How to Find the Best Whole Life Insurance Policy
Whole life insurance is a good policy to buy if you:
- Need coverage that lasts for your entire life
- Want the payments to stay the same (called level premiums)
- Want a guaranteed return on the cash value that builds up within the policy
Before you buy, ask a financial advisor if you need whole life insurance, rather than another type of permanent insurance or a term life policy. Whole life insurance fits the bill for some people, but term life insurance is sufficient for many families. Consult a fee-only financial advisor, if possible. These advisors don’t make commissions from sales, so they can recommend financial products objectively.
» Need term life instead? Get term life insurance quotes
Assuming whole life insurance is right for you, here’s a list of the biggest sellers and some tips on finding a good policy.
Largest sellers of whole life insurance
Here’s an overview of the biggest sellers of whole life insurance, listed in alphabetical order.
- On some policies, a portion of the cash value can be linked to performance of the Standard & Poor’s 500
- Choice of fixed or variable interest rates on loans taken out on policies’ 10th anniversaries
- Potential to earn dividends
- Guaranteed acceptance life insurance (no medical exam) of $2,000 to $25,000 for ages 50 to 75
- Larger whole life insurance policies are available with a medical exam
- Potential to earn dividends
- Three varieties of whole life insurance with different amounts and features
- No medical exam required
- Amounts from $3,000 to $50,000, depending on policy type
- Children’s whole life insurance available
- Two types of whole life offered: a standard policy and a custom whole life policy, designed to build cash value faster
- Potential to earn dividends
- Standard whole life policies and CompLife, which combines whole life and term life insurance
- Three options for paying premiums: up to age 65, up to age 90, or over periods of 10 to 30 years
- Potential to earn dividends
- Four whole life insurance choices with different premium-payment lengths
- Potential to earn dividends
- Options for limited premium payments (10 to 20 years) and a single-payment policy
- Final expense policy for $10,000 for ages 50 to 80
- Potential to earn dividends
- Amounts from $2,000 to $50,000
- Three types of final expense policies
Choose the right amount of coverage
To find the right coverage amount when you’re buying whole life insurance, decide what you want the policy to accomplish. A relatively small policy — $10,000, for example — may pay for a funeral. You will need a larger policy if you have other priorities, such as funding a trust for a child with special needs.
Not all sellers of whole life offer policies in small amounts of coverage, and those that market small policies don’t always sell large ones.
Understand the different approval processes
There are three main types of approval processes:
- Simplified issue: You answer some health questions but you don’t have to take a medical exam.
2. Guaranteed issue: There are no health questions or medical exam and you’ll be accepted.
These options are worth considering if you’ve been turned down for standard life insurance due to health problems — but beware of the downsides. The death benefits offered are relatively small, and the costs per $1,000 of coverage are higher than for policies that require a medical exam. In addition, these policies don’t pay the full death benefit if you die within the first few years of coverage.
3. Fully underwritten: This generally involves filling out a lengthy application and taking a life insurance medical exam. Even if you have some health issues, you can generally find the best price by applying for a fully underwritten policy.
Look at the rate of return on cash value
Whole life insurance policies feature a “cash value” savings account. A portion of your premium is invested in the account, which typically grows slowly on a tax-deferred basis. You can borrow against the cash value, use it to buy more coverage or surrender the policy for the cash. (The death benefit is reduced if you don’t repay a loan, and it disappears if you surrender the policy.)
Whole life insurance policies guarantee a minimum growth rate on the cash value.
Whole life insurance policies guarantee a minimum growth rate on the cash value. Some policies can perform even better if they earn dividends, which are portions of the insurer’s financial surplus. Dividends generally aren’t guaranteed, but they’re worth taking into account when you compare policies.
Life insurance companies provide illustrations of how each policy’s cash value could perform. Always ask which parts of the illustration are guaranteed. For example, an insurer may give cash value projections based on the payment of dividends, which aren’t guaranteed.
Riders are coverage features you can add to your policy, usually for an extra cost. Examples include a chronic illness rider, which lets you access some of the death benefit if you have a serious illness, and a “disability waiver of premium” rider, which lets you skip payments if you become disabled. Available types and costs of riders vary by insurance company. Make sure your policy has the riders you want.
