Whole Life Insurance Guide

Contributor, Benzinga

Looking for the best rate and coverage for life insurance? Consider Sproutt.

If you’re after peace of mind in your search for the right life insurance, whole life insurance may provide the type of benefits you’re looking for with its guaranteed death payouts and cash value. Whole life policies can get expensive, but you can find affordable whole life plans from some providers.

We’ll take a look at some of the best cheap whole life insurance policies available right now. We’ll help you decide if a whole or term policy is right for you, teach you how life insurance payouts work and introduce you to some of our favorite providers offering both whole and term life policies. 

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Key Points

  • It often has a savings element to it and is used as an investment.
  • The savings element, often called a cash value benefit, allows value in the form of “cash” to accumulate.
  • These policies are tax-advantaged, which is how the cash value savings component grows.
  • Whole life is not the same as universal life, indexed universal life or variable universal life insurance, but these are all types of permanent life insurance.
  • Whole life insurance is the original permanent life insurance and is often called traditional life insurance.

What is Whole Life Insurance?

Whole life insurance is a type of permanent life insurance policy that pays out a guaranteed death benefit to named beneficiaries when the policyholder passes away. Unlike term life insurance, this type of coverage lasts for the duration of your life so long as you continue to make your premium payments.

>> Deeper dive: What is Whole Life Insurance?

How Does Whole Life Insurance Work?

Whole life insurance is a type of permanent life insurance. This means that as long as you keep paying your premiums on time, you’ll have life insurance until you die. Whole life insurance typically includes 2 benefits: a death benefit and a cash value benefit.

  • Sign up for a policy with your chosen life insurance provider.
  • Name your beneficiary or beneficiaries. This is who receives your death benefit.
  • Choose your death benefit amount and how it will be distributed. This amount will affect how much your monthly premium is.
  • Pay your premium by month, which is a fixed rate meant to last the duration of your lifetime.
  • Your coverage cannot be canceled unless you don’t pay you premiums.
  • The cash value benefit is fed by a portion of your premium each month, which is added to the benefit tax-deferred. You don’t have to pay taxes on this money when it is withdrawn.

Want to know more detail? Here’s how whole life insurance works on a more in-depth basis.

When you sign onto a policy, you’ll name one or more beneficiaries. A beneficiary is someone who receives all or a portion of your policy’s death benefit. Your beneficiary can be your spouse, children, business partner or even a trust or religious institution.

You’ll also choose your policy’s death benefit. Your death benefit goes to your beneficiaries as a lump sum when you die. For example, let’s say you choose a policy with a $300,000 death benefit. Your beneficiary will receive $300,000 from your insurance provider after your death. Do you have more than 1 beneficiary? You may choose how your benefit is split.

The specific coverage levels available to you will depend on the company that issues your policy. As a general rule, the higher your death benefit, the more you’ll pay each month for your insurance premiums.

After you enroll in your policy, you pay a monthly premium to your insurance company. This premium is fixed and won’t change as you get older but your life insurance company has the right to terminate your policy if you discontinue paying your premiums.

Your insurance company cannot cancel your policy unless you elect to or you stop paying your premiums. This means that your beneficiaries will receive your death benefit as long as you stay on top of your premiums.

Whole life insurance also includes a cash value benefit and a portion of the premium paid money goes toward this benefit tax-deferred. This means that you don’t need to pay tax on the money when you withdraw it.

How to Cash Out Whole Life Insurance

The cash value portion of your whole life policy accumulates interest at a percentage set in the terms of your policy. This interest rate is usually much lower than other types of investments, but insurance companies typically guarantee a certain percentage of growth each year.

You can access this cash in a few different ways:

  • Withdraw the money. You may withdraw the money from the cash-value portion of your policy at any point. This money isn’t taxable unless you lapse on your policy and borrow above the amount you’ve paid in through your premiums.
  • Take out a loan. You can borrow against the money from the cash-value portion with a low-interest loan. This allows you to continue building interest on the cash in your savings account while also getting cash at a low rate. Like any other loan, these loans accrue interest that you must pay back in addition to your principal over time in monthly installments. If you die with a loan out, the amount you owe is deducted from your beneficiaries’ death benefit.
  • Surrender your policy. You can collect any money you’ve accumulated as a lump-sum payment if you cancel your life insurance policy. The earlier you surrender your policy, the less money you’ll collect. Your insurance company may also charge a surrender penalty on your cash value.

Remember, you can only claim your cash value while you are alive. The cash left after you pass will return to the insurance company, along with any interest accrued, unless you make a conscious effort to have it returned to your beneficiaries.

