The Pros and Cons of Whole Life Insurance Policies

Whole life insurance policies are important products in the life insurance field because they literally protect an individual for their entire life. This insurance has a guarantee that it will not lapses as long as the insured continues to pay the premiums. Whole life insurance policies will be in place until a person reaches 100 years of age. Whole life insurance policies also come with a component that allows an individual to save in a tax-deferred account and it builds cash value. These policies allow one to purchase dividends that show a life insurance company's ability to operate favorably. When looking at these whole life insurance policies there are several issues that must be taken into consideration. The major pros and cons of these policies are listed below:

PROS

  • As mentioned there is a savings component that gives the individual cash value as it grows and it is tax-deferred.
  • The cash value allows an individual to stop paying premiums when they reach a certain age or it allows them to borrow from their whole life insurance policies.
  • If the individual borrows from their policy it is done in a tax advantage way.
  • The whole life insurance policies do not increase during the insured's lifetime.
  • As long as premiums continue to be paid the beneficiary can receive the death benefit no matter when the individual dies.
  • If the policy is terminated the individual will receive the money back that was paid in premiums.

CONS

  • The individual has no control over how the cash value aspects are invested. This is totally up to the whole life insurance company.
  • The insurance company also decides when and how these aspects are invested.
  • There can be no changes in the whole life insurance policies from the point that it is purchased.
  • This policy cannot adapt to retirement plans or other types of insurance that change.
  • To access funds from the policy an individual must go through a procedure rather than withdrawing the money as from a bank.
  • The premiums are higher in whole life insurance policies than in term life.
  • This can be a more complex way to have life insurance than with term life.

It is wise to also investigate the differences between whole life insurance policies and term life policies. As a customer talking to an insurance agent who is knowledgeable in all life insurance products will be important to make sure that needs are met.