What is the reason for buying a “whole life” insurance policy? As the name implies, “whole life” insurance is meant to last for your entire life. This is the opposite of a temporary life insurance policy that covers a specific amount of time such as a 10-, 20-, or 30-year term. There are many good reasons for purchasing a whole life policy. The whole life policy never expires and in most cases, the premium doesn’t increase over the life of the policy. Some policies also build cash value that you can borrow from. Want a little help finding the right policy? Here are some of the best options for whole life insurance.
01 Best Whole Life for Building Cash Value: MassMutual
Death benefits are guaranteed through the MassMutual whole life policy, which means the beneficiary of your life insurance policy receives a lump sum cash payment regardless of when you die. Cash value benefits build over the life of the policy. If you are looking to use your life insurance as a supplement for your retirement income, the cash value of a whole life insurance policy can help contribute as a source of income. The MassMutual whole life policy also offers policy dividends, meaning you earn cash dividend payments annually. MassMutual is “A++” rated by A.M. Best and Insure.com rates MassMutual highly in the area of “value for the price.”
How does morbidity rate come into play?
02 Best Whole Life for Pricing: Northwestern Mutual
Northwestern Mutual is the largest direct writer of life insurance in the United States. It offers policy dividends payments for its whole life insurance policy. Northwestern Mutual received a 4-out-of-5 score in a recent customer satisfaction rating from J.D. Power & Associates. The waiver of premium rider from Northwestern Mutual is available, which pays your insurance premium should you suffer a disabling injury. Premiums are guaranteed not to increase and the whole life policy from Northwestern accumulates cash value that is tax-deferred. Northwestern Mutual’s whole life insurance rates are very competitive, particularly for seniors.
03 Best Whole Life for Dividend Returns: New York Life
New York Life
New York Life has consistently received the highest financial strength rating from four major insurance rating organizations (A.M. Best, Fitch Ratings, Standard & Poor’s and Moody’s Investor Services). Why is financial strength important in your life insurance company? The financial strength of an insurance company shows its ability to meet financial obligations and pay any claims presented. For policyholders, this means higher dividend payments.
04 Best Whole Life for Optional Benefits (Riders): MetLife
MetLife received the No. 2 ranking in customer satisfaction from J.D. Power & Associates. The MetLife whole life insurance policy offers a guaranteed level premium and cash value benefits. Dividend payments are earned starting with the second year term of the policy. MetLife gives policyholders the options of adding more coverage to the basic policy by something called a policy rider. Several policy riders are available: The Enrichment Rider (option to add more coverage and cash value over time as you need it); Accident Death Benefit (additional payment for a death as the result of an accident); Child Term Rider (coverage added for your children); Enhanced Care (cash value available for prolonged illness with access to up to 90 percent of the policy value); Flex Term Rider (a term life policy can be added that adds to the coverage for a period of time); and the Disability Waiver (premium is waived for a disability of six months or more).
05 Best Whole Life for Final Expense Coverage: Transamerica
Transamerica’s whole life insurance policy is available in amounts up to $50,000. Group whole life insurance is also available through your employer as a voluntary benefit in amounts up to $25,000. Small whole life insurance policies are available through Transamerica designed to cover funeral costs and other final expenses. Premiums are guaranteed for life as long as you keep paying your premium. Cash accumulation (tied to the performance of investments) is available that can be borrowed from and the tax payable on cash accumulation can be deferred. The accelerated death benefit pays a portion of the policy’s death benefits if you have a terminal illness, chronic illness or a critical illness such as a heart attack or stroke after your policy goes into effect. Transamerica has an “A+” financial strength rating from A.M. Best.
06 Best Whole Life for No Medical Exams: Mutual of Omaha
Mutual of Omaha
Mutual of Omaha does not require a medical exam for coverage and offers whole life insurance in values from $2,000 to $25,000. Whole life insurance policies are available for individuals aged 45 to 85 (in NY, 50 to 75). Children’s whole life insurance is also available. Mutual of Omaha has an “A+” financial strength rating from A.M. Best. There is a graded death benefit for the first two years of the policy, meaning, if during the first two years of the policy the death results from natural causes, the beneficiary receives all premiums paid plus 10 percent. For death by accidental injury, full benefits are available as soon as the policy becomes effective. Coverage is guaranteed for as long as you continue to pay your policy premium. Since Mutual of Omaha is a mutual firm, it pays back policyholders in the form of dividend payments.