Check the insurer’s financial strength rating
Look up the financial strength rating of each insurer you’re considering. You can find these through rating firms, such as A.M. Best. Financial strength is important because a strong company has a better chance of being around decades from now to pay claims. Any company with an A.M. Best rating of B+ or higher is a good choice; companies rated B and below are more vulnerable, in A.M. Best’s opinion.
All of the largest life insurance companies, for example, have solid financial strength ratings.
Research the insurer’s reputation for customer service
You can look up an insurer’s complaint ratio score on the National Association of Insurance Commissioners website. The ratio is based on the number of complaints filed against the insurance company with state regulators and is adjusted for market share. The national median is 1, so a score higher than 1 means the company received a larger number of complaints for its size.
Get life insurance quotes for the same amount of coverage from several insurers to compare prices. You may find that rates for whole life insurance vary widely.
Term vs. Whole Life Insurance Comparison Calculator
Term life insurance offers low cost protection with guaranteed level premiums for a fixed duration, typically 10, 15, 20, or 30 years. Whole life insurance offers lifetime guaranteed coverage with the additional benefit of accumulating cash values.
It’s the great debate among life insurance professionals, consumers, and financial planners.
Term life insurance vs. whole life insurance.
While each has its pros & cons, follow these 3 steps to find out which is best for you.
Term vs. Whole Life Insurance Comparison Calculators
COMPARE QUOTES NOW!
Now that you’ve got your term and whole life quotes, let’s dig into the pros & cons of term and whole life, and then you can use our comparison calculator.
Perhaps you’ve heard Dave Ramsey say, “You should only buy low-cost level term life insurance. Anything else is a rip-off or a gimmick,” or Suze Orman state that whole life insurance is a “waste of money.”
In fact, it seems like the only people who say whole life is a good idea are. Insurance Agents.
Surely only a very small minority of people still buy whole life, right?
Wrong! The American Council of Life Insurers reported in 2016 that 62.1% of all individual life insurance policies bought in the U.S. were Whole Life Insurance policies.
Key Term & Whole Life Insurance Questions
When analyzing term vs whole life insurance, of course you’ll want to look at quotes (the cost) the best companies, learn how cash value works, and learn the pros and cons.
We’ll cover all that here, but let’s start with the most crucial questions.
What is the difference between term and whole life insurance?
Term life insurance offers low cost protection for a specified period of time, such as 10, 15, 20, or 30 years. During this time the premiums and death benefit is guaranteed to stay level.
Term life insurance is the most basic form of life insurance and offers a death benefit as its only real benefit (it has no cash value).
Pros of Term Life Insurance:
Term life insurance is clearly the most affordable and the most suitable form of life insurance for the majority of Americans. Term is very affordable for younger people and a fraction of the cost of what you would pay for a similar whole life policy.
Term is an excellent choice for providing for:
- Income replacement
- Mortgage and Debt Payoff
- Business policies (key person and buy-sell arrangements)
- And more!
Term provides coverage for a specific period of time suitable to the needs of most people. The majority of term policies also come with a conversion feature where you can convert your term policy to a permanent policy without having to take a medical exam.
Cons of Term Life Insurance:
Term life can be very costly if you have to renew the policy when it expires because of your age and health issues. Policies do not offer any living benefits and has no savings features.
Whole Life Insurance Definition, Pros and Cons?
Whole life is a form or permanent life insurance.
Whole life insurance also pays out a death benefit upon the death of the insured person. However, it differs from term in that it offers lifetime coverage with fixed level premiums. Additionally, it offers the benefit of accumulating cash values.
Pros of Whole Life Insurance
A few benefits of whole life are:
- Whole Life provides coverage for your entire lifetime
- Premiums are guaranteed
- The cash value accumulation feature is non-taxable unlike other investment vehicles.
- You can borrow against the cash value accumulation feature.
- Many policies offer living benefits.
Cons of Whole Life Insurance
Whole life policies are typically very expensive and easily cost 10X or more than what you would pay for a comparable term life insurance policy.
Whole life policies are very inflexible as it relates to your premium payments, and compared to “traditional investments”, you might also think it’s inflexible, as you have no choice in how the money is invested.
