Is Whole Life Insurance a Good Investment? – NerdWallet

No Comments

Premium Domain Names for Sale at
We believe everyone should be able to make financial decisions with confidence. And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free.
So how do we make money? Our partners compensate us. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. Here is a list of our partners.
Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here’s how we make money.
Whole life insurance offers coverage and accumulates a cash value over time. 
This type of permanent life insurance may suit high net worth individuals and parents with lifelong financial dependents.
Depending on your budget, the low rates of return might not offset the high premiums.
On the surface, life insurance is a simple concept: You pay an insurance company a premium and, when you die, the company pays your beneficiaries. But whole life insurance also features a cash value component, which is where things can get complex.
These policies earn interest in a tax-advantaged account and offer guaranteed returns, but they’re expensive and not suitable for most people.
» MORE: Whole life insurance definition
Whole life insurance provides permanent coverage that accumulates a cash value.
When you pay your premium, the insurer invests a portion to give your policy a cash value. The cash value grows over time at a fixed rate guaranteed by your insurer. It’s tax-deferred, which means that any interest you earn isn’t taxed, as long as you keep the funds in the policy.
Once you’ve accumulated enough cash value, you can begin to take out loans against your policy. While you don’t need to pay back these loans — it’s your money — your insurer will subtract any outstanding loans from the payout when you die. You’ll want to make sure you don’t borrow too much against your policy to avoid running into issues later on.
If you choose to buy a policy from a mutual life insurance company — an insurer that’s owned by its policyholders — you might receive dividends based on the company’s financial performance. You can cash them in, use them to pay premiums or buy additional insurance to boost the face value of your life insurance policy. If you choose that option, your cash value will increase as well.
» MORE: Best whole life insurance companies
Whole life insurance can make sense as an investment in these situations.
If you’re a high net worth individual who has made all the allowable contributions to your tax-advantaged accounts like 401(k) plans or individual retirement accounts, you could use a whole life insurance policy to top up your tax-deferred savings.
The cash value will earn dividends or interest over the years, and when your children are adults, your mortgage is paid off or you no longer need life insurance for whatever reason, you can surrender your policy and collect the cash. If you surrender the policy, be aware that you will most likely be subject to income tax on the value it has gained, and your beneficiaries won’t receive a death benefit when you die.
Life insurance can offer peace of mind to anyone with financial dependents. If you’re a parent caring for a child with a disability, a whole life insurance policy might suit your situation as it typically provides lifelong coverage, giving your family a sense of financial stability.
To ensure your child is still eligible for government benefits, like Supplemental Security Income, avoid naming them as your beneficiary

Social Security Administration. Benefits for Children with Disabilities. Accessed Apr 3, 2023.

. Instead, consider setting up a special needs trust. An attorney can help you place your whole life insurance policy into the trust, and you can appoint a trustee (such as a guardian) to manage the money on behalf of your child.
» MORE: Life insurance planning for parents of children living with a disability
Is your estate worth $12.92 million or more? That’s the federal tax exemption limit for 2023, so the IRS might levy an estate tax on any assets above the threshold when you die

In addition, some states charge their own estate or inheritance tax. For example, New York’s estate tax kicks in after $6.58 million

New York State Department of Taxation and Finance. Estate Tax. Accessed Apr 3, 2023.

