You probably don’t need whole life insurance.

Life insurance is an important financial planning tool. It lets you protect your family from financial consequences that could undermine its standard of living and the wealth built up over the years.

But not everyone who needs life insurance needs whole life insurance.

This type of policy has legitimate uses, especially in certain wealth and estate planning situations. The problem is that buying it involves long-term costs and commitments that the insured’s needs do not always justify.

To judge whether whole life makes sense, you need to understand which risks the insurance should cover, how long that protection will be needed and which alternatives are available.

Insurance needs change over a lifetime

Consider a 40-year-old physician, married, with two young children. His income supports the family and pays for household expenses, the mortgage and the children’s education.

Although he earns a good income, he is still building his wealth. If he dies prematurely, his family will lose a source of income it was counting on for many years.

In this case, there is a clear need for financial protection.

Now consider the same physician at 65. The children are independent, the mortgage is paid off and he has built enough wealth to support the family.

Death is still a possibility, but its financial consequences have changed. The family no longer depends on the physician’s future income the way it did when he was 40.

This difference matters because the probability of death rises with age, while the financial need for death coverage may decline.

A family may need a large death benefit for the next 20 years and much less coverage after that. Depending on the wealth it has built, it may even stop needing death coverage altogether.

That is why the amount of coverage and how long it lasts should be set based on the family’s financial needs.

How much money would be needed to support the dependents? For how long? What debts would remain? What assets and other sources of income would be available?

The answers help determine both the amount of coverage and the period during which it will be needed.

Whole life and term insurance

Whole life insurance is a type of permanent insurance that combines long-term death coverage with the build-up of policy reserves, following actuarial rules set out in the contract.

In traditional policies, the premium is level throughout the payment period, aside from the inflation adjustments set out in the contract. Some products are paid over several years, and others let you pay the premium in a single payment.

Part of what the insured pays covers the cost of the insured risk, the operating expenses and the reserves the insurer needs to meet its future obligations.

That structure helps explain why the product is expensive.

Term insurance works differently. The insured buys coverage for a set period, such as 10, 20 or 30 years. If a covered death occurs during the term, the beneficiaries receive the agreed amount. When the term ends, the protection ends.

In general, traditional term insurance has no surrender value. The premiums pay for the protection provided while the contract is in force.

That is not a disadvantage in itself. Someone who buys homeowners insurance does not expect to get the premiums back if the house never catches fire. What they paid for was the transfer of that risk for a certain period.

The same goes for life insurance.

Not receiving a payout does not mean the premiums were wasted.

Because term insurance covers a limited period, its initial cost is usually significantly lower than that of a whole life policy with the same death benefit.

The difference can be significant, especially when the insured is young and wants a large amount of coverage to protect dependents.

Whole life, on the other hand, offers the possibility of keeping coverage for life, subject to the policy terms, without having to buy a new policy at the end of a term.

That feature has value for someone with a permanent need for protection. For someone who only needs to cover the years in which their family depends on them financially, it may be an unnecessary cost.

The risk of losing the ability to work

For a physician, there is another issue that deserves attention before buying whole life insurance: the ability to keep practicing.

A surgeon may lose the ability to operate because of an illness or injury without losing their independence in everyday activities. A self-employed professional may have to stop seeing patients for months and suffer a sharp drop in income.

In these situations, death coverage does not solve the financial problem.

The family still has expenses, but the professional loses part or all of their income. Depending on the health condition, there may also be additional treatment and rehabilitation costs.

That is why I think it is important to look at other kinds of protection before committing a significant share of the budget to whole life.

Professional liability insurance can protect your assets against certain claims and lawsuits related to medical practice, subject to the policy’s limits and exclusions.

Occupational disability coverage deserves special attention. There are important differences between being unable to practice a particular profession and losing functional independence. A physician may be unable to perform surgery and still not qualify under a policy that requires inability to carry out the basic activities of daily living.

Short-term disability insurance (DIT in Brazil) can help replace part of your income during time off work due to covered illnesses or accidents. You need to check the waiting periods before coverage begins, elimination periods, benefit limits and other policy conditions.