The cash value accumulation rate of investment is generally much lower than rates provided through other investment vehicles.
What Happens to the Cash Value of a Whole Life or Permanent Life Insurance Policy?
The cash value accumulation portion of any permanent life insurance is only available to the insured person while they are still alive, and is available to borrow against (for which the policyholder will be charged interest) or for withdrawal.
If you have borrowed against the cash value accumulation while still alive, any amount that has not been re-paid, along with interest, will be deducted from the death benefits when you die.
Here’s the real shocker! What most people don’t know is that when you die the cash value is not payable to your beneficiaries – it is absorbed by the life insurance company. This applies to all forms of permanent life insurance policies, whether it be Whole Life or Universal Life.
How do Term and Whole Life Insurance Work?
Whole life insurance contains 3 components:
- Death Benefits
- Cash Value Accumulation
When you pay your premium, a portion of the premium is applied to death benefits and a portion to the cash value accumulation. For the first 5 to 10 years the majority of the premiums you pay in these early years of the policy is applied to the death benefits portion (cost of insurance) along with policy fees & commissions.
After this period, the cash value will receive a greater portion of the premium. Another portion of your premium is also used to pay for administrative costs.
Your beneficiaries are entitled to receive only the death benefit portion of the policy when you die. You have no choice in how the life insurance company applies the premium you pay.
You can cash in or surrender your policy at any time. Otherwise, coverage is for your lifetime.
Cashing in your Whole Life Policy – How it Works?
You can cash in either a portion of the cash value accumulation or receive the full amount if you surrender the whole life policy.
The cash value portion is non-taxable so long as it does not exceed the amount of total premiums you paid (the cost basis) when you cash in a portion or surrender the policy. Any cash value in excess of the total premiums paid is taxable.
All you have to do is contact the life insurance company and they will provide you with current values and a surrender/withdrawal form. You complete the form and submit it to the company. If you surrender the policy, you may receive less than what you paid in.
How Term Life Insurance Works
Term life insurance is the most basic form of life insurance because it pays death benefits only.
Choosing a term life insurance policy is quite simple as it is 3 step process which includes:
- Select the amount of coverage (death benefits) you want
- Choose the length of coverage or term such as 10, 20 or 30 years
- Choose your beneficiary(s)
What is a “Convertible Term” Life Insurance Policy?
Most term policies sold today come with a conversion feature.
This allows you to convert your term policy to either a Whole Life or Universal policy. You can do so without having to take a medical exam.
The type of permanent policy and amount of coverage available varies from company to company. Generally, you must convert the policy at certain time periods specified in the policy.
What is Group Term Life Insurance?
Group term life insurance is generally available through an employer or a professional association or organization.
It covers all members who apply for the coverage period. Benefits are payable for the coverage period. Most of these policies are not portable and you are only covered while an employee or association/organization member. The majority or group term life insurance plans do not require a medical examination.
What is Universal Life Insurance?
Universal life is a form or permanent life insurance similar to Whole Life.
Universal Life provides both death benefits and a cash value accumulation portion. The major difference between Universal life and Whole Life is that Universal policies are more flexible in that that they options for your death benefits, how premiums are payable, and various investment options.
At Huntley Wealth & Insurance Services, we don’t offer whole life, and never will. We believe agents push whole life to their clients to earn high commissions, and consumers continue to buy because the benefits are confusing.
Consumers are made to understand that with whole life, they are getting a blend of permanent life insurance protection as well as some cash value build up that may be able to supplement their retirement. The problem is 99% of them don’t need permanent coverage. They need term.
We believe that if consumers knew the cost of term life insurance, and what their money could do for them if they were to “buy term and invest the difference,” that far fewer people would buy whole life insurance.
This calculator aims to provide what no other life insurance needs calculator provides, clear and conclusive proof that buying term and investing the rest is almost always best for consumers.
Whole Life versus Term Life Insurance Calculator
Cost Comparison of Term vs. Whole Life:
Let’s See What Happens if We Invest
the Savings, , at % Over 30 Years. Assuming an annual % return compounding, with deferred (or no) taxation during accumulation.
