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Whole life insurance

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A senior couple walking together on a sunny day. The man is pushing a bicycle with a basket on it.
Nitat Termmee/Getty Images
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Whole life insurance is a type of permanent life insurance that typically comes with level premiums and a cash value account that can accumulate interest and/or capped returns. Those who want lifelong coverage and an included cash value component may benefit from a whole life insurance policy. While considering the need for life insurance may not be the most welcome topic, researching which policy option is right for you can bring you peace of mind for your loved ones’ financial wellbeing. In the event of your death, a life insurance policy could help provide significant financial protection.

Key takeaways
  • Whole life insurance is a permanent policy that remains in force for your entire life, as long as premiums are paid, and guarantees a death benefit.
  • Whole life insurance policies may cost two to three times more than term life insurance policies because of the expected payout.
  • Whole life insurance policies usually have a cash value component that you may be able to put towards premiums when enough funds accumulate.

What is whole life insurance?

As long as premiums are paid, whole life insurance provides coverage for an insured’s entire life and the death benefit payout is essentially guaranteed in the event of the policyholder’s passing.  In addition to the death benefit, whole life policies include a cash value component, which is an account that accumulates funds over time.

The policyholder can also choose to borrow against the money during their lifetime under certain circumstances. This account is funded by the policy’s premiums.

How does cash value work?

The cash value component of a whole life insurance policy can be used in a variety of ways and has a few tax considerations to keep in mind. You may borrow against it, use it to pay premiums or make tax-free withdrawals, within policy limits. Withdrawals over the amount of the cash value may be considered taxable income and will reduce the death benefit amount that goes to your beneficiaries.

Knowing how to leverage the cash value can be a useful tool. When you borrow against the cash value amount, you will not have to undergo a lengthy approval process from a bank or lender, and you will likely enjoy a lower interest rate. Borrowing against the cash value account may be the right fit for individuals in a pinch who want a loan with an easy approval process. Additionally, a loan against the cash value is not reported to credit bureaus, meaning it does not impact your credit score. Just remember that any amount that remains unpaid when you pass will likely be deducted from the death benefit total.

Best whole life insurance

Many regional and national life insurance companies offer whole life policies, so choosing the right one will require some research. The following list of best whole life insurance companies may be a great place to start your search. Bankrate’s insurance experts chose these providers based on the following considerations: customer satisfaction rankings from J.D. Power’s 2021 U.S. Individual Life Insurance Study, financial strength scores from AM Best, reported complaints from the National Association of Insurance Commissioners (NAIC), available coverage options and digital policy management tools.

  • Globe Life
    • Perk: Globe Life offers a wide range of coverage options, including children’s whole life insurance and a no-exam whole life policy.
    • Drawback: The Globe Life mobile app has a low rating of 2.8 out of 5 on the App Store for iOS users.
  • Nationwide
    • Perk: The company offers 13 whole life insurance riders, more than most of its competitors, which is an advantage for policyholders who wish to create personalized policies.
    • Drawback: The highest coverage amount you can purchase is twenty times your annual income, which may restrict some customers from purchasing their desired amount of coverage.
  • New York Life
    • Perk: New York ranks above average for customer satisfaction, and offers five life insurance riders, including a chronic care option that allows policyholders to access their benefits early if they develop certain health conditions.
    • Drawback: Not every life insurance option is offered in all states.
  • Northwestern Mutual
    • Perk: Northwestern Mutual has the third-highest J.D. Power score and fewer than baseline complaints filed with the NAIC, which speaks highly to its customer satisfaction.
    • Drawback: The company does not offer a no-exam whole life insurance policy like many other insurers.
  • State Farm
    • Perk: State Farm ranks highest by J.D. Power for life insurance customer satisfaction and offers policies in nearly every state.
    • Drawback: The company offers just four whole life insurance riders, which is fewer than what is offered by many other large life insurance companies.

The cost of whole life insurance

Generally, whole life insurance is more expensive than the same amount of term life insurance coverage. However, whole life premiums remain stable and the policy comes with a cash value account, which policyholders can leverage for other financial needs.

Your specific whole life insurance policy cost is determined by multiple factors, including the amount of coverage you choose, your age and your relative health.

Learn more: Affordable life insurance companies

Is whole life insurance worth it?

Some people may prefer whole life insurance because it remains in effect for the insured’s entire life and because the cash value component adds additional financial flexibility. However, these financial components also contribute to a higher rate compared to premiums associated with a term life insurance policy. Whether or not whole life insurance is worth it to you depends on your financial situation, budget and long-term goals.

On the other end of the spectrum, many people prefer the shorter-term coverage that comes with a term life policy. For instance, if you only want coverage for a limited amount of time — such as when your children are in school or while you still owe on a mortgage — you may want to apply for a term life insurance policy just for the period of time when the financial protection is most critical. Term policies are typically much more affordable, as a payout is significantly less likely to occur.

Term life vs. whole life

When deciding between what type of life insurance to purchase, consider your personal financial goals and situation. Do you want your life insurance policy to cover specific financial obligations such as college tuition or a mortgage after your death? If so, you may want to consider getting term life insurance with a long enough term to cover the length of your mortgage or the number of years your children will be in school.

However, if you want lifelong coverage that is guaranteed to provide a sum to your loved ones after your passing, whole life insurance is likely a better option for you. Since whole life insurance policies are more costly, you may find it helpful to consult with a financial advisor on how best to leverage the cash value component with the cost of premiums. For those who prefer an investment aspect to accompany life insurance coverage, a whole life policy may be the right fit.

Frequently asked questions

Written by
Lizzie Nealon
Insurance Writer
Lizzie Nealon is a former insurance writer for Bankrate. Her favorite part of the job is making home, auto and life insurance digestible for readers so they can prepare for the future.
Edited by
Insurance Editor
Reviewed by
Senior wealth manager, LourdMurray
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