Life insurance is an incredibly valuable financial asset that can help provide you and your loved ones with the financial protection you deserve. If you have one or multiple individuals who are currently dependent on your income for their well-being, then purchasing a quality life insurance policy is especially important.
The benefits of owning a life insurance policy ought to be quite clear. In exchange for making a relatively small sacrifice each month, you can feel secure knowing that your family will be provided for no matter what the future may have in store. Currently, it is estimated that roughly 59% of American adults are covered by at least some type of life insurance policy.
However, the term “life insurance” is something that can often be used incredibly broadly. In order to plan for your financial future, it is very important to understand the different kinds of life insurance policies that are currently available.
This article will briefly examine one of the most important categories of life insurance—whole life insurance—and also discuss how a whole life insurance policy can be used to complete your financial portfolio.
What is Whole Life Insurance?
What is the Difference Between Whole and Term Life Insurance?
Generally speaking, most life insurance policies that are currently available can neatly fall into one of two policy categories. Term life insurance policies are the most popular type of life insurance policies.
Unsurprisingly, these policies are almost always the ones that are most affordable. With a term life insurance policy, you will pay a monthly premium over a predetermined amount of time. If you pass away during this specific period (referred to as the “term”), then your beneficiaries will receive a predetermined death benefit.
However, term policies are merely the most basic category of life insurance policies that are currently available. The more comprehensive category of life insurance is referred to as a permanent life insurance policy.
Pros and Cons of Whole Life Insurance
If you are considering purchasing a life insurance policy, you might be thinking of purchasing a whole life insurance policy. While whole life insurance policies have many benefits to offer to their policyholders, there are some potential downsides as well. Therefore, it is important to explore the pros and cons of whole life insurance in order to determine if this is the right type of policy for you.
The Pros of Purchasing a Whole Life Insurance Policy
Perhaps the greatest benefit to purchasing a whole life insurance policy is the fact that your benefit and premium will never change. Once you are locked into a policy, you can count on the premium remains the same. In addition, you already have a policy in place so, as you get older or if you become ill, you don’t have to worry about being denied coverage.
Another benefit to purchasing a whole life insurance policy is that it not only provides your loved ones with financial protection if you should pass away, but it also acts as an investment. As your whole life insurance policy grows in value, you can borrow against it if necessary. In addition, the interest that your whole life insurance policy builds is interest-free. Since professional investors handle the funds in whole life insurance accounts, you can count on the funds to grow.
The Cons of Purchasing a Whole Life Insurance Policy
Just as there are several pros associated with purchasing a whole life insurance policy, there are some potential downsides as well. For example, whole life insurance policy premiums tend to be far more costly than the premiums associated with term life insurance policies. For more information on term or whole life insurance click here. Furthermore, whole life insurance policies do not offer the same payment and benefit flexibility as universal life insurance policies. At the same time, if you are looking for a permanent life insurance policy that is low-maintenance, a whole life insurance policy is the way to go.
How Much Does Whole Life Insurance Cost?
Naturally, a whole life insurance policy will usually cost significantly more than a term life insurance policy, even if the death benefit is the same and the policy is being issued by the same life insurance provider.
The primary reason why whole life insurance costs more than term life insurance is that these policies not only offer a tangible cash value but they also provide you with coverage that will last your entire life. This means that, because whole life insurance policies are a form of permanent life insurance, the death benefit of a whole life insurance policy will be guaranteed to be paid out in the future.
There are other factors that affect the cost of whole life insurance policies. They are:
Depending on your job, family history, existing health conditions, age, and lifestyle choices (smoking, skydiving, etc…) your rates will differ. This means it can be hard to know how much whole life insurance will cost for you without getting more information.
However, to give a few examples, the chart below shows the cost of whole life insurance for various face amounts. These rates are for a 35-year-old male and female, in good health, who are not smokers.
|Face Amount||Male Rate||Female Rate|
Who is Whole Life Insurance Best For?
The strengths of whole life insurance policies is best summarized by this chart:
|Cash value||Over time, cash value is accumulated that can be borrowed against. This is a strong investment tool if used right.|
|Whole life coverage||Your coverage lasts your entire life. No need to worry about it expiring.|
|Fixed rates||Whole life insurance rates typically never change. You can lock in low rates at a young age that will never increase as you grow older.|
|Estate planning||Whole life insurance policies can span multiple generations. Many riders allow you to protect your estate and assets to build a trust and pass assets on to your family.|
Whole life insurance is a bit more nuanced than most term life insurance policies. With term life insurance, you are functionally “renting” financial security, but with whole life insurance, you are actually building equity.
