Origins
Level premiums based on mortality tables were pioneered by the Equitable Life Assurance Society in London in 1762, the template for modern life insurance. In Korea, Prudential Life introduced whole life in 1991, selling it through 'life planners' who sized coverage to a family's needs; large domestic insurers soon followed. See insurance agents in Korea.
How it works
- Death benefit paid whenever death occurs, apart from limited exclusions.
- Payment period such as 10 or 20 years, after which coverage continues.
- Cash surrender value is low early on because mortality charges and sales costs are deducted.
- Low- or no-surrender versions cost less but return little if cancelled.
Not a savings account
Short-pay whole life policies marketed on their year-10 return rose from 8.4% of Korean whole-life sales in 2019 to 41.9% in the first half of 2022, and whole life drew 55.2% of mis-selling complaints in late 2022. In a 2022 mystery-shopping exercise, 15 of 17 life insurers were rated poor (Financial Supervisory Service, 2023).
The economics
Yaari (1965) modeled insurance and annuities under an uncertain lifespan; Fischer (1973) traced demand across the life cycle; Bernheim (1991) inferred real bequest motives, which is why policies fund inheritance taxes (see Korea's gift tax). Hendel and Lizzeri (2003) showed front-loaded contracts protect against rising premiums as health worsens, but Gottlieb and Smetters (2021) found buyers underestimate their chance of lapsing while insurers price on it, a behavioral blind spot.
Before you buy
- Decide whether you need lifelong cover or cover for a set period.
- Make sure you can afford premiums to the end.
- Read the year-by-year surrender table.
- Disclose medical history truthfully.
- Medical bills are the job of indemnity health insurance, not whole life.
FAQ
- Do I lose money if I cancel?
- Usually yes in the early years, because charges are deducted first.
- Whole life or term?
- Whole life for lifelong cover or estate planning; term for cheaper cover during child-rearing years.
Sources reviewed: 2026-11-02
References
- Yaari, M. E. (1965). Uncertain lifetime, life insurance, and the theory of the consumer. The Review of Economic Studies, 32(2), 137–150. Foundational theory of life insurance under an uncertain lifespan.
- Fischer, S. (1973). A life cycle model of life insurance purchases. International Economic Review, 14(1), 132–152. Life-cycle model of how insurance demand changes with age.
- Bernheim, B. D. (1991). How strong are bequest motives? Evidence based on estimates of the demand for life insurance and annuities. Journal of Political Economy, 99(5), 899–927. Estimates bequest motives from life insurance and annuity demand.
- Hendel, I., & Lizzeri, A. (2003). The role of commitment in dynamic contracts: Evidence from life insurance. The Quarterly Journal of Economics, 118(1), 299–328. Why front-loaded long-term life policies exist.
- Daily, G., Hendel, I., & Lizzeri, A. (2008). Does the secondary life insurance market threaten dynamic insurance? The American Economic Review, 98(2), 151–156. How a secondary market for policies interacts with lapsing.
- Gottlieb, D., & Smetters, K. (2021). Lapse-based insurance. The American Economic Review, 111(8), 2377–2416. Shows insurers price policies around lapses that buyers underestimate.
- 금융감독원. (2023). 종신보험은 상담과정에서부터 충분한 설명을 요청하여 듣고, 이해한 후 가입여부를 결정하세요 [소비자경보 2023-6호]. Korean regulator's 2023 consumer alert on whole-life mis-selling.