goes down, interest isn’t credited to the account.

Indexed universal policies are a riskier choice because you can’t guarantee growth. However, they also have a higher chance of rewards. Indexed policies have higher returns than traditional whole or universal life policies.

Guaranteed Universal Life

A guaranteed universal policy is a form of universal life insurance in which your premium remains the same, but the policy doesn’t accumulate cash value. Since the policies don’t accumulate cash value, there is no market risk that comes with other universal life policies.

As long as you pay your premiums, you’ll have coverage.

Guaranteed acceptance universal life policies have a low face value and are generally meant to cover funeral and burial costs. Most guaranteed universal life policies restrict coverage to $25,000 or less.

With this type of coverage, your premiums won’t increase and your coverage won’t decrease.

Guaranteed universal life policies don’t have health-related questionnaires and don’t require a medical exam. Instead, the premium is based on your age, location, and gender.

Universal Life vs Whole Life

One of the biggest differences between traditional whole life and universal life is that whole life premiums remain the same, while universal life premiums are flexible and can be adjusted.

The cash value of traditional whole life policies doesn’t depend on market performance, but the cash value of universal life insurance policies depends on market performance.

Variable Life Insurance

Variable life insurance policies are permanent plans with a cash value account that’s invested in sub-accounts that are part of the policy. Variable life policies fall into two main categories: traditional and variable universal life insurance.

These policies provide flexible coverage with investment opportunities.

As you can see, the video above provides an overview of variable life insurance.

What is variable life insurance?

In addition to providing permanent life insurance coverage, variable life policies allow you to invest your cash value into multiple accounts that work similarly to mutual funds. These policies come with a higher risk than other life insurance policies since their value is based on stock market performance.

This means these policies also have the highest chance of reward.

Types of Variable Life

Traditional variable policies have a cash value that’s invested in several sub-accounts available with the policy. You can invest your cash value in stocks, bonds, or money market funds.

The value of a variable life insurance policy depends on stock market performance. If your accounts perform well and grow, so does the cash value. If your accounts don’t perform well, you could lose the cash value of your policy and possibly the face value, as well.

The growth of the policy’s cash value is not taxed the same way as traditional income.

Variable universal life insurance policies offer permanent coverage where the insured controls the amount of the premium and death benefit. These policies also have a built-in savings component.

Like standard universal life policies, the policies have adjustable and flexible premiums. However, variable universal life policies have the potential for investment rewards.

Most policies have a maximum cap and minimum floor investment returns.

Who Should Consider Variable Life

Variable life insurance is a good option for investors since the policies offer more investment opportunities than other types of whole life insurance. Since variable life policies allow you to invest your cash value into sub-accounts, you have more investment opportunities and a chance of higher cash value accumulation.

You can invest the cash value in stocks, bonds, or money market funds.

Variable life insurance may also be a good option for retirees. The accumulated cash value can be used to help supplement your post-retirement expenses.

Variable Life vs Universal Life

Variable life insurance policies offer more investment opportunities than universal life insurance policies. Since there are more investment opportunities, variable life policies also have a higher potential return.

However, this means variable life policies are riskier than universal life policies.

Both policies have cash values that fluctuate depending on market performance.

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Whole Life Death Benefits

A death benefit is the amount of money the insurance company pays to your beneficiaries after your death. As long as your premiums have been paid on time, your beneficiaries will receive the death benefit.

The claim filing process varies from company to company, but on average, the death benefit will be paid within 30 days of the claim being filed.

How the Death Benefit Works

Filing a claim with a life insurance company to receive your benefit is a relatively straightforward process. First, you’ll need to notify the company of the insured’s death. You’ll have to submit a death certificate to the life insurance company.

After the company has been notified of the death, they’ll send a claims packet with all the forms you need to fill out. The company may also request other documentation. Once you’ve sent in the paperwork, the company will begin to process your claim. Once your claim is approved, you’ll receive the benefit.

There are two parts of a whole life insurance policy death benefit: the face value and the cash value.

The face value is the amount of coverage guaranteed when you buy the policy. For example, if you paid for a $250,000 life insurance policy, your beneficiaries will receive a payment of at least $250,000.

The cash value is the amount of interest your premiums have earned. The cash value of your policy could be paid to your beneficiaries in addition to the face value.

The amount of cash value left behind depends on the performance of your investments. If your investments did well, you will have accumulated a larger cash value. The amount will also depend on if and how you accessed the cash value during your lifetime.

