Whole life insurance
Permanent life cover with a savings account attached - guaranteed, expensive, and slow.
Permanent life cover with a savings account attached - guaranteed, expensive, and slow.
Whole life covers you for life as long as premiums are paid, and bundles a cash-value component that grows at a guaranteed rate declared by the insurer, minus cost of insurance and fees. The early years consume most of the premium in charges, so the cash value lags years of contributions; it becomes a real asset over decades, funded by people who want permanence and predictability rather than return.
Policy loans let you borrow against the cash value without surrendering the cover - but an outstanding loan plus interest can erode the death benefit if left unpaid, and surrendering early triggers surrender charges and tax on gains. The honest comparison is against buy term and invest the difference: whole life wins on guarantees, creditor protection in some states and estate utility; market-linked alternatives typically win on long-run growth for the same premium dollar.
Worked example
$300/month into whole life builds a cash value that trails the same $300 invested elsewhere for the first decade or more - but the death benefit is contractually guaranteed from day one and cannot be cancelled for market reasons, which is the guarantee you are paying for.
Related terms and tools
Term life insurance, Life insurance calculator, Life insurance guide
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