What is Whole Life (permanent) Insurance?

Whole life insurance provides a life-long coverage for a fixed amount of premium based on the insured's age, (also known as permanent life insurance). Unlike term life insurance, the premium will increase if the buyer has the specified term matured and wishes to renew the policy.

For whole life insurance, as long as you pay the premiums, you will benefit from the guaranteed death benefit. This policy also provides the buyer with cash value; this cash value will be paid to the beneficiary upon the death of the policyholder in addition to the death benefit. The accrued cash value can be borrowed in time of need. This cash value benefit is the most attractive part of the policy. But if the cash value has used up, the buyer needs to start paying the premiums again or else the policy will lapse.

Another benefit for whole life insurance is that the coverage is adjustable and the amount can be increased. If the initial coverage is $100 thousand, the coverage after some years could be more than $100 thousand. That is to say the insured now has whole life insurance coverage of more than the initial $100 thousand without paying more on the previously stated premiums.

Some people also use a whole life insurance policy like a forced savings account. It gives the buyer coverage but also accrued cash value. The premium will be higher than other life policies, but the return is definitely higher.