Thinking about life insurance? For many people, term life insurance is the best choice because it’s affordable, simple, and flexible. It also ends eventually – which means sometimes you need more long-lasting protection than a term policy can provide.

In those cases, whole life insurance can offer the coverage you and your family need. Whole life protects you for your entire life as long as you pay your premiums, so you don’t have to worry about coverage length or renewal. Unlike term life, it also builds cash value you can use while you’re still living.

Here’s a closer look at some of the biggest whole life insurance pros and cons as you compare policies.

What is whole life insurance?

Whole life insurance is the most common type of permanent life insurance, which includes any policy that lasts for your entire life. Known for its dependability, whole life comes with premiums and a death benefit that stay the same for the entire policy. Your cash value account also grows at a steady interest rate, providing a guaranteed source of funds you can tap into during your lifetime.

Whole life insurance is designed for those with lifelong needs. For example, maybe you want to leave something behind for your child or grandchild, or you want to make sure your funeral and other end-of-life expenses don’t fall on your children or partner. A whole life policy gives you a guaranteed way to provide for those needs. You can also split the benefit among multiple people or organizations to carry out a variety of final wishes.

Pros of whole life insurance

Whole life insurance is more expensive than term life, but it can be a smart move if you need lifelong coverage and can afford the premiums. The main advantages of whole life insurance include:

No policy expiration

As long as you continue to pay your premiums, your policy will not expire. This means you won’t ever have to reapply for coverage, even if you develop a health condition that would make it tough to qualify for a new policy.

Consistent premiums

Unlike some other types of permanent life insurance, whole life insurance comes with a fixed premium that won’t ever change. This makes it simpler to budget for – an important consideration, since you’ll be paying that premium for the rest of your life.

Guaranteed payout

Just like your premiums, your death benefit won’t change during the life of the policy. That certainty can give you confidence that your loved ones will have the funds to spend on bills, pay for your funeral, cover the mortgage, or invest in anything else they need.

Cash value

The cash value in your whole life policy typically takes a few years to build up. After that point, you can borrow funds from your cash value while you’re living and spend the money on whatever you choose. Remember that borrowing from your cash value will reduce your future death benefit if you don’t repay the money.

Cons of whole life insurance

Whole life insurance offers permanent coverage and access to cash during your lifetime, but it can be more complicated and costly than people need . Here are a few disadvantages of whole life insurance to consider.

Expensive

Dollar for dollar, whole life is typically  more expensive than a similarly sized term life insurance policy. If you need a high amount of coverage, it may be smarter to buy term life to keep your premium payments affordable. If you just need enough to pay funeral costs or leave a small legacy, final expense insurance is a smaller whole life policy that’s relatively affordable.

More complex than term

The cash value feature of a whole life policy can be tricky to understand, and you typically don’t have control over the investments that make up your cash value account. If you’re just looking for coverage that provides a death benefit when you pass away, term life is a more straightforward choice.

Additional fees

If you’re unable to pay your premiums and keep your policy active, you may face fees that can reduce your policy’s cash value or cause it to lapse. While you can borrow from your policy’s cash value to pay your premiums, it may take several years to build up enough funds to do that.

Required medical exam

Most life insurance policies require a medical exam, which can delay the process and leave you without coverage while you wait. However, some insurance companies offer options to delay or even waive a medical exam in certain circumstances. Fidelity Life offers no exam final expense policies with coverage up to $40,000. You can also buy up to $150,000 in RAPIDecision^® Senior Whole Life coverage without an exam, in most cases.

Alternatives to whole life insurance

Whole life insurance isn’t right for everyone. So which policy should you pick? Here are some alternatives to cover you and your loved ones.

Term life

Term life insurance is a fast, flexible, and cost-effective way to get covered. These policies last for a set period of time, typically 10 to 30 years, which makes them ideal if you just need protection during the years you’re raising a family or paying off a mortgage. If you die during the term, your insurance company will pay a lump sum of cash, known as a death benefit, to your beneficiary. Once you reach the end of the term, you can either renew your policy, buy a different one, or let your coverage expire.

Universal life

Universal life insurance is another type of permanent life insurance, but it works much differently than whole life. This type of coverage allows you to change your premium or death benefit if needed, and your cash value grows based on current interest rates. That flexibility can be helpful if your finances change over time, but universal life also comes with more risks than whole life. Since the rate of growth for your cash value account varies, you can earn more than whole life if the market performs well, but the reverse is also true if interest rates fall.

Still have questions about whole life insurance?

The right life insurance policy is one that provides financial protection and peace of mind for you and your loved ones. Talk to one of our agents to explore your options, or get started with a quote.

At Fidelity Life, our goal is to make life insurance simple, affordable, and understandable for everyday families. This content is intended for educational purposes only. Each post is carefully fact-checked, reviewed, and updated regularly to ensure the information is as relevant as possible.