Life Insurance 101: Whole Life Insurance Pros and Cons
Jeffrey Manola is an experienced life insurance agent and the founder of Top Quote Life Insurance. His mission when he created Top Quote Life Insurance was to provide online consumers searching for life insurance with the absolute best quotes for term life insurance, permanent life insurance, no medical exam life insurance, and burial insurance.
Not only does he strive to provide you with the …
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Written by
Jeffrey Manola
Founder & Licensed Agent
Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs.
She has since used that knowledge in her more than ten years as a writer, largely in the insur…
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Reviewed by
Leslie Kasperowicz
Farmers CSR for 4 Years
UPDATED: Mar 1, 2022
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Facts You Should Know
Whole life insurance provides long-term coverage with a wide variety of benefits not offered by term life insurance
Whole life insurance rates are typically much higher than term life insurance rates
Since whole life insurance doesn’t require any additional health exams during your coverage period, whole life insurance policies can be worth considering for individuals with health concerns
When buying life insurance, the most popular policies are term life insurance and whole life insurance.
Whole life insurance is a type of permanent life insurance that offers many benefits, but these policies can be complicated and can come with pros and cons.
So, what are the pros and cons of whole life insurance? When considering whole life insurance vs. term life insurance, which one is better?
Before buying a whole life insurance policy, read our guide to understand everything you need to know about whole life insurance and how it compares to term life insurance.
Are you shopping around for whole life insurance? Enter your ZIP code for free quotes from the best whole life insurance companies in your area.
What are the pros and cons of whole life insurance?
Whole life insurance provides a variety of benefits, but there are many things to consider before buying a policy.
The main benefit of purchasing a whole life insurance policy is that whole life insurance never expires. As long as you pay, you will maintain your insurance coverage.
Since your insurance coverage won’t end, you won’t have to renew or extend your coverage at any point. Also, if you experience health concerns, you can still maintain your whole life insurance coverage.
With whole life insurance coverage, your rates are fixed, and you are not required to take any additional health exams during the length of your coverage. So, you won’t have to worry about your rates increasing or losing coverage if your health declines at any point.
Whole life insurance is also one of the few life insurance policies with a cash value. This cash value accumulates throughout the length of the policy and can be used for living benefits.
Although whole life insurance has many benefits, there are a few things to consider about whole life insurance before buying a policy.
A significant disadvantage of buying whole life insurance is the high rates. On average, whole life insurance is five to 20 times more expensive than term life insurance.
Compared to term life insurance, whole life insurance is a complicated policy and may be unnecessary if you only need basic coverage.
If you don’t need a cash value option or lifelong coverage, whole life insurance may not be worth the cost. In this case, term life insurance may be the better option for you.
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Term Life or Whole Life Insurance
Although whole life insurance and term life insurance work similarly, the coverage period is the main difference between whole life insurance and term life insurance.
While whole life insurance offers permanent coverage that lasts until your death, term life insurance only provides you with coverage for a set period of time before the policy expires.
This period can typically be 10, 20, or 30 years, but some life insurance companies may let you choose the duration of coverage you want for more policy customization.
When considering whole life or term life, whole life insurance is typically the more expensive option. This is due primarily to the permanent coverage and benefits you get with whole life insurance policies.
Although whole life insurance is more expensive to buy, whole life insurance policies come with many benefits that aren’t available with standard term life insurance policies.
Unlike whole life insurance, term life insurance policies do not have a cash value, and the rates are not guaranteed or fixed.
How does term life insurance work?
On a basic level, term life insurance works the same as whole life insurance. Both policies provide coverage and a death benefit that can be used by your beneficiaries after your death.
However, term life insurance only provides coverage for a certain period of time before the policy expires.
After this period is over, you will need to renew your policy, convert your policy, or buy a new life insurance policy.
If you think you may want to renew or convert your policy in the future, renewable term life insurance and convertible term life insurance are both options that can help you to continue having coverage even after your coverage has expired.
How expensive is whole life insurance?
With whole life insurance, rates can be 5-20 times more expensive than the average term life insurance policy.
Term life insurance can cost as little as $17 a month for a non-smoking male purchasing a $250,000 20-year policy, but the same male purchasing a $250,000 whole life insurance policy would pay $351 a month on average.
However, whole life insurance rates are fixed and are guaranteed not to increase during the length of your policy. Comparatively, term life insurance rates can increase throughout your coverage period.
Level rates help make whole life insurance a stable and reliable life insurance policy.
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Should I buy whole life insurance?
While whole life insurance is a stable policy that offers many benefits and lifelong coverage, it may not be suitable for everyone.
The downside to buying whole life insurance is that the monthly rates are often very high, but if you can afford the higher rates, whole life insurance is a good option for individuals that want permanent coverage and benefits like a cash value option and fixed rates.
However, if you cannot afford the higher rates of whole life insurance or are just looking for a simple policy to last a short time, term life insurance may be your best bet.
What’s the bottom line on the pros and cons of whole life insurance?
Whole life insurance offers permanent coverage at rates that are considerably higher than the average term life insurance rates, but whole life insurance policies typically come with a broader range of benefits.
The benefits whole life insurance offers can vary depending on what type of whole life insurance policy you buy, but typically include a cash value, lifelong coverage, fixed rates, and no additional exams.
However, if you’re looking for a straightforward policy with low rates or are not sure that you need lifelong coverage, term life insurance may be the better option for you. Later, if you decide you want more coverage, you can renew or convert your policy with renewable term life insurance or convertible term life.
Are you thinking of buying whole life insurance? Enter your ZIP code below to get free quotes from the best life insurance companies near you.