The longer you are able to go without withdrawing from the cash value of your policy, the quicker that policy will accumulate additional value. If you are able to be a disciplined and patient saver, your whole life insurance policy may be eventually outperforming the stock market (while still providing you with financial security via the death benefit).
Because of the unique structuring that can be seen in a whole life insurance policy, these policies are often considered to be ideal for people who are hoping to balance growth and security.
If all you are looking for in a life insurance policy is financial protection, then you would likely be better of using a term life insurance policy. If all you are hoping for in a financial asset is growth, then you would likely be much better off investing in an S&P 500 Index Fund.
However, if you are looking to balance multiple financial objectives at once, then a whole life insurance policy may be exactly what you’ve been searching for.
If you currently have young children, then the security portion of your whole life insurance policy will protect them until they are old enough to support themselves on their own. The growth portion of the policy, in the meantime, can also help you prepare for retirement and relevant late in life expenses.
What are the Best Whole Life Insurance Companies?
There are currently many different whole life insurance providers available for you to choose from. As stated, the whole life insurance policy that makes the most financial sense for some families may not make as much sense for others. It is important to do your research and compare multiple different options before you make any final commitments.
Here are some of the most highly rated whole life insurance providers in the industry:
|Company||A.M. Best Rating||Customer Reviews|
|Protective Life||A+||4.4 / 5|
|Prudential||A+||4.2 / 5|
|Banner Life||A+||4.2 / 5|
|AIG||A||4.1 / 5|
|Lincoln Financial||A+||4.0 / 5|
|Mutual of Omaha||A+||3.9 / 5|
|North American||A+||4.0 / 5|
|Ameritas||A+||3.8 / 5|
1. Protective Life
Protective Life has options available for multiple different health classes. Additionally, they are consistently recognized for having excellent customer service.
Prudential is one of few companies that has A+ rating from AM Best. Since it first opened in 1875, Prudential has been one of the most reliable companies in all of the life insurance industry.
3. Banner Life
Banner Life statistically averages eight times fewer complaints per customer than the average whole life insurance provider. The company also has a very extensive history.
AIG offers a very wide range of life insurance policies and other valuable assets that make it easy to build a comprehensive financial portfolio. Some of these include travel insurance, mutual funds, annuities, long-term care insurance, and numerous others.
5. Lincoln Financial
Lincoln Financial is also quite flexible—its college savings plans and retirement assets can be incorporated with a life insurance policy to help plan for every stage of life.
6. Mutual of Omaha
Mutual of Omaha is typically among the most admired life insurance companies due to their commitment to various causes as well as their commitment to their customers.
7. North American
North American Company offers a distinctive Indexed Universal Life insurance which can often produce greater returns on investment than many of its alternative options.
Ameritas is yet another life insurance company that is highly reviewed by its clients and is also able to help build more comprehensive portfolios (with numerous banking products to choose from).
Though there are still many other life insurance providers that you will have the option to consider, this list can help you begin searching in a productive direction. Once you have been able to effectively identify your current needs and the budget you have for a policy, finding an option that can work for you should be significantly easier.
Whole Life Insurance – What to Takeaway
There are many different ways that you can begin to improve your current financial situation.
Exploring the life insurance industry and comparing the different options they have available is a mature step towards achieving total financial security.
Whole life insurance policies are a type of permanent life insurance—these policies provide you with financial protection for your entire life while also allowing your portfolio to grow and accumulate a cash value.
If you are willing to be patient and wait for your investments to grow, a whole life insurance policy is a great way to simultaneously establish equity and protection.
Finding the Best Whole Life Insurance Rates
With any large investment in life, you want to take the time and make sure you are educated before making a purchasing decision. The best way to do this in the overwhelming world of life insurance quotes is to first contact an independent life insurance agent.
Our agents work with over 50 of the best life insurance companies, providing whole and term life insurance.
We seek to undertsand your personal situation, in order to identify the financial needs of your family, and find you the best whole life insurance policy in order to get them the protection the deserve.
Give us a call today, or get started now with our online quoting engine!