For example, some policies allow you to use the cash value to pay your premium. The more times you’ve accessed your cash value, the less money there will be for your beneficiaries.

Certain life insurance policies will let you take out a personal loan against the cash value. If you take out a loan against your cash value, you have to pay it back with interest.

If there is outstanding debt at the time of your death, the remaining balance will be taken from the cash value and face value. This could decrease the amount of money your beneficiaries will receive.

Types of Death Benefits

There are two main types of death benefits: fixed and increasing.

If you choose a fixed death benefit, the price of your premium becomes lower as your cash value accumulates. The benefit is equal to the face value of the policy you bought.

For example, if the cash value on your $500,000 policy accumulates to $35,000, your premiums would decrease because you are now paying for $465,000 of coverage.

After the insured’s death, the $35,000 cash value is added to the $465,000 face value, ensuring your beneficiaries receive the guaranteed $500,000 benefit.

Your premiums and face value remain the same with an increasing death benefit. However, your cash value will increase, which means the overall death benefit will increase.

Looking at the same example from above, if the cash value on a $500,000 policy accumulates to $35,000, your premiums remain the same because you’re still paying for the same amount of coverage.

After the insured’s death, the cash value is added to the face value, which will give beneficiaries a $535,000 death benefit. Generally, an increasing death benefit is more costly over time but could lead to a higher death benefit.

Shopping for Whole Life Insurance

If you’ve decided whole life insurance is the best option for you and your family’s needs, there are some factors to keep in mind while shopping for a policy.

There are many factors that can affect your premium, including your age, gender, occupation, and habits. Let’s take a closer look at the way these components can change your rate.


Your age plays a large role in determining your premium. If you’re younger, your premium costs will be lower. As you age, it becomes more likely an insurance company will have to pay your policy. If you’re older, your premiums will be higher.


Women have longer life expectancies than men. Since men aren’t expected to live as long, they pay higher rates for insurance than women. The average life expectancy of a woman is 86.5 years, while the life expectancy of a man is 84 years.


There are some jobs that are considered more dangerous than others. Occupations with a higher number of accidental, fatal work injuries are considered high-risk.

Industries considered to be high-risk include construction, transportation, and warehousing. Police officers and firefighters are also considered to be in high-risk jobs. If your job is considered high-risk, you’ll pay more for life insurance.

Lifestyle & Habits

Do you fly for recreation or travel to international sites to donate and volunteer? Do you like extreme sports or have a hazardous occupation? These are things that should be disclosed when you want to price insurance.

Dangerous hobbies such as private aviation, skydiving, scuba diving, bungee jumping, and rock climbing can all affect your rate. A one-time excursion won’t hurt your premium, and neither will what experts refer to as small or “acceptable” risks. However, a pattern of legitimately risky events will cause your rate to increase.

Generic quotes will not include added charges for hazardous occupations and hobbies. They also will not assume that you have a bad habit like using tobacco or drinking more than socially. All of these factors can play a role in how long you are projected to live, and when this number goes down your premiums will go up no matter what.

Make sure that you are prepared to pay a surcharge if you are a thrill seeker or your occupation puts you at-risk. If you are honest, you can find out if you are eligible for coverage before you assume a generic price quote applies to you.


The habit that does the most harm to your insurance rate is smoking. Across all ages and genders, smokers pay more for life insurance policies.

Vitals & Body Type

Agents or applications will ask for your height, weight and other information to determine your Body Mass Index. This is because it plays a role in your life expectancy when you are overweight or underweight.

You will also be asked to get a medical check-up with a paramedical service so that your vitals, urine, saliva, and blood can be checked.

Be as honest as possible when you provide this information because anything you state will be verified electronically through your medical records. If the picture that you paint does not match the picture that the records paint then you may have to pay a higher premium or you can face denial which will is something all life insurers can see.

Driving Record

If you have a less than perfect driving record then this is something you will want to tell the quoting agent. Some insurance companies take driving histories very seriously because the number of individuals who drive in car crashes each year is very high.

With at-fault accidents and moving violations, you may be a higher risk and be asked to pay a table-rated premium per thousand dollars in coverage.



Short-term expenses are the costs that will need to be covered immediately after your death. These can include:

  • Funeral and burial expenses
  • Medical bills
  • Mortgages
  • Outstanding debt

Whole life policies also cover long-term expenses, including:

  • Income replacement
  • Child care costs
  • College tuition

Your medical history can also have an impact on your rate. Most whole life policies require a medical exam as part of the application process.

