Skip to Content
Multigenerational family talking on couch representing that different stages require different insurance policy types.
Policy Types

3 basic elements that define a whole life insurance policy

Arm yourself with facts when looking for life insurance. Read this article to learn basic facts about whole life Insurance, a permanent policy that pays death benefits and earns you cash value.

Many of the questions you may have regarding whole life insurance can certainly be answered by a knowledgeable life insurance agent or broker. However, before you go shopping, it might be a good idea to educate yourself on the basics. Not only does this provide you with valuable information, but it can help prompt additional questions that you might have as you're deciding on what type of policy to buy. The following are three basic elements that define a whole life policy:

1. Whole life insurance is permanent insurance

Whole life insurance is a permanent* cash value policy that provides coverage for your whole life, rather than for a specified term. Typically, a whole life policy remains in force as long as required premiums are paid. It provides protection that can last your entire lifetime and your beneficiaries typically receive death benefit proceeds tax-free.

2. Whole life insurance earns cash value

Each time you pay your premium, a portion is used to provide you with life insurance coverage. The remainder, however, is set aside and allowed to accumulate. This component, called cash value or loan value, builds over time and can be taken out as a loan against the policy. Keep in mind that loans against the policy will accrue interest and decrease both death benefits and cash value by the amount of the outstanding loan and interest.

3. Whole life insurance offers

  • Level premiums — The premiums you pay remain the same for the life of your policy, regardless of your age or health.
  • Death benefits — Your beneficiaries receive the face amount of the policy upon your death. However, the death benefit will be reduced by any outstanding cash value loans and interest.
  • Cash value — Your cash value will grow each year, tax-deferred. You also have the option of borrowing against your policy's cash value.

A whole life policy might be right for your family if:

  • You're looking for life insurance that you can't outlive.
  • You need life insurance to be part of your long-term financial planning.
  • You want the opportunity for you policy to build cash value.

Deciding on the type of life insurance doesn't have to be overly complex. Now that you are armed with some basic information, you'll be in a better position to discuss with your agent and determine the best policy for you.

 

* As long as required premium payments are timely paid.

 

WEB.1271.01.15

Arrows linking indicating relationship

Related Articles

Young woman in glasses smiling, researching something on her computer.

Disability insurance questions

Learn more
Senior couple in bike helmets enjoying the outdoors

AD&D insurance vs life insurance policies

Learn more
Happy family celebrates with food and drinks outside their RV

Get smarter about your RV insurance

Learn more
All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective or its subsidiaries.

Learning Center articles may describe services and financial products not offered by Protective or its subsidiaries. Descriptions of financial products contained in Learning Center articles are not intended to represent those offered by Protective or its subsidiaries.

Neither Protective nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax-related decisions. For information about Protective and its products and services, visit www.protective.com.

Companies and organizations linked from Learning Center articles have no affiliation with Protective or its subsidiaries.