Finally, term life insurance can protect the family during the years in which it depends financially on the professional’s income.

Each of these coverages addresses a different risk. Whether you need each one depends on the work you do, your wealth, your financial obligations and the protection you already have.

A physician with enough wealth to support the family may need little additional death coverage but remain exposed to significant liability and occupational disability risks.

Another physician, early in their career and with young children, may need a large amount of death coverage but be unable to afford whole life insurance without hurting their ability to save.

In both cases, the choice should take the whole financial picture into account.

The cost of whole life and building wealth

In traditional level-premium whole life policies, part of what you pay at younger ages goes toward funding the rising risk of later ages.

Today, the insured bears part of the cost of protection they may use decades later.

This prepayment is tied to the build-up of policy reserves and the long-term structure of the contract.

But there is an opportunity cost that has to be considered.

If someone wants to protect their family for the next 20 years, they can compare the cost of a whole life policy with that of a term policy offering the same death coverage over that period.

The difference in outlays could be directed to an investment portfolio.

Over the years, the wealth built up can gradually take over the role that insurance once played. When the children become independent, when debts are paid off and when available assets come to cover the family’s needs, the need for additional coverage falls.

This strategy, often called “buy term and invest the difference,” is not necessarily better in every circumstance.

The result depends on the actual cost of the policies, the contract terms, investment discipline, taxes and the returns achieved.

There is also an important difference in guarantees: when a term policy ends, buying new coverage may require another medical assessment, cost more or even be out of reach.

Whole life insurance can avoid part of that uncertainty by keeping the coverage in place.

Even so, the option of buying term and investing the difference deserves consideration. In many cases, the goal of financial planning is precisely to build enough wealth to reduce dependence on insurance over time.

Surrender value does not turn insurance into an investment

One of the features most often used in selling whole life insurance is the possibility of getting back part of what you paid.

In certain types of policy, the contract provides for building a policy reserve that gives rise to surrender values.

This calls for a few clarifications.

The first is that the surrender value does not necessarily equal the sum of the premiums the insured paid. Part of the money funds the protection, the operating expenses and other obligations of the insurer.

The second is that surrender may be subject to time requirements, conditions and consequences for the coverage.

I reviewed, for example, the general terms and conditions of a single-premium whole life product sold in Brazil.

The contract states that the reserve starts building in the first month, but surrender can only be requested starting in the policy’s 61st month.

The values in the surrender table assume a technical interest rate of 3% a year and are adjusted for inflation by the IPCA, Brazil’s official inflation index, under the policy terms.

That technical rate does not represent a return of 3% a year above inflation on the premium the client paid.

It is already built into the actuarial calculation of the values shown in the table. The insurer itself states that these values do not correspond to the return on a financial investment or a private pension plan.

The contract also states that a full surrender cancels the coverage. In a partial surrender, the death benefit is reduced in the same proportion.

So this is not a financial investment from which the client can simply withdraw money while keeping all the original features of the policy.

The reserve has a function within the structure of the contract and should be evaluated in that light.

It is entirely possible that the right to surrender has value for the insured. But the existence of that option does not show that the product is financially advantageous.

To evaluate the purchase, you would need to know the premium, the surrender values set for different dates, the death benefit and the alternatives available.

The comparison should take the whole contract into account, not just the existence of a reserve or the technical rate used to calculate it.

Use in estate planning

Life insurance can be a useful estate planning tool, especially for families whose wealth is concentrated in illiquid assets.

A family may own real estate, business interests and other high-value assets but lack enough cash to meet the expenses and obligations that follow the death of one of its members.

A life insurance payout can provide liquidity to the beneficiaries at a difficult time, reducing the need to sell assets in a hurry.

In Brazil, Law No. 15,040/2024, in force since December 2025, provides in Article 116 that the death benefit is not considered part of the inheritance. The law also provides, in Article 122, that insured amounts cannot be seized by creditors, under the conditions it sets out.

These features can be relevant to wealth planning.

However, they are not exclusive to whole life insurance.

The death benefit of a term policy is also subject to the legal provisions that apply to life insurance.

The estate planning advantage, therefore, does not automatically justify choosing whole life.

