Buying a life insurance policy can help you create a financial safety net for your family and ensure you fulfill your financial obligations even after you’re gone. Buying a whole life insurance policy can do all that and help you prosper while you’re still alive!

Indeed, whole life insurance comes with a variety of living benefits, like cash value accumulation, making this a very attractive life insurance product for those who want to build up generational wealth for their families. 

Buying the right life insurance policy is an essential step to securing your family’s financial future. To help you make this decision, Insurify has created a life insurance comparison tool to help you compare life insurance quotes and policies all in one place—give it a try today!

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What is whole life insurance?

Whole life insurance is a type of permanent life insurance policy that pays a predetermined amount of money—called a death benefit—to a designated person when you pass away. Unlike term life insurance policies, whole life policies insure you for the entirety of your life, rather than just a period of time

Whole life insurance also builds cash value as time goes on, which means part of your premium payments goes into an investment account or a bank account that grows interest. This cash value component allows you to borrow against your policy if you ever need to take out a loan. 

While whole life insurance offers many attractive features, it does cost a lot more than term life insurance. This type of policy is best suited for those who want a robust life insurance policy with an investment feature and are willing to pay a steep price for it. Alternatively, a term life insurance policy would provide similar coverage for a cheaper price, without an investment feature. 

Make sure you compare life insurance policies and prices on Insurify before deciding what type of policy is best suited for you and your needs. 

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Cash Value and Whole Life Insurance

All permanent life insurance policies, including whole life insurance, include an incredibly attractive cash value component. This cash value component allows a portion of your premium payments to accrue cash value over your policy’s term. 

Usually, part of your monthly premium payments goes toward the actual coverage of your policy (the death benefit payout), while the rest of it goes to a tax-free bank account that grows interest or an investment account. If your money goes into a bank account with an agreed-upon interest rate, you will have guaranteed cash value. If your money goes into an investment account, the growth of your funds depends on market conditions. Your policy’s cash value is tax-deferred, so you don’t have to pay taxes on it.  

Once the account begins to build cash value, you can withdraw from or borrow against the money in this account. This withdrawal, however, will be subject to income tax. Alternatively, you can even use the money in this account to pay for your life insurance premiums or purchase more coverage. 

If you choose to cancel or surrender your life insurance policy, your life insurance provider will pay you the remaining money from your cash value account. As with withdrawals, this money will also be subject to taxes. Make sure you consider any taxes you will have to pay on this amount before canceling your policy.

Whole Life vs. Term Life Insurance

A lot of people considering life insurance primarily look into buying either a whole life or a term life policy. These two policies can be quite different from each other and serve slightly different needs. 

One of the biggest differences between term life and whole life policies is the policy length. A whole life insurance policy is a permanent life insurance policy that lasts your entire life, while a term life policy only lasts for a predetermined number of years, generally ranging from 2 to 30 years. 

Another pretty big difference between the two types of policies is the ability to invest your money and take out policy loans. While whole life insurance allows you to invest a portion of your premium and grow your money, term life insurance does not. Some term life policies do, however, have a feature that returns a portion of your premiums back to you if you’re still alive at the end of your policy period. 

Perhaps the most significant difference between the types of policies is the difference in cost. Term life insurance policies are generally much cheaper than whole life insurance policies. This is an important factor to consider if you’re drawn to the cash value component of whole life insurance policies. With term life insurance, you may not be able to invest part of your premium, but you could potentially separately invest the money you’re saving as a result of the cheaper premiums. 

Whole life insurance might be a good option for you if you have steady income and are looking for permanent coverage, a cash value component, and a guaranteed return on your investment. Conversely, a term life policy is a good option if you’re young and want inexpensive life insurance coverage with a guaranteed death benefit to secure your family’s financial future, albeit without a cash value component. 

If you’re still unsure about whether to buy a whole life policy or a term life one, you should consider buying a term life policy from a company that gives you the option to convert the policy to whole life either during or at the end of your term. 

Regardless of what you choose to buy, make sure you compare life insurance costs and policies on Insurify before settling down on a specific policy—you might find a good deal on some great life insurance coverage!

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Deciding Whole Life Insurance Coverage Amounts

Since you can’t predict the future, determining how much life insurance coverage you need can stump even the most prudent consumer.

To get a general idea of how much life insurance you should buy, calculate your long-term financial obligations (your mortgage, your child’s college tuition, etc.) and subtract your assets. This is how much money your life insurance policy should cover.

Additionally, don’t forget to consider replacement costs. If one parent stays at home to care for the children and run the household, these duties will need to move to someone else in the event of your passing. And that person will need to be paid for their work.

Consulting a fee-only financial advisor as you shop for policies will help you figure out how much financial protection your family needs and greatly increase the chances that you get the right amount of coverage for the best price. If you don’t have the time or money to do that, though, a good rule of thumb is to err on the side of caution and buy a little more coverage than you think you might need.

Whole Life Insurance Approval Processes

Simplified Issue

A simplified issue life insurance policy means you get a policy if your answers to certain questions fit the underwriting guidelines of the insurance company. No medical exam is necessary. Typically, you have to answer four or more questions to get a simplified issue life insurance quote. These questions seek to determine your smoking habits, your HIV/AIDS status, whether you have a terminal illness, and whether you reside in a hospital or long-term-care institution.

With these questions, carriers can determine a baseline level of risk and then price your policy accordingly. However, since insurance companies only get a few self-reported bits of medical information with which to price these policies, they end up taking on more risk, which translates to higher costs for you. If you are relatively healthy, a fully underwritten policy will most likely be cheaper.

Guaranteed Issue

Like simplified issue, guaranteed issue does not require a medical exam. In fact, guaranteed issue policies do not require you to answer any medical questions. As the name implies, you are “guaranteed” a policy as long as you pay the premium. Because the insurer knows nothing about your health, though, the premiums are significantly more expensive than either simplified issue or fully underwritten policies.

