Whole Life Insurance
Lifelong coverage that can help build family assets.
What is whole life insurance?
Whole life insurance is a type of permanent life insurance policy that offers two primary benefits: a guaranteed death benefit paid to your beneficiaries when you pass away, as long as you keep the policy in force, and a cash value that can be withdrawn or borrowed from during your lifetime.1,2,3
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How is whole life different from term life?
Whole life insurance covers you for your entire life, and part of your premiums contribute to the cash value — a tax-efficient financial asset that is guaranteed to grow with payment of your premiums.4,5 Term life insurance covers you for a limited period — typically 10, 20, or 30 years — and doesn’t provide cash value.
Which other type of life insurance has cash value?
There are two main types of permanent life coverage with cash value: whole life and universal life insurance.6 Whole life premiums are fixed for life – they never go up or down. However, if you need more flexibility, a universal life insurance policy lets you adjust monthly premiums within a specific range.7
What can you do with cash value?
It typically takes a few years to grow into a useful amount, but once that happens, you can use it in a variety of ways. For example, you can take out tax-efficient loans against it, use it to help pay premiums, or even surrender the policy to help supplement your retirement income.
Whole life insurance policies offer permanent life insurance protection with coverage that lasts the duration of the policyholder’s life as long as the premiums are paid and the policy is active.
Policyholders have guaranteed-level premiums that will never change, and their beneficiaries will receive a guaranteed death benefit that will not decrease. The life insurance company will pay the death benefit to the policyholder if they are still living at a specific “maturity” age, often from 100 to 121 years old.
Whole life insurance policies also have a “cash value” component, which is a life-long financial asset that grows at a set rate each year until a certain age. This cash value can accumulate on a tax-deferred basis.
Whole life insurance offers a guaranteed death benefit in the event of the policyholder’s death at any age. The policy also builds cash value over time. Policyholders are also able to borrow against their whole life insurance policy and access the cash value in other ways.
As with other financial products, the answer to "Is whole life insurance worth it?" depends on your life situation and goals. It can provide financial confidence that other products may not because cash value growth is guaranteed and insulated from financial market performance. Also, if you need protection that lasts your entire life, as long as the policy remains in force a whole life policy guarantees the death benefit payout amount along with level rates that won't rise. A universal life insurance policy provides more flexibility, but in certain circumstances, you may have to pay higher premiums to maintain coverage.
No, as with other types of life insurance, premiums are not tax-deductible. However, death benefits are typically not subject to income tax when whole life insurance companies pay them to beneficiaries. Also, with whole life insurance, a portion of your premium helps build tax-efficient cash value: money withdrawn or borrowed from the cash value up to the amount of premiums you’ve paid is not considered income, so it’s not taxed as such.8 Your financial and tax professionals can also help you structure any withdrawals you make to help mitigate unnecessary tax penalties.
Unlike a term life insurance policy, permanent life insurance policies – like whole life – may have significantly higher premium payments for a given benefit level. Why? Because it's designed to help protect you for the rest of your life and includes a cash value that can be used as an asset. Another potential drawback to whole life is fixed premiums: people with variable incomes may find it hard to pay them in years when earnings are down. These people may want to consider universal life coverage with more payment flexibility – premiums can be adjusted up or down within a specific range.
According to USA Today, the average cost of a $100,000 whole life insurance policy is about $88 a month, or $1,056 a year, for a 30-year-old nonsmoker in good health. Your actual cost will likely vary, because whole life insurance policies are finely tailored to each applicant's specific needs and situation. It’s also important to note that while the cost is substantially higher than a term policy, term life premiums may rise significantly with age at each renewal. By contrast, whole life insurance rates remain level for life, and the policies build tax-efficient cash value – which isn’t available in a term policy. To get a more accurate idea of what your whole life costs would be, you should consider consulting a financial professional.
Whole life insurance policies offer permanent life insurance protection with coverage that lasts the duration of the policyholder’s life as long as the premiums are paid and the policy is active.
Policyholders have guaranteed-level premiums that will never change, and their beneficiaries will receive a guaranteed death benefit that will not decrease. The life insurance company will pay the death benefit to the policyholder if they are still living at a specific “maturity” age, often from 100 to 121 years old.
Whole life insurance policies also have a “cash value” component, which is a life-long financial asset that grows at a set rate each year until a certain age. This cash value can accumulate on a tax-deferred basis.