You need to assess whether the family will need that coverage regardless of the age at which death occurs.

There are situations in which that can happen.

A family with a dependent who will need financial support for life may have reasons to seek permanent coverage.

The same may apply to certain estate plans that require liquidity at death on a lasting basis.

On the other hand, some families’ liquidity needs can be met by building cash reserves, reorganizing investments or taking other wealth planning measures.

Whole life insurance can play a part in estate planning, but the need to use it must be demonstrated.

Incontestability

Another selling point for whole life insurance is what is known as incontestability.

Some contracts set specific periods after which the insurer limits its ability to contest certain claims related to pre-existing conditions.

These clauses can give the insured additional security, but they must be read in light of the policy terms and the applicable law.

Law No. 15,040/2024 governs waiting periods and exclusions related to pre-existing medical conditions. Article 119 sets specific requirements for the insurer to rely on the insured’s voluntary failure to disclose a pre-existing condition.

The legal protections are not exclusive to whole life insurance.

That is why it is important to check the actual scope of the coverage offered, the exclusions, the disclosure duties and the circumstances that may justify a claim denial.

The word incontestable, on its own, is not enough to judge how secure a policy is.

When whole life may be appropriate

There are legitimate reasons to buy whole life insurance.

The need to provide for a dependent who will require permanent financial support is one of them.

Another involves estate plans in which it is important to guarantee that a certain amount of money will be available, even if death occurs at an advanced age.

Someone may also want to keep death coverage without depending on being able to buy new policies in the future, especially given the risk that your health may change.

These situations need to be analyzed individually.

The structure of the assets, available liquidity, the family’s goals, the ability to pay and the total cost of the contract all affect the decision.

Even when there is a permanent need for protection, you still need to compare products and check whether the price is justified.

The fact that a policy meets a particular need does not mean it is automatically the most efficient option.

The incentives involved in the recommendation

Buying whole life insurance can be a significant financial commitment, often for decades.

That is why I think it is also important to understand how the professional making the recommendation is paid.

Insurance distribution has traditionally relied on commissions paid by insurers. This is a legitimate form of compensation, but the amounts and terms can vary with the product and the sales structure.

That difference deserves attention because products with different features can generate different compensation for whoever distributes them.

You cannot conclude, merely from the existence of a commission, that a recommendation is inappropriate.

But the client should know about these incentives and receive enough information to compare the alternatives.

A whole life recommendation should explain why the family needs permanent coverage, what that protection costs and which options were considered.

If term insurance can meet the need at a lower cost, that alternative should be part of the analysis.

If permanent coverage is necessary, the rationale should be clear.

And if the family already has enough wealth to absorb the financial risk of a death, the possibility of not buying a new policy should also be considered.

The intermediary’s compensation should not influence how the client’s financial need is defined.

At Van Soldat Wealth, our compensation comes solely from the fees our clients pay. We do not sell insurance or receive commissions from insurers.

Our analysis looks at insurance as part of financial and wealth planning, including how it relates to investments, liquidity, income protection and estate planning.

The result of that analysis may be buying whole life insurance, choosing term coverage, reviewing existing policies or concluding that no additional coverage is needed.

Before you buy

The need for insurance does not stay constant over a lifetime.

During the wealth accumulation phase, when the family depends mainly on income from work, transferring risks to an insurer can be essential.

As wealth grows, part of that protection may no longer be needed. The assets built up start to provide the resources to support dependents and cope with the unexpected.

Some needs, however, may remain. It is in those cases that long-term coverage deserves attention.

Whole life insurance is one possible tool within that planning. Its cost, the build-up of reserves, the surrender rules and the permanence of coverage need to be assessed together.

Before you buy, find out how much it would cost to protect your family with term insurance, how long the coverage would be needed and what else you could do with the difference in cost.

Also check the surrender conditions, the criteria for paying a claim, the exclusions and how the person recommending the product is paid.

The decision should take into account the family’s financial needs and the role the insurance will play over the years.

Whole life insurance can be a good solution when there is a permanent need for protection. Outside those situations, the client may end up paying much more for coverage they did not need to keep for life.