Whole Life Insurance:
Term Life Insurance:
Recalculate On Your Own Terms
Free Whole Life Insurance Analysis
Did you get sold a bill of goods and you’re not sure what to do now with your whole life policy? Fill out this form to bypass our agents and one of our owners Chris or Kim will contact you directly.
Assumptions and Disclaimers
Assumptions: We have assumed an annual % return compounding, with deferred (or no) taxation during accumulation. The assumption is that these funds would be available for tax-free withdrawal, similar to withdrawals from a Roth IRA or tax-free loan from a life insurance policy. These are loose assumptions, and for illustrative purposes only. In the case that the savings by buying term instead of whole life were to exceed $5,500 (or the current allowable max contribution to an Roth IRA), we have NOT adjusted our assumptions for these maximums. When available, we have compared whole life insurance to 30 year term life insurance. Longer terms are not available at older ages, so some calculator uses will see term rates presented for shorter term lengths, such as 15 or 20 years instead.
Disclaimers: Term and whole life rates above are not actual quotes from insurance carriers. They are estimates developed internally at Huntley Wealth & Insurance Services for illustrative purposes only, which we believe reflect current whole life and term rates from some of the top life insurance carriers in the US. The rates above are not to be considered an offer for insurance. Do not use this information to make any decision, as our numbers could be completely wrong. Each individual must speak to a knowledgeable financial or insurance professional for accurate quotes and advice as to how life insurance fits into his or her overall financial plan. We’re just showing you what the numbers are under the above assumptions and any minor change to the numbers, your financial situation or the cosmos could completely throw these numbers off and so you shouldn’t rely on them but thank you for using our calculator. Now don’t make any decisions based on what information you did or did not imply from it. And even after we’ve told you not to use this information, if you do, you cannot sue us because we’ve already told you the numbers are not be be used for such purposes. Entertainment only.
Invitation for application for life insurance on insuranceblogbychris.com are made through its designated agent, Christopher Huntley, only where licensed and appointed. All applications in the state of California will be submitted by Huntley Wealth Insurance Services, Inc., DBA Huntley Wealth & Insurance Services, California Lic. #0K23182. Christopher Huntley is a licensed life insurance agent in 48 states. The following agent license numbers are provided for Christopher Huntley as required by state law: CA Lic. #0E60169, LA Lic. #529134, MA Lic. #1933366, MN Lic. #40239532, UT Lic. #323130, TX Lic. #1605079, AR. Lic. #8274215. Additional licenses are available upon request.
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Life insurance policies described, quoted, shown, and illustrated throughout this website are not available in all states and may include those issued by: American General Life; Banner Life Insurance Company, Urbana, MD, and William Penn Life Insurance Company, Garden City, NY, both Legal & General America companies; United of Omaha Life Insurance Company, Omaha, NE, a Mutual of Omaha affiliate company; Fidelity Life Association, A Legal Reserve Life Insurance Company, Oak Brook, IL; Genworth Life and Annuity Insurance Company, Lynchburg, VA and Genworth Life Insurance Company of New York, New York, NY, member companies of Genworth Financial, Inc.; Lincoln Life & Annuity Insurance Company of New York, Syracuse, NY and The Lincoln National Life Insurance Company, Fort Wayne, IN, both insurance company affiliates of Lincoln National Corporation, whose marketing name is Lincoln Financial Group; First MetLife Investors Insurance Company, New York, NY, MetLife Investors USA Insurance Company, Irvine, CA and Metropolitan Life Insurance Company, New York, NY, all three members of the MetLife family; Protective Life and Annuity, Birmingham, AL; Pruco Life Insurance Company, Newark, NJ and Pruco Life Insurance Company of New Jersey, Newark, NJ, member companies of Prudential Financial, Inc., Newark, NJ; VOYA Life Insurance Company, Minneapolis, MN, VOYA Life Insurance Company of New York, Woodbury, NY and Security Life of Denver Insurance Company, Denver, CO, member of the ING family of companies; Transamerica Financial Life Insurance Company, Harrison, NY, and Transamerica Life Insurance Company, Cedar Rapids, IA, both AEGON companies.
Rates and time taken to qualify and purchase a life insurance policy vary by product and underwriting requirements.