07 Best Whole Life for Cash Value Options: Guardian
In addition to paying policy dividends, Guardian also excels at options available to customers looking to accumulate cash value. In fact, there are eight different cash value options, far more than other life insurers. Guardian has an “A++” financial strength rating from A.M. Best. The whole life policy through Guardian offers guaranteed premium, cash value accumulations, potential dividend payments and tax benefits such as being able to defer paying taxes and the dividends accumulating on your policy. Also, if you have to borrow against your policy, the loan may not count as income for tax purposes. Several riders are available, including waiver of premium, enhanced accelerated death benefit, guaranteed insurability and the accidental death benefit.
08 Best Whole Life for Paying off Your Premium Early: State Farm
Courtesy of State Farm
A whole life insurance policy from State Farm has many benefits, including lifetime coverage, access to cash value (tax deferred), guaranteed death benefit and level premium amounts over the life of the policy. Policy limits are available up to $100,000. State Farm also has what they call “Limited Pay Life Plans” for 10, 15 or 20 years. What this means is that you can completely pay for your life insurance premium for the term you choose, in 10, 15 or 20 years. This will help you avoid having to pay life insurance premiums during your retirement.
You are eligible to earn dividend payments but these are not guaranteed. If you are looking for a value in whole life insurance, State Farm offers more policy discounts than many other insurers; (67 percent vs. 40 percent for the industry average). State Farm offers online quoting for its whole life policy. State Farm is “A++” rated by A.M. Best and has the highest rating from J.D. Power & Associates in the area of customer satisfaction.
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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 advisor, if possible. These advisors don’t make commissions from sales, so they can recommend financial products objectively.
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.
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.
» MORE: How much life insurance do you need?
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.
What is Whole Life Insurance?
Whole life insurance is a type of permanent life insurance coverage designed to last from the time you purchase your policy through the remainder of your life.
Whole life insurance typically offers guaranteed acceptance and builds cash value over time. A portion of each premium you pay becomes part of this cash value. This money accumulates on a tax deferred basis and is available to you (subject to policy terms). Additionally, you can borrow money against the cash value of your whole life insurance policy instead of taking out a loan elsewhere. Usually, this can be done without the waiting periods and credit checks that other types of loans can have. Just keep in mind that if you borrow against the cash value of your whole life insurance policy, you should consider repaying it as soon as possible. If you don’t, your loved ones will have a reduced death benefit if you die since unpaid loan balances are deducted from death proceeds.
Learn more about the benefits of cash value: https://www.aigdirect.com/about-life/understanding-cash-value-life-insurance
How Much Does Whole Life Insurance Cost?
Like most other life insurance products, the cost of whole life insurance is determined by age, health, lifestyle, and other factors that contribute to your placement into what life insurers call a «rate class». In order to determine the exact amount you’ll pay for coverage, you’ll have to answer a series of questions before receiving a quote.
Whole Life Insurance Premiums
One advantage of whole life insurance policies is that they offer fixed premium rates and death benefits. That means that from the time of purchase to the end of the policy, your premium payments and death benefit should remain locked in place (so long as you make your premium payments on schedule, and haven’t taken out any cash value). Your predictable, fixed-rate premium payments can be made on a monthly, quarterly, semi-annual, or annual basis as agreed upon by you and the insurer you choose. You can also work with an agent to create a customized a premium payment plan that works for your budget.
For some, it’s the fixed premiums; for others the cash value attracts them to whole life insurance. But, if you’re over 50, 60, or 70 years old there may be another reason to consider whole life insurance from AIG Direct. A commonly chosen type of whole life insurance called Guaranteed Issue Whole Life insurance (GIWL), offers guaranteed issue coverage up to $25k with no medical exam required. Because of its accessibility, GIWL is often chosen by seniors. Also known as «Senior Life» or «Burial Insurance» beneficiaries can use the proceeds to help cover final medical and burial expenses.