Whole Life Insurance
Way.com: The Better Way to Shop for Whole Life Insurance
No Medical Exams
100% Online
Get estimates in seconds
4.9/5 Rating on the App Store
Way.com: The Better Way to Shop for Whole Life Insurance
No Medical Exams
100% Online
Get estimates in seconds
4.9/5 Rating on the App Store
Key Takeaways
Deriving the meaning from the name, whole life insurance is a type of life insurance policy that provides coverage for the policyholder's entire life. Going by its nature, it is also known as permanent life insurance as it does not have a specific term or expiration date like term life insurance.
Even though the premium of whole life insurance is high, it also has a savings part where cash value can build up. In other words, the interest builds up at a fixed rate and is not taxed immediately. The death benefit and the savings are the major takeaways of this kind of policy. Therefore, it is an asset and a reserve for an unpredictable future.
Whole life insurance is a long-term solution for those who want to use the policy as a source of tax-free income in retirement. Here we look in detail at what whole life insurance means and whether it is the right choice based on your needs.
Whole life insurance guarantees the beneficiaries will get a death benefit if the policyholder dies. In exchange, the policyholder pays a level, regularly due premium. Along with the death benefit, the policy has a savings part called the "cash value." In the savings part, interest can build up without being taxed. A key part of whole life insurance is that the cash value grows over time.
However, the premium rates are dependent on your choice of coverage, age, and medical history.
Here is an overview of how a whole life insurance policy works.
The key terms one should understand about whole life insurance are death benefits, premium, cash value, and dividends.
| Key Factors of Whole Life Insurance | What does it mean? |
|---|---|
| Premium | • It is the amount to be paid regularly to the insurance company. It can vary with the chosen coverage limits. |
| Dividends | • It is a share of the insurance company's profits. Most of the time, the dividend amount depends on how much was paid into the policy.
• Guaranteed dividend policies have higher premiums to balance the insurance company's risk. Non-guaranteed dividends may have lower premiums but may not pay out yearly. |
| Cash Value | • The amount of money accumulates over time as a portion of the premium payments is invested by the insurance company in a savings account called the cash value account.
• It builds up as savings which can be used to pay premiums or withdrawn in emergencies. |
| Death Benefit | • It is the amount paid to the beneficiary at the time of death.
• This amount is non-taxable. |
The specific coverage and benefits a whole life insurance policy provides can vary depending on the insurer and the policy terms. However, in general, whole life insurance typically covers the following.
Death benefits in the case of whole life insurance include the insurance amount that the beneficiary receives and the funeral and burial costs, plan inheritance funds and retirement. In addition, if you have more estate than what is allowed by your state or the federal government, the death benefit can be used to reduce estate tax.
Whole life insurance can be broadly classified as participating and non-participating. While participating pays dividends based on the company's profit, non-participating, on the other hand, doesn't pay dividends to the policyholder. However, the premium for non-participating whole life insurance tends to be lower.
With an indexed whole life policy, the cash value grows at a rate set by your provider. Though there is a guaranteed minimum and a set upper limit, your provider's investment index determines other changes in the investment.
This kind of whole life insurance policy allows you to apply if you are 50 to 80. The company will guarantee a policy no matter what your health condition is.
However, this will allow you to pay at shorter intervals but a larger sum as a premium.
This whole life insurance covers two individuals in a single policy. The death benefit, in this case, can be received after the death of a policyholder or after both policyholders die.
In modified whole life insurance, the initial payments for up to 5 years are lower than in a standard insurance policy. However, the premium rates spike after the extended honeymoon period in this type of policy. This is due to the reason that death benefits are lower during this period. It provides the security of whole life insurance with a minimum initial investment.
When you have opted for a whole life policy but cannot afford to pay the premiums, they can surrender the policy for its cash value or convert it to a reduced paid-up policy and use the policy's cash value to pay the premiums.
Thus, a paid-up policy is when the policyholder stops paying the premium, and the death benefit is reduced and adjusted according to the cash value of the policy paid till then.
This whole life insurance policy doesn't require any medical examination but mandates a health questionnaire. The death benefits are up to $40,000. However, you might be denied coverage if you are terminally ill or are currently bedridden; you may not be eligible for the policy.
When you pay a lump sum as the premium upfront, it can be considered a single-premium whole life insurance. The policy works for the rest of the life and provides death benefits to the beneficiary.
This kind of whole life insurance is when the insurance's cash value is invested in mutual funds. Therefore, the fluctuating nature of the cash value can be highly variable. However, it can also be allocated towards a fixed deposit and reduce the risk with the fixed interest.
Life insurance policy for children suits best for children from early in their childhood. However, the younger the child, the cheaper the policy. Even though the cash value is higher due to a greater number of years, it happens at a low rate of return.
Here are the best companies for whole life insurance based on average monthly costs, policy types, sample costs according to gender, payment methods, and waiting period.
| Insurance Company | Policy Types | Sample Costs (monthly) | AM Best Rating |
|---|---|---|---|
| New York Life | Term, Universal (UL), Variable Universal (VUL), Whole | N/A | A++ |
| Nationwide | Final Expense, Indexed Universal (IUL), Term, Universal (UL), Variable Universal (VUL), Whole | $26.25 | A+ |
| Guardian | Term, Universal (UL), Whole | $27.47 | A++ |
| MassMutual | Term, Universal (UL), Variable Universal (VUL), Whole | $26.97 | A++ |
| Penn Mutual | Term, Whole, indexed universal life, VUL, Guaranteed Universal Life | N/A | A+ |
The life-long coverage it provides, the cash value, and the provision for earning dividends are all reasons for the high costs of whole life insurance compared to term life insurance. Apart from these, the age, gender, and medical history of a person too play a part in determining the insurance rates. For example, suppose you are a younger person signing up for whole life insurance. In that case, you will be paying less as the premium, considering the insurer's health, lifestyle, coverage, and even driving record.
