Broker Check

Whole Life

There are those who believe life insurance has very little to do with, well, life. Chances are they’re not too well acquainted with Whole Life Insurance. Known as one of the most versatile financial instruments ever devised, Whole Life does far more than simply offer protection for your loved ones when you die.


Thanks to three guaranteed components* - premium, cash value and death benefit.

Of course, Whole Life will help replace your income to protect your family or your business in the event of your death. But thanks to the cash value within the policy, it can also help accumulate wealth, give you access to cash to cover unexpected expenses, augment your retirement income, facilitate estate planning, and more. All at a predictable cost on account of the guaranteed policy premium.

Unlike Term Life Insurance - which, as its name suggests, is in effect for a limited period or “term” - Whole Life is permanent insurance. That means it will provide benefits for the duration of your life.

Whole Life vs. Term Life Insurance

Type of insurance

Term Life

Whole Life

Never expires

No

Yes

Access to cash value

No

Yes

Potential dividends**

No

Yes

Growth potential

No

Yes

Guaranteed death benefit

For term limit

Yes

Income tax-free death benefit

Yes

Yes

Protection

Whole Life protects your family or your business by offering a permanent death benefit that can fulfill a broad range of financial needs.

For your family:

  • Payment of loans/mortgages
  • Funding of buy/sell agreements
  • Key person insurance
  • Funding of supplemental retirement programs

For your business:

  • Payment of loans/mortgages
  • Funding of buy/sell agreements
  • Key person insurance
  • Funding of supplemental retirement programs

Wealth Accumulation

One of the greatest advantages of Whole Life is its ability to increase in value over time. The cash value of a Whole Life policy can grow thanks to the guaranteed cash value and the potential to accumulate dividends. But unlike other types of investments and savings vehicles, the cash value and dividends of a Whole Life policy generally grow tax-deferred for as long as the funds remain in the policy.

Access to Cash Value

At any time, for any reason, you can access the cash value you’ve accumulated — generally with no penalty or tax liabilities. You can use the cash value in a Whole Life policy to:

  • Pay for education expenses
  • Expand your business
  • Provide emergency funds
  • Collateralize a bank loan
  • Pay the premiums of the policy itself

It is important to note that accessing the policy cash value through loans and surrenders may cause a permanent reduction of policy cash values and death benefit and, depending on the policy, negate any guarantees against lapse. The amount that can be borrowed or surrendered will be affected by the surrender charges applicable to the policy. Loans may be subject to interest charges. Although loans are generally not taxable, there may be tax consequences if the policy lapses or is surrendered with a loan. It is possible that the amount of taxable income generated at the lapse or surrender of a policy with a loan may exceed the actual amount of cash received. Surrenders are generally taxable to the extent they exceed basis in the policy. 

Tax Benefits***

Whole Life Insurance offers a host of unique tax advantages. These can help minimize the impact of taxes on both the death benefit and cash value of your policy.

  • Tax-free death benefit ensures your loved ones or business receive the full value of your policy
  • Tax-deferred growth means you’ll pay no income tax for as long as the funds remain in the policy
  • Dividend withdrawals are generally tax-free up to the amount cumulatively paid in premiums
  • Loans taken against the cash value of the policy will usually not trigger a taxable event, regardless of how much profit the policy has shown

* Guarantees are based on the claims paying ability of the issuing company.
** The payment of dividends is not guaranteed. Companies may reduce or eliminate the payment of dividends at any given time. 
*** Neither Kaplan Financial nor LPL Financial provide tax advice.

Before you purchase, be sure to ask your financial advisor about the life insurance policy’s features, benefits, risks and fees, and whether the life insurance is appropriate for you, based upon your financial situation and objectives.