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What can it offer?
In addition to lifetime protection, whole life insurance offers a unique combination of benefits to help meet your needs, including:
Consistent premium payments
Whole life insurance is typically more expensive than term life policies, but the premium amount is fixed for the life of the policy.
Consistent cash value growth
Your whole life insurance policy receives guaranteed cash value growth.
Tax-free death benefit
The payout your beneficiary receives if you pass away is typically tax-free and has a steady value throughout the life of the policy.
Policy customization
You can customize a whole life insurance policy with a variety of optional features for an additional charge.
How does whole life insurance work?
Your premium payments remain the same over the life of the policy, and a portion of it goes toward the insurance, which includes any fees and death benefit coverage.
A small amount from each payment is also set aside to build up your predetermined, guaranteed cash value.
With this policy, you can borrow against the cash value if needed. When you pass away, an income-tax free death benefit is paid to your beneficiaries. Keep in mind that borrowing against the cash value will reduce the death benefit paid to your beneficiaries, though.
Could whole life insurance be right for you?
Check out how it compares to other types of life insurance (e.g., whole life vs. term life) to get a better idea of whether it meets your needs.
| Whole Life | Indexed Universal Life | Universal Life | Variable Universal Life | |
|---|---|---|---|---|
| Death benefit | Yes | Yes | Yes | Yes |
| Designed for low cost | No | No | No | No |
| Access to your money1 | Yes | Yes | Yes | Yes |
| Market participation | No | No | No | Yes |
| Tax advantages | Yes | Yes | Yes | Yes |
| Flexible payments2 | No | Yes | Yes | Yes |
Frequently asked questions
A life insurance death benefit is the tax-free payout to the beneficiary or beneficiaries, offering financial support when the insured person passes away.
Whole life insurance offers 3 important tax advantages that can be useful additions to a comprehensive financial strategy:
- A tax-free death benefit: The death benefit paid to beneficiaries is typically not subject to income tax.
- Tax-deferred cash value growth: Any cash value within a permanent life insurance policy can grow on a tax-deferred basis until a withdrawal is made.
- Tax-free policy loans: Policyholders can borrow against the cash value of their life insurance policy without facing immediate tax implications.
With whole life insurance, premiums are typically paid for the entire duration of the policyholder’s life or up to a specified age, depending on the terms of the policy.
Term life insurance covers you for a set length of time, or term, typically 10 to 30 years. If you pass away during that period, the insurance company pays a death benefit in the amount you choose.
Whole life insurance is intended to last a person’s lifetime. The premium is generally higher than term life insurance because it not only funds the tax-free death benefit, but a cash value account. In addition to the death benefit, the policy’s cash value grows over time and can be used for a number of purposes, including low-interest loans, while the policyholder is alive.
Tools and resources
How to buy whole life insurance
You need to work with an insurance professional to buy this type of product. If you don’t have one, our life insurance specialists are here to help.
Give us a call today at 1-866-207-9160 for a no-obligation consultation.
Hours of operation are 9 a.m. to 8:30 p.m. ET, Monday through Friday.
[1] This assumes that the contract qualifies as life insurance under section 7702 of the Internal Revenue Code (IRC) and is not a modified endowment contract (MEC) under section 7702A. Most distributions are taxed on a first-in/first-out basis as long as the contract meets non-MEC definitions under section 7702A. Loans and partial withdrawals from a MEC generally are taxable and, if taken prior to age 59½, may be subject to a 10% tax penalty.
[2] This assumes there is sufficient cash value to cover monthly policy charges. Keep in mind that variable universal life insurance has market volatility so it’s possible that you may need to pay an additional premium on your policy.
Guarantees and protections are subject to Nationwide’s claims-paying ability.