A paramedical service will come to you to conduct the exam. During the exam, your vitals will be recorded, along with your height and weight. They’ll also take blood and collect a urine sample.

After the exam is complete and the results come back from the lab, they are submitted to the underwriter. The underwriter will review them and determine your risk classification.

If you or someone in your family has a history of serious diseases, such as heart disease, your premium will probably cost more.

You also need to buy life insurance from a trustworthy company. When it comes to something as important as protecting your family, you want to be sure you can count on your life insurance company.

Check credit ratings from the following websites to get an idea of the company’s financial standing and credit risk:

To see what consumers and policyholders have to say about a company, visit these websites:

Getting a Whole Life Insurance Quote

If you have decided that whole life insurance is the best product for you and your loved ones, you will need to start comparison shopping so that you can find the best rates.

Whole life insurance is the perfect product for any individual who wants permanent coverage with level premiums, but choosing the right death benefit and then sifting through all of the providers can be a daunting task.

The key to being a resourceful modern day consumer is learning how to make the intimidating process of shopping for whole life quick and easy without compromising your protection.

Not only must you learn what you should value most when you are getting a quote, you also must know what information you will need to provide to get the most accurate quotes the first time around.

With this guide, you will be able to learn about all of the factors that you should consider before choosing a quote and how to answer quoting questions to prevent a misquote.

Be sure to use the FREE quote comparison tool above to start searching for whole life insurance!

What to Consider Before Price When Buying Whole Life Insurance

With whole life insurance being one of the more expensive life insurance products on the market to purchase, finding a company that is competitively priced is important.

Unlike consumer goods, where you can compare the pricing with several different retailers for the same exact product, whole life insurance products are only as good as the carrier providing the coverage.

This is why you have to look past price and consider the carrier first when you are getting a whole life insurance quote. Here are some of the questions you need to ask to avoid the sub-par companies and to stick with the reputable ones:

What products and lines of insurance does the company offer?

If you want strictly life insurance, you may only be concerned with the types of life products that the company offers.

If you want discounts off of your other lines of insurance like auto or home, it can be beneficial to choose a company with a full product offering that is complete with auto, home, life, and even disability.

Companies with broader ranges of insurance will have more options for you if you are in need of flexibility in the future.

What is the financial status of the company?

Many people assume that a life insurance plan is insured and guaranteed much like your account balances with the bank are insured by the Federal Deposit Insurance Corporation. Unfortunately, this is not the case.

That is why, when you are buying a permanent life product that you will be paying on for a lifetime, you need to be sure that the insurer will be financially sound for as long as you are around.

You can check the financial standing of the company by visiting rating agencies’ websites and seeing their assigned letter grades.

A.M. Best is a very reliable and unbiased consumer protection agency that has accurate rankings and that will help you decide which companies should not make your list of possibilities.

Is the company licensed and part of a guarantee association?

You should only buy coverage that is licensed in the state where you reside. By buying your whole life insurance from a licensed entity that is recognized by your state’s Department of Insurance, you have peace of mind in knowing that you have consumer protection.

The department will review any complaints filed by consumers and will ensure that the carriers are adhering to a certain standard of conduct so that you know that they cannot back out on their promises.

Are customers satisfied and are there several complaints?

Current customer satisfaction ratings are important.

There are many customer service satisfaction sources that you can check on the Internet to read unbiased reviews and to learn about real life experiences.

In addition to these third-party sources, you can also check the complaint records of the carrier because these records are public record.

You can check the database through the state department or through the National Association that all state departments are managed by. Be aware that all companies will have complaints, but only companies who do not provide quality service or represent themselves properly will have a lot of founded complaints.

What riders and features does the providers offer?

All whole life plans are in force for as long as you live, but some have added features that provide your family with even more protection. Riders are added types of protection that can be built into the policy, most of the time for an added rate.

Sometimes, riders can be included in the plan at no extra charge.

If you want premiums to be waived if you are disabled or an income from the policy, look for waiver of premium and disability income riders. If you would prefer to raise your death benefit without medically qualifying, look for guaranteed renewability riders.

Many companies will also insure your children and spouses with their own limits if you add the child or spouse rider. If you would like any special riders and they are not offered, you will not have the peace of mind and added protection the riders offer.

How to Get the Best Rate

Now that you’ve learned about whole life policies, you should know how to get the best rate possible while you’re shopping for one.

