How Does Whole Life Insurance Work?

Whole Life insurance is a policy that will accumulate cash value over time. The policyholder pays a fixed premium that is divided between the death benefit, cash value, and a profit for the insurer. As long as the premiums are current, this policy will remain in effect.

Death Benefits

Upon your death, your named beneficiaries receive a tax-free, lump-sum payment. The average coverage amount is anywhere from $10,000-$250,000 but can be greater. The amount of the payout is the same through the years, except if the policyholder has taken loans on the policy that are still outstanding.

Cash Value

A portion of each premium payment goes toward a cash value, like a savings account, that earns interest. The insured may access this amount during their lifetime.


There are options that the policyholder or insured may incorporate. Discuss the details with your insurance agent.


The insurer will set the standards for eligibility and premium amount based on age, gender, employment, medical history, and lifestyle. Generally, a medical exam is a requirement.

Accessing the Cash Value

Many people select this type of life insurance because it will build tax-deferred earnings. The most common reasons are to supplement retirement, college costs, or emergencies. The cash value grows slowly but is low risk because the rates are guaranteed no matter what the stock market does. At the onset, the cash value accumulates quickly. As you age and your risk becomes greater, the portion of the premium allocated to cash value diminishes. You can access this money through a tax-free loan, withdrawals, or cancelling the policy.

If you would like more information about whole life insurance and the details of how it operates, contact us. One of our specialists will be happy to answer all your questions or take the pertinent information about how to arrange for one of these policies.

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