Policy Types

Why Are Whole Life Insurance Rates More Expensive

Whole life insurance rates are typically more than term policy rates because of added financial benefits and the fact that it is a permanent policy meant to remain in force until you die.

Why Are Whole Life Insurance Rates More Expensive?

Whole life insurance is designed to last you your whole life. This coupled with the added component of having the potential to accumulate cash value over time, is generally what makes whole life more expensive than other types of life insurance. And if you’re willing to pay more, you might find these features worth the extra dollars.

How whole life insurance works

When you pay your whole life premiums, part of your money goes toward insurance costs, while the other portion goes into a cash value component of your policy that begins growing at an established interest rate. Every year, the insurance company allocates part of your premium into your cash value portion. This feature of whole life insurance is what typically accounts for the price difference compared to a term policy, and why you’ll pay more for this type of cash value component.

Another factor in why whole life policies can be pricier, is the simple fact that they offer coverage that is meant to be with you for the rest of your life. For this reason, insurers figure that there is a greater likelihood of paying out a death claim at some point on a whole life policy, compared to a term life policy.

There are many factors that go into setting life insurance premium rates and every insurance company has their own set of life insurance products, underwriting guidelines, and policy fees. Before you make a decision on whether or not whole life is right for you, make sure that the cash value and permanence of the policy justify the higher premiums you may be paying. Consult with an insurance professional or company representative who can explain the benefits and features of various life insurance products so that you can select the policy that best meets your individual needs.

For more information on whole life and other permanent life insurance policies, visit the Protective Learning Center.

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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax‐related decisions. For information about Protective Life and its products and services, visit www.protective.com.

Whole Life Insurance Rates

Whole life insurance rates are typically higher than term policy rates. But because this type of life insurance provides features and benefits not offered with a term policy, whole life insurance rates can be higher. It is important to understand both types of insurance since it isn't always a direct comparison. For more information, visit our learning center.