Broker Check

Is Whole Life Insurance Right For You?

Is Whole Life Insurance Right for You?

We get it—Whole Life insurance is complicated. That’s why a lot of people avoid adding it to their plan or even learning about it. But by ignoring this product, you could be missing out on an opportunity to reach your goals sooner and more effectively.

To help you avoid that mistake and make the most of your financial plan, we’ve provided a run-down on Whole Life Insurance to help you determine if it’s right for you. (Hint: We think you’ll want to make the switch.)

What is Whole Life Insurance?

We like to compare life insurance to renting or buying a home. Similar to renting, a Term Life Insurance policy requires you to pay a premium each month so you can reap the benefits of that policy if and when you need it. Like a leasing agreement, Term Policies last only for a specified number of years. When the policy expires, you don’t get money back or reap any benefits from investing in the policy; you simply have peace of mind that you’re protected while you “rent” the short-term agreement.

Whole Life Insurance, on the other hand, is more like buying a home. So long as you continue to pay premiums, the policy is yours and will protect you and your family for as long as you need it1. Whole Life Insurance also accumulates cash value as you pay into your policy, much like earning equity on a home2. Every dollar you invest in a Whole Life policy becomes an asset, earning interest and gaining value that you can leverage later.

The Swiss Army Knife of Insurance

While its primary purpose is to provide aid to your beneficiaries in the event of your death, a Whole Life Insurance policy can do a lot for you and your family while you’re alive. Because you own the policy rather than “rent” it, you have more flexibility with how you use it3. Whole Life provides actual cash value to your portfolio, and you can use the assets for other major expenses like the following:

  • Buying a home
  • Funding your retirement
  • Paying for your child’s education
  • Starting a business
  • Donating to charity

Whole Life policies can do many great things, but they’re not a one-size-fits-all tool. Because of their flexibility, it often takes several conversations for us to craft a policy that’s just right for you.

Why Should I Consider Adding Whole Life to My Portfolio?

Whole Life is more flexible and enduring than term insurance, but it provides other benefits to your financial portfolio as well:

See Consistent Returns: Whole Life Insurance acts almost like a bond in your investment portfolio. It offers a guaranteed return, plus it earns dividends, so it can help you diversify your assets and reduce the overall risk in your portfolio.4

Get What You Pay For: Instead of paying term insurance premiums for a policy you might never use (especially if you live a long, healthy life), you can reap the benefits of your investments with Whole Life Insurance. Whole Life policies gain cash value and earn interest over time, and you can use that money for other purposes later.

Tax Benefits: Whole Life provides built-in tax advantages both on the earned cash value and the death benefit.5

It Sounds Too Good to Be True - Is It?

If Whole Life provides better benefits than Term Life Insurance, why doesn’t everyone make the switch? To start, Whole Life does require a large cash contribution each year, so you’re committing a portion of your budget to building the policy. It’s also a long-term strategy, so you won’t see returns immediately—but that doesn’t mean it’s not working for you. Like most things in life, the great rewards are worth waiting for.

Am I Ready to Make the Switch?

Whole Life Insurance could be right for you if you meet the following requirements:

  • You have discretionary income to pay higher monthly premiums
  • You have an underlying need for life insurance
  • You currently have a Term Life Insurance policy and you’d like to earn more value for your contributions
  • You don’t like the idea of paying for something you might never use

Still Not Sure?

We know that every situation is unique, so if you have any questions about how Whole Life works or what it can do for you, we’d love to talk with you. You can also check out our Wholeistic Thinking page for more information about Whole Life Insurance.

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Important Disclosures

1All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.

2Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.

3Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.

4Dividends are not guaranteed. They are declared annually by Guardian’s Board of Directors.

5Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.

2021-128904 Exp. 10/23