Advantages / Disadvantages of Whole Life Insurance

Whole life insurance is a comprehensive insurance policy like no other. Not only does paying premiums into a whole life life insurance policy establish a death benefit for your next of kin or other beneficiaries you list, the policy can be used as an investment strategy as the premiums fund a cash value for the account. Using whole life life insurance for both the death benefit and investment builder aspects has many positives, but there can also be some drawbacks.

Advantages of Whole Life Insurance

  • Benefits that the policy holder can take advantage of while alive
  • Premium payments go towards funding the whole life insurance policy and the policy will build cash value over time
  • Once policyholders are “paid-up” on the investment, they can withdraw cash
  • The policy can be tapped into as a low-interest line of credit for the policy holder
  • The cash value is built on a tax-deferred basis
  • The premiums will remain level during the life of the policy
  • The whole life insurance policy cannot be canceled except for lack of payment
  • Whole life insurance can be purchased from ages 0-99, but it’s generally better to buy life insurance earlier
  • Death benefits paid out to the beneficiaries upon the demise of the policy holder

Disadvantages of Whole Life Insurance

  • The cash value of a whole life insurance policy will not start to build until 2-3 years of continual premium payments
  • Whole life insurance is extremely expensive
  • Money taken out or borrowed against the cash value of a policy can reduce the death benefit
  • Whole life insurance is a relatively complicated matter to understand and will require much research
  • Experienced investors may find investment options too limited

When contemplating whether or not to secure a whole life insurance policy, it is important to truly weigh the pros and cons before signing on the dotted line. You should also obtain multiple life insurance rates and compare them before. Go Insurance Rates can help – by filling out our online form, you’ll receive free rates quickly and conveniently.