Whole life insurance offers a guaranteed death benefit in the event of the policyholder’s death at any age. The policy also builds cash value over time. Policyholders are also able to borrow against their whole life insurance policy and access the cash value in other ways.
As with other financial products, the answer to "Is whole life insurance worth it?" depends on your life situation and goals. It can provide financial confidence that other products may not because cash value growth is guaranteed and insulated from financial market performance. Also, if you need protection that lasts your entire life, as long as the policy remains in force a whole life policy guarantees the death benefit payout amount along with level rates that won't rise. A universal life insurance policy provides more flexibility, but in certain circumstances, you may have to pay higher premiums to maintain coverage.
No, as with other types of life insurance, premiums are not tax-deductible. However, death benefits are typically not subject to income tax when whole life insurance companies pay them to beneficiaries. Also, with whole life insurance, a portion of your premium helps build tax-efficient cash value: money withdrawn or borrowed from the cash value up to the amount of premiums you’ve paid is not considered income, so it’s not taxed as such.8 Your financial and tax professionals can also help you structure any withdrawals you make to help mitigate unnecessary tax penalties.
Unlike a term life insurance policy, permanent life insurance policies – like whole life – may have significantly higher premium payments for a given benefit level. Why? Because it's designed to help protect you for the rest of your life and includes a cash value that can be used as an asset. Another potential drawback to whole life is fixed premiums: people with variable incomes may find it hard to pay them in years when earnings are down. These people may want to consider universal life coverage with more payment flexibility – premiums can be adjusted up or down within a specific range.
According to USA Today, the average cost of a $100,000 whole life insurance policy is about $88 a month, or $1,056 a year, for a 30-year-old nonsmoker in good health. Your actual cost will likely vary, because whole life insurance policies are finely tailored to each applicant's specific needs and situation. It’s also important to note that while the cost is substantially higher than a term policy, term life premiums may rise significantly with age at each renewal. By contrast, whole life insurance rates remain level for life, and the policies build tax-efficient cash value – which isn’t available in a term policy. To get a more accurate idea of what your whole life costs would be, you should consider consulting a financial professional.
How much life insurance coverage you need mostly depends on where you live and how many people depend on your income. In general, the younger you are, the more coverage you may want to consider to compensate for the years of potential wage-earning ahead of you. And the more people depend on you, the more coverage you may want to meet their needs.
Your financial professional will review your personal situation and potential coverage options with you and then help you apply for a policy if you choose. As part of the underwriting process, you'll submit details about your medical history, finances, primary care physician, and beneficiaries. You can typically expect to have a medical exam as part of the approval process.
Riders are optional provisions you may be able to add to your policy before it is issued, and they provide added protection at an additional cost.11 Policies vary, but common riders may include the following, and more:
Disability waiver of premium rider: Pays your premiums during a period of disability that would prevent you from making regular payments, including critical illness, physical impairment, or serious injury.12
Chronic care rider: Allows access to a portion of the death benefit to help you cover the costs of long-term care associated with chronic illness.
Accidental death benefit rider: Adds an additional death benefit for loved ones if the insured dies due to an accident. This rider typically terminates at age 70.
Living benefit rider: Lets you use a portion of the death benefit to pay for treatment or care that you may need when terminally ill. This rider may only incur a charge if it's used by the policyholder.
Some insurance providers offer unique payment options or types of whole life insurance policies. These options may include the following:
Single premium- Make a single, flat-fee premium payment upfront and receive lifelong coverage.
Limited pay- Make premium payments for a set period of time, often 10 or 20 years, or to a set age. These premiums may be slightly higher than standard pay options.
Pay up to 65- Make premium payments until the age of 65. These premiums may be slightly higher than standard pay options.
How much life insurance coverage you need mostly depends on where you live and how many people depend on your income. In general, the younger you are, the more coverage you may want to consider to compensate for the years of potential wage-earning ahead of you. And the more people depend on you, the more coverage you may want to meet their needs.
Your financial professional will review your personal situation and potential coverage options with you and then help you apply for a policy if you choose. As part of the underwriting process, you'll submit details about your medical history, finances, primary care physician, and beneficiaries. You can typically expect to have a medical exam as part of the approval process.
Riders are optional provisions you may be able to add to your policy before it is issued, and they provide added protection at an additional cost.11 Policies vary, but common riders may include the following, and more:
Disability waiver of premium rider: Pays your premiums during a period of disability that would prevent you from making regular payments, including critical illness, physical impairment, or serious injury.12
Chronic care rider: Allows access to a portion of the death benefit to help you cover the costs of long-term care associated with chronic illness.