Thanks to the cash value component, whole life insurance is a form of “forced savings.” Whether you hold the policy until you die or surrender it for cash when you retire, whole life insurance can give your loved ones the money they need to pay estate taxes without having to dip into other accounts.
The cash value on a whole life insurance grows at a set rate, and returns are dependable. They’re not subject to the ups and downs of the market, so you won’t lose any money if the market takes a turn.
This differs from other permanent policies, like variable life insurance and variable universal life insurance. With these policies, the cash value grows at a variable rate, meaning returns are subject to market conditions and aren’t guaranteed.
» MORE: Average life insurance rates
While whole life insurance has its perks, it’s not the right policy for most people. Before you sign up for a policy, be aware of these downsides.
The cost of whole life insurance tends to be much higher than term life insurance. For example, a healthy 40-year-old man can expect to pay an average annual premium of $7,028 for a $500,000 policy, while a woman of the same age might pay $5,937, according to Quotacy, a life insurance brokerage. To compare, a term life policy for a healthy 40-year-old would cost $334 for a man and $283 for a woman, on average.
If you’re purely interested in life insurance coverage, you might be better off buying a term life insurance policy and funneling the savings into other investment vehicles.
» MORE: Term vs. whole life insurance: How to choose
For the first few years, your insurer will direct a chunk of your premiums to fees, commissions and other administrative costs. Eventually, a higher percentage of your premium will go toward your cash value. But this takes a while, so it can take 10 to 15 years (or even longer) for you to build up enough cash value to borrow against.
If you’d prefer an investment that offers positive returns quickly, you’ll want to look elsewhere. And if you are interested in the relatively low but predictable returns offered by whole life insurance, try to buy a policy while you’re young so you have plenty of time to reap meaningful returns on the cash value.
The average annual rate of return on the cash value for whole life insurance is 1% to 3.5%, according to Quotacy. While whole life insurance offers fixed, guaranteed returns on your cash value, you may earn higher returns with other investments, such as stocks, bonds and real estate. Consult a fee-only financial advisor to learn about tax-advantaged investment options that suit your risk tolerance.
With whole life insurance, the insurance company declares the dividend or interest rate and professionally manages the investments for policyholders.
On one hand, this makes whole life insurance a hands-off product. But if you’re a seasoned investor, you may not like relying on your insurer’s investment managers to deliver returns for you.In that case, you could consider policies that allow you to select investment subaccounts from a portfolio presented by your insurer. These include indexed universal life insurance, variable life insurance and variable universal life insurance, which typically have the highest risk and highest possible returns for life insurance.
Generally, you only pay taxes on the cash value if you access it — and the IRS only charges a tax on the amount that exceeds the policy basis. This is the amount of money you’ve already paid in premiums, minus any dividends you’ve received.
If you withdraw less money than the policy basis, those funds are yours, tax-free. But any withdrawals over that are subject to income tax. You may also pay taxes if you surrender your life insurance policy, or if you borrow against your life insurance and don’t repay the loan. Speak to an accountant to learn more about how whole life insurance can affect you at tax time.
» MORE: Is life insurance taxable?
Check out these additional resources about whole life insurance.
Whole life insurance definition
How does whole life insurance work?
The cost of whole life insurance and why it’s so high
Best whole life insurance companies
On a similar note…
Read more
Read more
Read more
Disclaimer: NerdWallet strives to keep its information accurate and up to date. This information may be different than what you see when you visit a financial institution, service provider or specific product’s site. All financial products, shopping products and services are presented without warranty. When evaluating offers, please review the financial institution’s Terms and Conditions. Pre-qualified offers are not binding. If you find discrepancies with your credit score or information from your credit report, please contact TransUnion® directly.
NerdUp by NerdWallet credit card: Bank services offered by Evolve Bank & Trust, Member FDIC. The NerdUp by NerdWallet Credit Card is issued by Evolve Bank & Trust pursuant to a license from Mastercard International, Inc.
NerdWallet Compare, Inc. NMLS ID# 1617539
NMLS Consumer Access|Licenses and Disclosures
California: California Finance Lender loans arranged pursuant to Department of Financial Protection and Innovation Finance Lenders License #60DBO-74812
Property and Casualty insurance services offered through NerdWallet Insurance Services, Inc. (CA resident license no. OK92033)  Property & Casualty Licenses
NerdWallet™ | 55 Hawthorne St. – 10th Floor, San Francisco, CA 94105

Premium Domain Names:

A premium domain name is a highly sought-after domain that is typically short, memorable, and contains popular keywords or phrases. These domain names are considered valuable due to their potential to attract more organic traffic and enhance branding efforts. Premium domain names are concise and usually consist of one to two words or two to four individual characters.

Top-Level Domain Names for Sale on

If you are looking for top-level domain names for sale, you can visit is a platform that offers a selection of domain names at various price ranges. It is important to note that the availability of specific domain names may vary, and it’s recommended to check the website for the most up-to-date information.

Contact at

If you have any inquiries or need assistance regarding the domain names available on, you can reach out to them via email at Feel free to contact them for any questions related to the domain names or the purchasing process.

Availability on,, and

Apart from, you can also explore other platforms like,, and for available domain names. These platforms are popular marketplaces for buying and selling domain names. Each platform may have its own inventory of domain names, so it’s worth checking multiple sources to find the perfect domain name for your needs.

#PremiumDomains #DomainInvesting #DigitalAssets #DomainMarketplace #DomainFlipping #BrandableDomains #DomainBrokers #DomainAcquisition #DomainPortfolio #DomainIndustry #DomainAuctions #DomainInvestors #DomainSales #DomainExperts #DomainValue #DomainBuyers #DomainNamesForSale #DomainBrand #DomainInvestment #DomainTrading

About us and this blog

We are a digital marketing company with a focus on helping our customers achieve great results across several key areas.

Request a free quote

We offer professional SEO services that help websites increase their organic search score drastically in order to compete for the highest rankings even when it comes to highly competitive keywords.

Subscribe to our newsletter!

There is no form with title: "SEOWP: MailChimp Subscribe Form – Vertical". Select a new form title if you rename it.

More from our blog

See all posts

Leave a Comment