Key features of a whole life insurance policy

Lifetime protection

The full death benefit is payable - without income taxes - from the first day the policy is in effect, helping to protect your family's financial wellbeing. But unlike a term policy, that financial protection lasts a lifetime – it can't be canceled as long as premiums are paid. 


Cash value

Like all permanent policies (and unlike term life), there's a cash value that grows over time and earns interest. You can take out policy loans against it, use it to pay premiums, or even surrender your policy for money to supplement retirement income. 



With a mutual company (like Guardian), the policy may earn dividends based on company performance.5 While dividend payments are not guaranteed , these can increase a policy's value beyond the growth rate guarantee. 


The income tax-free death benefit is guaranteed never to decrease. The cash value is guaranteed to grow at a set annual rate. Your monthly or yearly premiums are guaranteed never to change.

Tax advantages

The policy value grows on a tax-deferred basis, so no taxes are owed on current earnings or interest. Also, the benefit is paid income-tax-free to beneficiaries.

Whole life insurance costs

Whole life policies offer life-long protection, predictable growth, and more guarantees than other types of coverage. As a result, whole life policies typically cost  more than term life insurance for a given death benefit level – but it's important to remember that term policies do not build cash value. Whole life coverage is also generally more expensive than a permanent universal life insurance policy, which gives policyholders the flexibility to raise or lower premiums within a specific range.6,7 While it's impossible to know your exact cost before applying for coverage and going through the underwriting process, a recent survey by the Top Whole Life insurance blog listed actual monthly premiums for recent applicants in excellent medical condition. Here are some examples: 


Male Non-Smoker

$50,000 policy


Female Non-Smoker

$50,000 policy


Male Non-Smoker

$100,000 policy


Female Non-Smoker

$100,000 policy


Age 20





Age 30





Age 40





Age 50





Premium cost per month. Source: Top Whole Life How much does whole life insurance cost? Rates & charts

Factors that affect your rates

A higher coverage amount will obviously cost more than a lower one. However, health and life expectancy determine your level of risk to the life insurance company, which also affects cost. Actuarial science – the discipline that applies mathematical methods to assess risk – shows that younger, healthier people are less likely to die in a given time frame, so they generally pay lower rates. Here are some of the factors that may be used to determine your specific policy rates: 


As you get older, life expectancy goes down, and premiums rise. So it makes sense to apply for whole life coverage as soon as possible to set your premiums at the lowest level.


Women pay less for coverage than men because they have a statistically proven tendency to live longer. 

Driving record

Poor driving habits can indicate excessive risk-taking behavior – especially if there are DUI convictions.


Certain professions (such as law enforcement) and work environments (e.g., an off-shore oil rig) are riskier than average. This can affect your rates.


Tobacco use lowers life expectancy, so smokers pay higher rates. High-risk activities such as scuba diving may also affect rates. 

Using cash value while you're still alive

In the first years of a policy, cash values tend to be low while the insurer covers expenses and begins to invest premiums. After a few years of tax-deferred growth, it can become a valuable financial asset. You can use it to:

  • Purchase additional coverage
  • Provide collateral for a low-interest, tax-favored policy loan 
  • Pay most or all of your premiums in later years, helping to keep the policy in effect 
  • Leverage the surrender value to help supplement your retirement income

Things to look for when buying a whole life policy

The guaranteed growth rate

Whole life policies provide cash value that is guaranteed to increase each and every year, as long as premiums are paid.


Whole life policies from a mutual insurance company (such as Guardian) can earn an annual dividend because these companies are owned by their policyholders. Dividends can increase your account value beyond the guaranteed growth rate. While not guaranteed, Guardian has paid them every year since 1868

Direct underwriting

Some companies sell policies from another insurer. This can sometimes add cost – and an additional layer when you want to access policy benefits. Consider a company that underwrites its own whole life policies, like Guardian.

Financial strength

One of the main emotional benefits of life insurance is confidence – the assurance the company will be there in times of need. Independent companies rate the claims-paying ability of each life insurance company and provide objective financial strength ratings. 8


Policy contracts can have riders –  optional provisions that add flexibility and additional value to a policy.9 For example, a Waiver of Premium rider helps keep the policy in effect if you become disabled and can't pay premiums.10 A Paid-Up Additions rider can help increase accumulated cash and death benefit values.11

Why people choose whole life insurance

All life insurance policies provide a death benefit, but no single type of coverage is best for every need. Term life may be more cost-effective for people who only need income replacement for a limited time, for example, while their children are still at home; universal life insurance can be a better permanent option for people with variable incomes. However, whole life can be the best option for people who want lifelong insurance protection, wealth-building cash value, and the most guarantees available in a life insurance policy. It is also particularly well suited for certain needs:

  • Funding a trust: Life insurance can be used to fund a trust that supports your child after you pass away. Term life typically doesn't work in these situations because once the term expires, there's nothing left. The predictability and guarantees of whole life provide unique advantages in this application.
  • Ensuring business continuity: When two or more partners own a business, and one dies, the surviving partners typically need to buy out the deceased partner's share. A whole life policy can be the most predictable way to fund these kinds of buy-sell agreements.
  • Paying estate taxes: The current federal estate tax exemption is $11.7 million, but the limit is significantly lower in many states. Permanent life insurance can be an effective way to pay an inheritance tax liability that might otherwise necessitate the sale of a property or business. 