A major drawback to guaranteed issue policies is that the full death benefit is not available until the policy has been in place for a certain amount of time, usually a couple of years. So if you buy this type of policy and die within two to three years of purchase, your beneficiaries will only be given the amount of the premiums paid up to that point.

Fully Underwritten

The most important thing to note about fully underwritten policies is that they typically provide the cheapest premiums. They also allow you to purchase as much coverage as you like. With simplified issue and guaranteed issue, there will be a limit to how much coverage you can buy.

Insurers use the term “underwriting” to describe the risk-assessment process. To fully assess a person’s risk, insurance companies require you to submit an application, fill out a medical questionnaire, and undergo a medical examination. 

If you are in generally good health, your risk to these companies will be low, so they will give you lower rates. If you apply for fully underwritten policies and for some reason, don’t get accepted for coverage, you can always then look into simplified or guaranteed issue policies afterward. That being said, these “no medical exam” options should be a last resort.

What are “riders,” and do I add them to my policy?

In short, a rider is an addition to a policy that amends the coverage terms in some way. Most riders serve to add coverages for additional costs.

Riders make it so that policyholders can create life insurance policies that meet their specific needs. They are often used to add coverage to an existing policy in lieu of purchasing another separate policy. Not all providers allow for riders, but if yours does, you must get in touch with the insurance company to add one.

Common riders include “Guaranteed Insurability,” “Family Income Benefit Rider,” “Accidental Death and Dismemberment,” and “Accelerated Death Benefit.” Each of these provides unique benefits for very specific situations.

Whole Life Insurance Quotes

To help you better understand the costs and pricing of whole life insurance, we’ve put together some whole life insurance quotes from top companies

Company Name Avg. Monthly Quote for Whole Life Policy
Mutual of Omaha $194
Farmers $303
USAA $719
Gerber Life $784
State Farm $927

For reference, these are some term life insurance quotes for a 30-year policy:

Company Name Avg. Monthly Quote for 30-Year Term Life Policy
Mutual of Omaha $51
State Farm $55
Prudential Financial $92
John Hancock $119
Gerber Life $129

Remember, whole life insurance policies are generally more expensive than term life insurance policies

To compare personalized life insurance quotes and coverage amounts, head on over to Insurify today! 

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Best Whole Life Insurance Companies

Not all life insurance companies are created equal, which is why Insurify has put together a list of the best companies offering whole life insurance. 

State Farm 

Based out of Bloomington, Illinois, State Farm has provided insurance products to Americans for almost a century. 

State Farm offers both term and whole life insurance and currently holds an Insurify Composite Score of 96—one of our highest. It is also the highest-ranking life insurance company according to J.D. Power, which measures customer satisfaction.

Rest assured, State Farm offers great life insurance products as well as a fantastic customer service experience. 

MassMutual 

With a 170-year record of providing life insurance and other financial products, it’s no surprise MassMutual is #2 on our list. 

Buying a term or whole life insurance policy from MassMutual also allows customers to benefit from its wide range of financial products and affiliations with other financial institutions. 

MassMutual currently holds an Insurify Composite Score of 94 and holds a financial strength rating of A++ from A.M. Best—making it a solid contender for your life insurance company

Guardian Life 

Guardian Life offers both life and health insurance, ensuring your and your family’s well-being is protected during the course of your life as well as after you’re gone. 

Another industry old-timer, Guardian Life has sold life insurance products for 160 years. That being said, the company’s products are quite well-suited for the tech-savvy. Its website offers interactive tools and quoting experiences that allow you to determine how much coverage you need and get an idea of how much it would cost. 

Guardian Life currently holds an Insurify Composite Score of 92 and an A++ financial strength rating from A.M. Best. 

Mutual of Omaha 

Mutual of Omaha offers life insurance and Medicare supplement health insurance, making it a particularly attractive choice for seniors looking for life insurance. 

Mutual of Omaha is also well-known for its affordable life insurance prices as well as its diverse array of life insurance products, including whole life insurance, term life insurance, and universal life insurance

Mutual of Omaha currently holds an Insurify Composite Score of 78 and an A+ financial strength rating from A.M. Best. 

Colonial Penn

While Colonial Penn has only provided life insurance for about 50 years, the company provides great whole life insurance options with level premiums and flexible payment options.

Colonial Penn’s other life insurance products are also very senior-friendly, with term life policies that are renewable up to age 90, final expense coverage, and guaranteed acceptance life insurance that doesn’t require a medical exam. The only drawback is that the company’s maximum benefit is only $50,000. 

Colonial Penn currently has an A+ rating from the Better Business Bureau. 

Make sure you compare life insurance quotes on Insurify before settling on a company. Insurify shows you quotes and policies from over 20 different life insurance companies, allowing you the chance to compare life insurance all in one place!

How to Compare Prices and Get the Best Policy for You

Buying life insurance used to mean contacting multiple insurance companies, filling out their paperwork, and then getting individual quotes from each one. These days, you can easily compare by getting quotes online through quote-comparison sites such as Insurify. You answer a few questions, and the comparison site provides quotes from multiple carriers.

Assuming you are relatively healthy, you will get the best price and coverage by going for a fully underwritten policy. If that’s not the case, though, you can always compare simplified and guaranteed issue options.

Updated April 14, 2021

Tanveen Vohra is currently a content writer for Insurify. Tanveen has a background in college media, having produced videos, news articles, and feature pieces for various student magazines and newspapers at SUNY Buffalo. She recently moved to the Boston area, and now works full-time for Insurify, helping produce blog content. In her spare time she frequents climbing gyms and explores film photography.