What is Whole Life Insurance and How Does It Work?

Whole life insurance is a permanent life insurance policy that provides lifelong coverage and includes a cash value component that grows on a tax-deferred basis. Unlike term life insurance, it doesn’t expire as long as you continue paying your premiums. Read on to learn how whole life insurance works, what it costs and how it compares to other policies so you can choose the right coverage with confidence.

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Table of Contents

Key Takeaways

Whole life insurance provides lifelong coverage, a guaranteed death benefit and a cash value component.
While whole life insurance often costs more than term life insurance, it provides permanent protection and added financial flexibility.
Aflac offers whole life insurance for individuals and families with coverage designed to fit a range of needs and budgets.

What is whole life insurance?

Whole life insurance is a permanent life insurance policy that pays a death benefit to your beneficiaries when you pass away. It also includes a cash value component that grows on a tax-deferred basis over time.

How does whole life insurance work?

When you purchase a whole life insurance policy, you pay a fixed premium on a regular schedule. A portion of each payment funds your death benefit, while another portion builds your cash value over time. As long as you keep up with your premiums, your coverage remains in place for life, providing your beneficiaries with a guaranteed payout.

Whole life insurance features

Now that you understand how whole life insurance works, here’s a closer look at its key features:

Lifelong coverage: Your coverage stays active for life as long as you pay your premiums.
Death benefit: Your beneficiaries receive a guaranteed financial payout when you pass away.
Level premiums: Your premiums typically remain the same over time.
Cash value: Part of each premium helps build your cash value, which grows over time on a tax-deferred basis.
Optional riders: Some policies offer riders, such as an inflation rider that increases your death benefit based on annual inflation.

How to use the cash value of a whole life insurance policy

As your cash value grows, you may be able to access it through loans, withdrawals or by surrendering the policy. Keep in mind that loans and withdrawals can reduce your death benefit, and surrendering your policy ends your coverage.

Whole life insurance example

Let’s look at a simple example to see how whole life insurance works in real life.

A married father of three children purchases a whole life insurance policy to help protect his family financially. Years later, he passes away unexpectedly, and his policy provides a $500,000 death benefit.

His loved ones use the payout to:

Cover his funeral and final expenses
Manage everyday household costs
Help pay for childcare and future education expenses

This financial support can help his family maintain financial stability as they adjust to life without him.

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How much does whole life insurance cost

Whole life insurance generally costs more than term life insurance because it offers lifelong coverage and builds cash value.

Your premium depends on various factors, such as your:

Age
Health
Coverage amount
Gender
Tobacco use
Riders

Here are average monthly costs for a $500,000 policy by age and gender:¹

Age	Male	Female
30	$282	$247
40	$382	$352
50	$571	$498
60	$887	$782

Should I get a whole life insurance policy?

Whole life insurance may be a good fit if you:

Want lifelong coverage
Can afford higher premiums
Have long-term financial or estate planning goals
Have dependents who may need ongoing support after your passing

Whole life insurance vs. term life insurance

Term life insurance is another popular life insurance option. Here are some notable differences between whole and term life insurance:

Coverage length: Term life insurance lasts 10 to 30 years, while whole life insurance lasts for life.
Cost: Whole life insurance is typically more expensive than term life insurance.
Cash value: Whole life insurance builds cash value, while term life insurance does not.
Premiums: Whole life premiums are usually fixed, while term life insurance premiums may increase over time.

Get Aflac whole life insurance

Now that you know how whole life insurance works, you can decide whether this type of policy fits your needs.

Aflac can help you explore your whole life insurance options to find the right policy. Speak with an agent today to learn more and get a quote.

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