The first step to getting the best rate is to think about your long-term and short-term needs. As we’ve previously mentioned, you need to consider what expenses you want to be covered for your family.

Once you determine what you want to be covered, you can make sure you’re not overpaying for a policy that has the coverage you don’t need.

Whole Life Insurance Rates

The next step to make sure you’re getting the best rate is to get a quote. Most life insurance companies have quote tools on their website. Get as many quotes as possible so you can compare multiple companies and see which one offers the best policies and the best rates.

You also need to buy life insurance when you’re younger. Life insurance probably isn’t a high priority for most young people, but buying early could save you a lot of money.

Premiums get higher as you age. If you buy life insurance when you’re younger, you can lock in a lower premium.

The table below shows the average sample whole life insurance rates for whole life insurance.

Average Monthly Life Insurance Rates by Age, Gender, and Policy Amounts for Smokers
Age$100,000 – Male$100,000 – Female$250,000 – Male$250,000 – Female$500,000 – Male$500,000 – Female
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Changing Your Policy

As your needs change, the initial whole life insurance policy you bought may no longer be the best option for your family. Luckily, universal life and variable life insurance policies give you the flexibility to adjust your coverage.

Converting Whole Life

Most term life insurance policies can be converted to whole life policies. The conversion can happen at specific periods during the term coverage or when the term coverage is about to expire.

However, whole life policies can’t be converted to term policies.

If your financial needs change and you want to change your traditional whole life policy, you have to cancel your policy and buy a new one that’s a better fit. An early policy cancellation could result in surrender fees.

Changing Your Death Benefit

Standard universal and variable universal life insurance policies will allow you to change the face value of your policy. You usually have to change the coverage before you hit a certain age. If you change the face value of your policy, you may have to take another medical exam.

The death benefit on a life insurance policy can also be decreased. Most policies have an established minimum you can pay without your coverage lapsing.

Changing your death benefit could also result in surrender fees.

Surrender Fees

A surrender fee is the amount charged by insurance companies after the insured cancels their policy. Many companies charge fees if you cancel your policy within a certain time, such as the first 20 years of coverage.

The fees are assessed against the cash value of your policy. If you decide to cancel your policy completely, you’ll receive a surrender value from the insurance company.

Pros & Cons

Now that you have an overview of whole life insurance, let’s discuss the advantages and disadvantages of its coverage. Here’s a breakdown of the pros and cons of whole life insurance, universal life insurance, and variable life insurance.

Traditional Whole Life Insurance

First, the pros and cons of traditional whole life insurance.

Premium remains the sameMore expensive
Guaranteed death benefitPolicy may not be worth it if you have to cash out early
Cash value builds over timeN/A
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The biggest advantage of traditional whole life insurance is that it offers permanent coverage with level premiums and a guaranteed death benefit. The policies also accumulate cash value over time.

However, traditional whole life policies are more expensive than term life policies. If you have to cash out or cancel your whole life insurance policy early, the investment may not be worth it.

Universal Life Insurance

Next, the pros and cons of universal life insurance.

Permanent coverageGreater investment risk
Flexible premiumsCash value depends on market performance
Less expensive than traditional whole lifeN/A
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Universal life insurance insurance policies offer more flexibility than traditional whole life policies since they allow you to adjust the amount and frequency of your premiums. These policies tend to be less expensive than traditional whole life.

There is a greater chance for investment rewards. However, there is also greater risk, since the cash value is dependent on market performance.

Variable Life Insurance

Lastly, the pros and cons of variable life insurance.

Investment opportunities, multiple options for investing cash valueRiskier than other life insurance policies
Higher income potential than other forms of life insuranceHigher cost due to multiple fees
Cash value growth is not taxed the same way as traditional incomeN/A
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Variable life insurance policies provide multiple investment opportunities. This means the policies also have higher income potential than other forms of life insurance.

Another advantage of variable life policies is the cash value that accumulates is not taxed the same way as traditional income.

The biggest disadvantage of variable life policies is that they are riskier than other options because their value depends on market performance. These policies can also have higher costs due to investment fees.

The Bottom Line

Whole life insurance policies offer lifetime coverage with investment opportunities. Since they offer permanent coverage, whole life policies are more expensive. There are also some financial risks involved with whole life coverage since the cash value of some policies depends on market performance.

If you want to make sure your family is covered and protected without higher costs or the risk of market fluctuation, you may want to consider term life coverage instead.

However, if you want permanent life insurance coverage that also provides multiple investment opportunities, whole life insurance may be the right choice for you.

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