Whole life insurance is one of permanent insurances that provide permanent protection for the dependents while building a cash value account. With this type of insurance, this cash value account allows the insurance company to charge a fixed, ensured premium and to provide a death benefit and cash value throughout the life of the policy. The attractive part of the policy is that it provides coverage for the policy owner’s entire life. Premium payments of Whole life insurance policy require paying more than is needed for the current costs of insurance coverage and expenses. The excess payment is credited to a cash value account. This premium inflexibility of this policy is its primary disadvantages, and the internal rate of return in the policy may not be competitive with other savings alternatives. Whole life insurance policies encourage estate planning as through whole life insurance, policy owners can be tension free from estate taxes as the policy ensures the proceeds of the insurance policy are used to pay their estate tax.The death benefit can also be increased through the use of policy dividends. Dividends cannot be guaranteed and may be higher or lower than historical rates over time. Premiums are much higher than term insurance in the short-term, but cumulative premiums are roughly equal if policies are kept in force until average life expectancy.

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