Accidental death benefit rider: Adds an additional death benefit for loved ones if the insured dies due to an accident. This rider typically terminates at age 70.
Living benefit rider: Lets you use a portion of the death benefit to pay for treatment or care that you may need when terminally ill. This rider may only incur a charge if it's used by the policyholder.
Some insurance providers offer unique payment options or types of whole life insurance policies. These options may include the following:
Single premium- Make a single, flat-fee premium payment upfront and receive lifelong coverage.
Limited pay- Make premium payments for a set period of time, often 10 or 20 years, or to a set age. These premiums may be slightly higher than standard pay options.
Pay up to 65- Make premium payments until the age of 65. These premiums may be slightly higher than standard pay options.
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This article is for informational purposes only. Guardian may not offer all products discussed. Please consult with a financial professional to understand what life insurance products are available for sale. Links to external sites are provided for your convenience in locating related information and services. Guardian, its subsidiaries, agents and employees expressly disclaim any responsibility for and do not maintain, control, recommend, or endorse third-party sites, organizations, products, or services and make no representation as to the completeness, suitability, or quality thereof.
1 All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.
2 Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.
3 Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.
4 Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.
5 Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.
6 Permanent life insurance consists of two types: whole life and universal life. Cash value grows in a participating whole life policy through dividends, which are declared annually by the company's board of directors and are not guaranteed. Cash value grows in a universal life policy through credited interest and decreased insurance costs. The cash value of both policy types benefits when the policyholder pays an amount above the required premium.
7 Universal Life Insurance may lapse prematurely due to inadequate funding (low or no premium), increase in cost of insurance rates as the insured grows older, and a low interest crediting rate. This does not apply to universal life policies which have a secondary guarantee, but if the secondary guarantee requirements are not met the policy will most likely lapse.
8 As long as your policy is not a Modified Endowment Contract.
9 Financial information concerning Guardian as of December 31, 2023, on a statutory basis: Admitted assets = $80.3 billion; liabilities = $71.2 billion (including $58.0 billion of reserves); and surplus = $9.1 billion.
10 Dividends are not guaranteed. They are declared annually by Guardian’s Board of Directors.
11 Riders may incur an additional cost or premium. Riders may not be available in all states.
12 The Disability Income and Waiver of Policy Premium Benefit Rider (form ICC21 DIR, DIR (12-2021), or state equivalent) is underwritten and issued by The Guardian Life Insurance Company of America (Guardian®), New York, NY. There will be an additional cost or premium associated with this Rider. Provisions, features, and availability may vary by state. Exclusions and limitations may apply
This article is for informational purposes only. Guardian may not offer all products discussed. Please consult with a financial professional to understand what life insurance products are available for sale. Links to external sites are provided for your convenience in locating related information and services. Guardian, its subsidiaries, agents and employees expressly disclaim any responsibility for and do not maintain, control, recommend, or endorse third-party sites, organizations, products, or services and make no representation as to the completeness, suitability, or quality thereof.
1 All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.
2 Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.
3 Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.
4 Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.
5 Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.
6 Permanent life insurance consists of two types: whole life and universal life. Cash value grows in a participating whole life policy through dividends, which are declared annually by the company's board of directors and are not guaranteed. Cash value grows in a universal life policy through credited interest and decreased insurance costs. The cash value of both policy types benefits when the policyholder pays an amount above the required premium.
7 Universal Life Insurance may lapse prematurely due to inadequate funding (low or no premium), increase in cost of insurance rates as the insured grows older, and a low interest crediting rate. This does not apply to universal life policies which have a secondary guarantee, but if the secondary guarantee requirements are not met the policy will most likely lapse.
8 As long as your policy is not a Modified Endowment Contract.
9 Financial information concerning Guardian as of December 31, 2023, on a statutory basis: Admitted assets = $80.3 billion; liabilities = $71.2 billion (including $58.0 billion of reserves); and surplus = $9.1 billion.
10 Dividends are not guaranteed. They are declared annually by Guardian’s Board of Directors.
11 Riders may incur an additional cost or premium. Riders may not be available in all states.
12 The Disability Income and Waiver of Policy Premium Benefit Rider (form ICC21 DIR, DIR (12-2021), or state equivalent) is underwritten and issued by The Guardian Life Insurance Company of America (Guardian®), New York, NY. There will be an additional cost or premium associated with this Rider. Provisions, features, and availability may vary by state. Exclusions and limitations may apply