Introduction to Whole Life Insurance – (The Simple Guide)

Written by Terumi Davis

Introductio to whole life insurance

​Are you curious as to what a whole life insurance policy is? Are you unsure whether a whole life insurance policy is right for you and your family?

Good news!

This introduction to whole life insurance will help you to understand and evaluate if this type of insurance will be a good match for you and your beneficiaries.

Introduction to Whole Life Insurance

​Life insurance falls into two main categories:

  • Permanent
  • Term

Permanent insurance means that you are covered for your entire lifetime as long as your are current on your insurance premiums. Whole life insurance is a permanent policy.

Term life insurance is a considered a temporary policy, since it will offer you coverage for a set period of time.


Deciding on the type of life insurance for your needs is a tough decision.  Let me help you choose the best choice for your needs.

What is it?

Whole life insurance is a permanent policy, and it will provide you protection for your entire life.

Whole life policies have the following features:

  • guaranteed death benefit
  • guaranteed cash value
  • fixed premiums
  • may have policy dividends

Upon the passing of the insured, the beneficiaries will receive the proceeds of the death benefit tax-free.

​You will never pay more for your premium even if your health deteriorates as you get older.

Upon the passing of the insured, the beneficiaries will receive the proceeds of the death benefit tax-free.

​Types of whole life policies available

Non-participating Whole Life Insurance​ - The premium and face amount of the policy stays fixed and will never change. What makes it non-participating is that thee will be dividends that will be paid out.

Participating Whole Life Insurance - These policies will pay dividends. However, please know that dividends are not guaranteed. Dividends can be used to pay down your premium payments, increase your cash values or increase death benefits.

Level Premium Whole Life Insurance - You will pay a fixed premium for your entire life.

Limited Payment Whole Life Insurance - You pay premiums only for a limited amount of time, for example, 10 years. The premium payments will be higher due to the fact the premiums will be paid over a shorter period.

Single Premium Whole Life Insurance - The insurance policy is fully paid up with just one payment. Therefore, no more additional premiums will be required. Since the policy is fully paid up, you will have immediate cash value.

Modified Whole Life Insurance - The early years of the policy will have cheaper premium payments. Then in later years, your premium payments will be higher until all of the premiums are caught up. The cash value will grow slow due to the decreased premium in the early years of the policy.

Graded Benefit Whole Life Insurance - The death benefit is not fixed and will increase over time.

​Cash value

​Part of your premium payment will go towards insuring your life, and the other part goes to the cash value. The cash value acts as a savings vehicle with a guaranteed interest rate, and it will accumulate over time.

​You can use borrow against the cash value and take out a loan. Please be aware that when you make a withdrawal or take out a loan, it can reduce the death benefit on your policy, increase the chance of a policy lapse and decrease the policy's cash value

​Due to the high front-ends costs, your cash value will grow slowly for the first few years of your policy. As the years progress, the cash value will then grow regularly and will have a minimum guaranteed rate of return.


For policies that pays dividends, they are not guaranteed. The insurance company's board of directors will decide whether or not dividends are to be paid to the policyholders.

Typically, dividends will be paid out to policyholder's when the insurance company's investments perform well and when payouts on death benefits have decreased.

How much will it cost?

A permanent policy is pricey! Compared to a term life policy, you will be paying about 5-10 times more for a whole life policy.

For the first few years of a policy, most of the premium payment will go towards the costs of insurance and paying the insurance agent's commission.

Whole life insurance Rates

Julia is a 45 year old female, non-smoker and in excellent health. Below are her rates for coverage up to age 121.


Yearly Premium







Don't let your policy lapse

​Want to know a secret in the insurance industry?

About 4 percent of whole life insurance policies lapse on a yearly basis. What that means is that the policy is no longer in force and the life insurance company will not pay out a death benefit if you were to pass away.​

How does this lapse happen?

When you do not pay your insurance premium, your policy is considered lapsed and it will become null and void.

You will have a grace period after a payment is missed before the policy is considered lapsed. The grace period varies between states, but 30 days is typical for most states.​ After the grace period has expired and a payment has not been made, is it then referred to as a lapsed policy.

However, a whole life policy has the cash value component and you can use those funds (if the cash surrender value is sufficient) to cover the cost of the premium if you have stopped making the payments.

Once the cash surrender value has been depleted and you still have not made any premium payments, then it will be considered a lapsed policy.

How to avoid a policy lapse?

Set up automatic monthly billing through your bank account.

​Bottom Line

​Check this out!

If you are looking for a policy that offers:

  • coverage for your entire life span
  • steady guaranteed cash growth that is tax-deferred
  • the ability to make withdrawals and take out loans against the policy
  • possible dividends for policy holders

If you can comfortably afford the higher premiums, a whole life insurance policy is the way to go for you and your family. However, if the premiums are beyond your budget, term life insurance is a much better choice for you.

Before you choose which policy you would like, you should always seek the guidance of a life insurance agent first. An agent like myself will guide you in the direction that will best suit your unique life insurance needs.

If this Introduction to Whole Life Insurance blog post has not answered all your questions, I will be happy to further discuss it with you.

You can contact me by calling me today at 800-876-9016 or email me at and together we will get started on protecting your family's financial future.

About TDL Insurance Group
About TDL Insurance Group

We work with individuals across the nation to secure the best life insurance rates.

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