Whole Life Insurance

Permanent life insurance that guarantees a death benefit, level premiums, and cash value that grows on a fixed schedule.

Overview

Part of each premium pays for protection and part builds cash value, credited with a guaranteed interest rate and often a dividend. Participating policies from mutual insurers pay dividends that have historically increased effective returns, though dividends are not guaranteed. Cash value grows tax deferred, can be borrowed against at any time, and unpaid loans reduce the death benefit at death. Surrender in early years triggers heavy fees, so whole life rewards long holding periods. It costs roughly five to ten times more than term for the same initial death benefit. Common uses include estate liquidity, inheritance planning, and lifetime gifts where certainty of the permanent payout matters more than cost.