After 20 years on a 20-pay whole life insurance policy, you stop paying premiums, but the coverage remains active for your entire life, growing cash value and guaranteed to pay a death benefit to your beneficiaries whenever you pass away, effectively becoming a "paid-up" policy with lifelong protection. It's different from term insurance, which would expire; your whole life policy just continues to accumulate value without further payments.
Unlike term insurance, whole life policies don't expire. The policy will stay in effect until you pass or until it is cancelled. Over time, the premiums you pay into the policy start to generate cash value, which can be used under certain conditions.
Term life is designed to cover you for a specified period (say 10, 15 or 20 years) and then end. Because the number of years it covers are limited, it generally costs less than whole life policies. But term life policies typically don't build cash value. So, you can't cash out term life insurance.
There isn't any age cut-off that makes life insurance no longer worth it; it's all about your personal situation. That being said, it is often worth having life insurance after 65 if you have dependents who rely on you financially.
The premiums you've paid cover the time you were insured, and once cancelled, that money isn't returned. However, if you have a whole of life or investment-linked policy, there may be a cash value built up over time. If so, you might receive a partial payout, minus any fees or charges.
Whole life insurance disadvantages include high premiums compared to term life, slow cash value growth in early years (due to fees and commissions), and limited flexibility, making it hard to change coverage or stop payments without penalties, plus a long-term commitment that might not suit changing financial needs. Its complexity and the opportunity cost (money could grow faster elsewhere) are also significant drawbacks for many people, notes Thrivent and Millennium Brokers.
Many older life insurance policies mature at a specific age, typically 95 or 100. If the insured individual attains that age, the policy's cash value may be paid out to the policy owner in lieu of a death benefit payment.
There is typically no penalty for cashing out whole life insurance because these policies are designed to offer the opportunity to help build wealth. However, surrendering the policy may result in surrender charges if done before a specified date.
If you outlive your term (let's hope this is the case), then typically one of two things happens: The policy will simply end, and you'll no longer owe payments or be covered, or. The insurer might allow you to keep your coverage by converting all or a portion of the policy into permanent life insurance.
Whole Life or Permanent Insurance — It Never Expires
If you don't “use” whole life insurance, the policy stays active until the day you die — guaranteed payout. Plus, it builds cash value you can use while you're alive.
Many people in their 60s and 70s may no longer need life insurance. They may have already paid off the house, stopped working, sent the kids off to care for themselves or accumulated enough assets to offset the need for life insurance. But sometimes buying or maintaining a life insurance policy over age 60 makes sense.
The policyholder may have a financial or medical obligation and needs the money now. The policyholder has been diagnosed with a terminal or chronic illness and wishes to use the money. The whole life insurance policy may have been purchased to insure the life of a business partnership and may no longer be needed.
A 50-year-old might buy a 30-year term, while a 75-year-old may only qualify for a 10-year option. Whole life insurance: This permanent coverage is often available up to age 85, and in some cases, it may be available up to age 90, depending on the company. Premiums are higher, but coverage lasts your entire life.
The main benefit of an ROP rider is that you get back some or all your premium payments when your policy expires. With a standard term life policy, your coverage ends without any benefit paid to you or your beneficiaries.
Whole life insurance isn't just for protection—it's a tool for building tax-free, multi-generational wealth. The wealthy use it to fund investments and pass down wealth using strategies like the Rockefeller family's “use, grow, and pass down” system.
Con: Higher premiums
Due to the lifelong coverage and cash value component, whole life insurance comes with higher premiums. It may be a challenge to cover them if you're young or don't have a lot of extra cash at your disposal.
How long does it take to build cash value in life insurance? Cash value typically doesn't accrue for the first two to five years of a policy's term. It can take decades for it to accumulate into a significant amount.