Glossary

Whole life insurance

Permanent life insurance with fixed premiums, a guaranteed death benefit and guaranteed cash value growth, sometimes boosted by dividends.

Also called: whole life, ordinary life, traditional whole life

Whole life insurance covers you for life, as long as premiums are paid, with three core guarantees: a level premium, a death benefit that won't decrease, and cash value that grows on a guaranteed schedule set in the contract. Policies from mutual insurers are usually participating, meaning they may also pay dividends, which aren't guaranteed.

Premiums are set well above the cost of insurance in the early years, and the excess funds the reserve that builds cash value. You can borrow against the cash value, use dividends to buy paid-up additions or reduce premiums, or surrender the policy for its cash value. Limited-pay versions compress premiums into 10 or 20 years or end them at age 65. Hypothetically, a 35-year-old paying $5,000 a year for a $400,000 policy might see little cash value after the first two or three years, because early premiums cover commissions and expenses, with values catching up over decades.

Whole life suits needs that last a lifetime and buyers who value guarantees and forced savings. Critics point to high premiums compared with term, low early cash values and the cost of lapsing early. Whether it's worth it depends on how long you keep it and what you need it for. See how whole life insurance works and is whole life insurance worth it?.

Last reviewed October 4, 2026

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Related terms

Cash value The savings component that builds inside whole life, universal life and other permanent policies, which the owner can borrow against or withdraw. Policy dividend A non-guaranteed annual payment a participating whole life policy may receive when the insurer's mortality, investment and expense results beat its assumptions. Participating policy A policy, usually whole life from a mutual insurer, that can share in the company's surplus through yearly dividends, which are not guaranteed. Paid-up policy A permanent life policy that needs no more premiums yet stays in force for life, because past premiums or its cash value have fully funded it. Guaranteed values The cash values, death benefits and premiums a permanent policy promises in writing, which the insurer can't reduce whatever its results. Permanent life insurance Life coverage designed to last for the insured's whole life as long as it is funded, usually with a cash value account that grows over time.

Related guides

AARP life insurance: how the New York Life program works AARP does not insure anyone. New York Life issues the term, permanent and guaranteed acceptance policies sold to members. What they offer and the catches. Burial insurance vs final expense vs preneed Burial and final expense insurance are the same small life policy; preneed is a prepaid funeral contract. How each works and what happens if plans change. Buy term and invest the difference: does it hold up The case for and against buying term life and investing the premium savings instead of whole life: the math, the behavior risk, taxes and who it fits. Converting term life to permanent: how the conversion option works A conversion swaps term coverage for whole or universal life with no new medical exam. How deadlines, pricing and partial conversions work, and when it pays. Mail-order and direct-response life insurance Direct-response life insurance is sold by mail, phone, TV and web ads without a local agent. How it works, what it costs, who it suits, and what to check first. Final expense insurance: what it covers and costs Final expense insurance is a small whole life policy meant to pay funeral and end-of-life bills. How it works, what it costs per $1,000, and who should skip it.

Related insurers

American Fidelity A family-owned Oklahoma City insurer selling life, supplemental health and annuities at work, mainly to school, public sector and auto dealer employees. Cincinnati Life Life insurer of Cincinnati Financial, selling term, whole life, universal life, worksite coverage and fixed annuities through independent agents. American-Amicable (iA American Life) iA Financial Group's Waco, Texas insurers (American-Amicable, iA American, Occidental, Pioneer), selling final expense, term and UL through agents. Security National Life Salt Lake City insurer selling preneed funeral and final expense policies; part of Nasdaq-listed Security National Financial, which also runs funeral homes. Senior Life Insurance Company Family-owned Thomasville, Georgia insurer that sells small final expense life policies, up to $30,000 for ages 0-85, through a large network of agents. Wellabe Des Moines mutual holding company (formerly American Enterprise Group) selling preneed funeral insurance and Medicare Supplement and other senior health plans.

Related tools

Buy term and invest the difference calculator Compare a whole life premium with a term premium plus an investment account, and see the return the account needs to match the policy's cash value. Which type of life insurance fits me? Answer six questions about your goal, timeline, budget, health and age to see which kinds of life insurance are built for your situation.