Is Whole Life Insurance a Good Investment?

What is whole life insurance?

Whole life insurance is a permanent policy that offers lifelong coverage if you continue to make your fixed premium payments. No matter when you pass away, your beneficiaries will collect a guaranteed payout or death benefit. Whole life policies also have a cash value component, which will accrue interest over time, increasing the value of the policy. You may borrow against this value or receive cash benefits from the policy while you’re still alive through living benefits.

Whole life insurance vs. term life insurance

Term life and whole life insurance are two popular policy options that are available through Aflac. Here are some key differences between the two types of policies:

• Term life insurance pays your beneficiaries a death benefit if you pass away while the policy is in effect. Policies typically last between 10 and 30 years. These policies do not have a cash value component and are therefore usually have more cost-effective premiums than whole life policies.
• Whole life insurance will cover you throughout your lifetime, rather than a set period of time. It pays out a guaranteed death benefit amount and comes with a cash value component you can tap into while you’re still alive, under certain circumstances. Due to its lifelong coverage and cash value account, a whole life policy comes with higher premiums.¹

Is whole life insurance worth it?

Whole life insurance can be worth the cost if you want coverage for the rest of your life. It can be a good investment for your family’s future and provide financial flexibility through living benefits you can access while you’re still alive.

However, it isn’t the right option for everybody. Here are some key considerations when deciding if it’s right for your family:

• Dependents: If you believe your dependents will only require your assistance for another few years before becoming financially independent themselves, term life insurance might make more sense. But if you have a dependent with a disability who will need lifelong coverage, for example, whole life insurance may be a better fit.²
• Financial goals: If your primary goal is to help protect your partner and children financially with a death benefit in the event you suddenly pass away, term life insurance may be your best bet. However, if you’d like to diversify your investments or leave a larger financial legacy, whole life insurance with cash value could be a better option.
• Debts: If you have several large debts to repay, whole life insurance may be a better option than term life. Take an inventory of your debts, which may include a mortgage, car loans, and student loans, and consider if a whole life policy’s cash value will make it easier for your beneficiaries to pay off those debts after you pass.
• Budget: If you’re okay with higher premiums in exchange for lifelong coverage and a cash value component, whole life insurance may be a viable option. If low premiums are your priority, you should consider a term life policy instead.