 Two ways to pay for a whole life policy 

Features, provisions, and costs vary from one insurer to the next, and each whole life contract is unique to the policyholder. But, generally speaking, there are two basic types of payment structures for whole life:

  • Level premium whole life - This is the most popular type. Guardian's level premium policies go to ages 95, 99, and 121, making it easier to provide affordable lifetime insurance coverage with the knowledge that your premium payment will not change.
  • Limited payment whole life - This type of policy also has a fixed level premium, but the premium is only payable for a fixed period of time. The advantage is that they are guaranteed to be paid up at the end of the payment period, so no payment is required at later ages.

How to get a whole life policy

1. Talk to a professional

Term life is easy to shop for and get a quote online, but whole life insurance is an altogether more complex product. Look for a financial professional who has helped others get this kind of life insurance coverage. If you don't know an agent, ask friends or colleagues for a recommendation. Or, Guardian can connect you to a financial professional who can help. 

2. Explore options together

Your life situation, financial obligations, and goals are unique. Your financial professional can help you better weigh the pros and cons of all your life insurance options, explain how cash values accumulate, and decide how much coverage you need. Then they can make recommendations about tailoring coverage to your needs, help find the best life insurance company or companies to work with, and compare whole life insurance quotes.

3. Apply for coverage

After settling on a life insurance quote, you'll start the application. When you apply for a policy with a substantial death benefit, there's typically an underwriting process. The life insurance company will gather your personal information, ask health questions, and usually require a medical exam to determine how healthy you are. That information will be used to assign you to a rate class (such as Preferred Plus [healthiest], Preferred [healthy], or Standard [less healthy]) that determines your final life insurance cost. After that, coverage will go into effect the day you sign the policy contract.

4. Review your progress

You should meet with your financial professional from time to time to check on account growth, review your financial planning goals, and make desired adjustments to your policy, for example, to reinvest dividends in order to boost the death benefit.

Frequently asked questions about whole life insurance policies

What are the disadvantages of whole life insurance?

Whole life insurance is the simplest form of permanent life insurance, with guarantees for the death benefit amount, premium costs, and growth. However, like any financial product, it has certain advantages and disadvantages. Compared to universal life (another form of permanent coverage), it offers more guarantees but less payment flexibility. Compared to term life insurance policies, whole life insurance provides life-long coverage and cash value; but the premium payments for a given level of death benefit are substantially higher.

How does a whole life insurance policy work?

It provides permanent life-long coverage that cannot be canceled as long as your life insurance premiums are paid. These policies also build value in a tax-advantaged way, which can be used while you are alive for policy loans, to help fund retirement, and for other life events. Or, it can be used as part of an estate plan, for example, to pay for estate taxes and other final expenses.

What happens when a whole life insurance policy matures?

These policies have a maturity date, often defined by life insurance companies as the day the policyholder turns 100 or 121. Cash values are calculated to equal the benefit amount at that time.

Can I cash out my whole life insurance policy?

Yes. The policy builds guaranteed cash value, making it a wealth-building vehicle that can be used to supplement retirement income or other needs. Just ask the insurer to pay you the surrender value, which equals the policy value less any surrender charge. You may also be able to purchase an annuity using a 1035 exchange to avoid paying taxes on the surrender value.

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Policy Form Numbers:  L95/L99: WL-21;   L121: 18-L121
Rider Form Numbers:  PUA:  21-PUA;  Waiver of Premium:  18-WP WL

This article is for informational purposes only. Guardian may not offer all products discussed. Please consult with a financial professional to understand what life insurance products are available for sale.

1Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.

2 All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.

3 Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial professional and refer to your individual whole life policy illustration for more information

4 Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.

5 Dividends are not guaranteed. They are declared annually by Guardian’s Board of Directors.

6 Permanent life insurance consists of two types: whole life and universal life. Cash value grows in a participating whole life policy through dividends, which are declared annually by the company's board of directors and are not guaranteed. Cash value grows in a universal life policy through credited interest and decreased insurance costs. The cash value of both policy types benefits when the policyholder pays an amount above the required premium.

7 Universal Life Insurance may lapse prematurely due to inadequate funding (low or no premium), increase in cost of insurance rates as the insured grows older, and a low interest crediting rate. This does not apply to universal life policies which have a secondary guarantee, but if the secondary  guarantee requirements are not met the policy will most likely lapse.

8 Financial information concerning Guardian as of December 31, 2020, on a statutory basis: Admitted Assets= $68.1 Billion; Liabilities = $60.3 Billion (including $48.9 Billion of Reserves); and Surplus = $7.8 Billion.

9 Riders may incur an additional cost or premium. Riders may not be available in all states.

10 A Waiver of Premium rider waives the obligation for the policyholder to pay further premiums should he or she become totally disabled continuously for at least six months. This rider will incur an additional cost. See policy contract for additional details and requirements.

11 Paid-up Additions (PUA) are purchases of additional insurance (death benefit) that have a cash value. These purchases are made with dividends and/or a rider that allows the policyholder to pay an additional premium over and above the base premium. This creates the growth of death benefit and cash values in a participating whole life policy. Adding large amounts of paid-up additions may create a Modified Endowment Contract (MEC). A MEC is a type of life insurance contract that is subject to last-in-first-out (LIFO) ordinary income tax treatment, similar to distributions from an annuity. The distribution may also be subject to a 10% federal tax penalty on the gain portion of the policy if the owner is under age 59 ½. The death benefit is generally income tax free.

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