Depending on the coverage we choose, the average monthly rates can vary. However, a 30-year-old healthy non-smoker female costs $185 a month for a $25,000 life insurance policy, while it costs $206 for a male of the same age group.
| Age | Female | Male |
| 30 | $185 | $206 |
| 40 | $267 | $298 |
| 50 | $393 | $450 |
| 30 | $357 | $399 |
| 40 | $511 | $569 |
| 50 | $757 | $852 |
The rates will vary according to the coverage and the number of years the insurance is taken for. Here we compare the whole life insurance rates for 20 and 10-year terms for both $250,000 and $500,000 whole life insurance policies.
| Age | Female | Male |
| 25 | $381 | $417 |
| 35 | $498 | $550 |
| 45 | $658 | $717 |
| 55 | $891 | $965 |
| 25 | $755 | $829 |
| 35 | $991 | $1094 |
| 45 | $1312 | $1431 |
| 55 | $1776 | $1925 |
| 25 | $997 | $1061 |
| 35 | $1061 | $1211 |
| 45 | $1469 | $1559 |
| 55 | $1806 | $1904 |
| 25 | $1988 | $2117 |
| 35 | $2417 | $1291 |
| 45 | $2934 | $3111 |
| 55 | $3606 | $3804 |
The guaranteed death benefits, in most cases, assure financial security to the beneficiaries. Depending on the coverage and the waiting period, in some cases, benefits are assured in whole life insurance.
The cash value that grows over time is a distinct feature of whole life insurance. It grows over time as you pay your premiums and can be borrowed against or used to pay premiums, and may also provide a source of income or savings in retirement.
The death benefits and the cash value component are tax-free. Therefore, the increasing savings are available to you without paying tax.
The premiums are paid at fixed rates throughout the policy term. The rates may be calculated initially according to gender and age, but the amount to be paid remains static with age.
If you own a whole life insurance policy, it can be used as collateral for getting bank loans at competitive interest rates.
| Pros | Cons |
|---|---|
| Tax-free benefits | Higher premiums |
| Cash value | More time for cash value build-up |
| Easier retirement planning | Expensive investment |
| Lifelong coverage | Possibility of a surrender fee if you stop paying the policy. |
| Fixed premiums | |
| Predictable in nature |
Any insurance is a protection against any unexpected financial liability. Whole life insurance protects you throughout your life, provided you pay the premium as a lump sum or at regular intervals. If you want to build your savings, then the cash value component of the whole-term life insurance is an added benefit. In addition to the guaranteed death benefit to your beneficiaries, the cash value component of a whole life insurance policy can grow tax-deferred; therefore, it can be included in a long-term financial plan.
If you meet these criteria, you can consider buying a whole life insurance plan.
It is always a good idea to review the details of a policy before purchasing it to ensure it meets your needs and financial goals. When you plan insurance, you should understand your requirements in the long run based on your current financial status. Universal, whole, and term life insurance can be chosen according to one's needs.
| Universal Insurance | Whole Life Insurance | Term Life Insurance |
|---|---|---|
| Death benefits are not guaranteed | Guaranteed death benefits | Death benefits while the policy is in force |
| The cash value can build over but depends on the policy. | Guaranteed cash value | No cash value accumulation |
| Flexibility in premium rates | Flexibility in dividends | Customizable |
| Lower premiums | Expensive premiums | Lower premiums |
| May lapse | Doesn't lapse | Will lapse if you outlive the term length |
| An investment option in some variants. | Works as an investment option | Not an investment option |
| Long-term option | Lifetime protection | Covers a set period |
The life insurance rates published in this guide are based on the results of research completed by Way.com’s data team. Using a mix of public and internal data, we analyzed millions of rate averages across U.S. ZIP codes.
Quotes are typically based on a full coverage policy average unless otherwise noted within the content.
These rates were publicly sourced from insurer filings and should be used for comparative purposes only — your own quotes will differ. Given this, it’s important to go through our insurance steps form to find how much you can save with way.com
Whole life insurance is a good investment method due to the cash value account factor. It functions like a savings account you can withdraw or borrow against.
The life insurance cost is dependent on age and gender. The average cost of a $100,000 whole life insurance policy for a healthy 30-year-old non-smoker, with a 10-year term, will cost $101 per year while it will cost $113.
The average interest rate depends on the factors the insurers consider; the average annual rate is 1.5%.
If not for any loan you took against the cash value, you will receive the full death benefit.
Yes, you can borrow or take a loan against the cash value.
The cash value which builds within the policy is tax-free. However, the death benefits remain tax-free except for when there is a delay in taking the payout or when the people associated with the policy function in three different roles.
The insurance company gets the information from third-party sources, and the questionnaire is filled in initially. It is obtained from medical reports and motor vehicle reports as well.
Before buying a policy, check its details to ensure it meets your needs and financial goals. You should also consider your long-term financial needs when planning insurance. If you want lifelong coverage, then whole life insurance is the option. However, short-term coverages can be considered under term life insurance.
Access your digital insurance card through the app. You no longer need to carry your physical insurance card with you.
Receive reminders before your renewal. Way.com will also send new quotes from up to 45 insurance companies with your renewal reminder.
Keep everyone on your policy up to date by sharing your insurance information.
Make changes to your policy right from the app (coming soon) and ask for expert advice.
For the best user experience, please download our Way app.
or
