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Whole Life Pros and Cons

Whole Life Insurance: The Main Benefits

Whole life insurance is designed to help people provide for their family's future in two ways: by way of a guaranteed death benefit and with a savings plan. As an added bonus with Whole Life Insurance, you may also borrow against the policy, because it builds a cash value over time.
(More on the Advantages of Whole Life Insurance Below)

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Basic Disadvantages of Whole Life Insurance

The main disadvantages of whole life insurance when compared to other forms of life insurance are that the premiums are inflexible, the interest rates tend to be lower, and the cash value of the policy typically reverts to the insurance company upon death of the insured.
(More on Whole Life Insurance Disadvantages Below)

The Advantages of Whole Life Insurance

Whole Life Insurance Advantages:
Guaranteed

Death Benefits

Unlike some other forms of life insurance, whole life insurance has a guaranteed death benefit. This means that, so long as the premiums are kept current, you can be assured of having some money available for your family in the event of your passing. The death benefit can even be increased by a rider on your whole life insurance policy that directs the dividends earned to raise the life insurance policy limits.

Whole Life Insurance Advantages:
Investments and Savings
A portion of your whole life insurance premiums are directed into a savings/investment plan of some sort. This plan allows for the slow but stable growth of an additional fund which would be passed on to your family. This is a good option for people who don't like to manage their own investments, and still want predictable, guaranteed returns on investments.

Whole Life Insurance Advantages:
Interest Free Loans
Since your whole life insurance policy builds in cash value, you can actually borrow tax and interest free loans against the value of your policy. This is limited by the overall cash value, and can never exceed the death benefit of the policy. This can become an excellent safety net for you, should your family encounter financial difficulties.

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The Disdvantages of Whole Life Insurance

Whole Life Insurance Disadvantages:
Inflexible Premiums
With strictly scheduled premiums, whole life insurance policies can be cancelled if you are unable to make a scheduled payment. This makes the whole life insurance policy not especially advisable for people who have fluctuating income or those who do not have an emergency savings account as a contingency.

Whole Life Insurance Disadvantages:
Lower Interest Rates and Earnings
Although whole life insurance earnings are very stable, these earnings can be much lower than other types of investments. Unaffected by market fluctuations and other things that affect savings and investment vehicles, the lower interest rate is still offset by the guaranteed returns.

Whole Life Insurance Disadvantages:
Cash Value Reverts to Insurance Company
With whole life insurance, any cash earned from the investments remains the property of the insurance company upon your demise. Although this disadvantage is offset by the fact that your family will receive the face value of your policy, some people are put off by this fact.

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