Whole Life vs. Term Life

There are 2 major types of life insurance: term life and whole life. Let’s take a look at some of the differences. 

  • Whole life guarantees a death benefit for your beneficiaries as long as you keep paying your payments. Whole life policies also include a cash-value component that you can take advantage of while you’re still alive.
  • Term life is much less complicated than whole life insurance. When you sign onto a term life insurance policy, you make monthly premium payments for a set number of years. Your policy’s term might range from 10 years to 30 years. Your beneficiaries receive the policy’s death benefit if you die during the policy’s term. If you outlive your policy’s term, your account closes and your beneficiaries don’t receive any money. Term life insurance policies don’t include a cash benefit.

Some financial experts recommend term life insurance because term policies are much more affordable than whole life policies. According to a study by the Society of Actuaries, about 30% of whole life policies are surrendered within the 1st year, compared to only about 8% of term life insurance policies. Term life insurance provides a simple way to get cheap life insurance you can afford. The downside is that you won’t get any money if you outlive your term. 

Here’s a look at some of our favorite providers offering term and/or whole life policies.

Benefits of Whole Life over Term Life

Whole life insurance might be more expensive than term life insurance, but it does come with a number of benefits. Let’s take a look at a few reasons why you might want to pay more for whole life insurance.  

  1. Your beneficiaries are guaranteed a payout. You never need to worry about outliving a whole life insurance policy. As long as you stay up to date on your payments, your beneficiaries are guaranteed a payout.
  2. You can recoup some of your premium costs. Unlike term life insurance, whole life insurance policies allow you to recoup a percentage of your premium costs with a cash-value benefit. You can access this money at any point in your life.
  3. Your premiums won’t increase. It’s possible to outlive your term life insurance policy and then get sick. You’ll pay even more money if you try to buy another term policy. You’ll always pay the same premium with a whole life insurance policy — no matter what types of hardships you run into. 

Best Whole Life Insurance Companies

Now that you understand how whole life insurance works and how it’s different from term life insurance, let’s take a look at some of the best life insurance companies that offer whole life policies.  

1. Ethos

Ethos makes life insurance simple so you can focus your time on what matters most. 

Ethos is a modern life insurance company using insurtech to streamline the process of getting coverage, making it easier, faster and better.

Ethos offers term life insurance to anybody between the ages of 20 and 65 and whole life insurance to people aged 65 to 84. From end-to-end, getting coverage can take less than a few hours with Ethos. 

Getting a quote and seeing your policy and coverage options only takes a minute or two. Because they leverage technology like AI and machine learning, Ethos is able to cut out the extra steps that can make getting life insurance so arduous, like medical exams, lengthy doctors appointments and endless meetings with agents.

Also, their agents are non-commissioned and hands-off (unless you want their help!). 

Ethos life insurance agents won’t waste your valuable time trying to upsell you products you don’t need — instead, they’re on call to answer any questions you may have and help you through the process. But it’s also possible to complete the entire process from quote to coverage completely on your own.

Disclosure: Not available to New York residents.
Age Requirements
20 — 65
N/A
1 Minute Review

Ethos is life insurance for the modern age, leveraging technology to bring customers an easy and fast application process so you can get back to spending time with those who matter most — your family.

Ethos offers both term and whole life insurance policies with top-rated carriers. You may not be able to predict when you go, but you can help ensure your family and loved ones are taken care of when it does happen. With Ethos, you can have peace of mind knowing that you’ve helped protect your family.

 

Best For
  • Newlyweds, young people, homeowners, seniors and parents
  • Individuals who wants a quick, easy life insurance application process
  • Individuals for whom life insurance had previously been inaccessible
  • Self-starters who prefer a hands-off approach when interacting with insurance agents
Pros
  • Instant personalized quotes
  • 10 minute seamless application process
  • Same-day coverage available
  • Range of term and whole life coverage policies
  • No medical exam or blood tests required (just answer a few health questions)
Cons
  • Not available in New York

2. Northwest Mutual

Northwest Mutual is one of the largest life insurance companies in the United States. The company specializes in offering personalized plans tailored to your life goals. When you begin with Northwest Mutual, you’ll answer a few questions about why you want to buy a life insurance policy.

Northwest Mutual’s team of experts will then recommend a custom policy that balances coverage and premium expenses based on your goals. Whether you want to set up a financial safety net for your family or guarantee your retirement, Northwest Mutual has a plan for you. 

Age Requirements
18 – 100
N/A
1 Minute Review

Northwestern Mutual offers a variety of life insurance policies that are suitable for a wide range of people. Policies are available in all 50 states, although some policies and riders may not be available in every state. The company has strong financial strength ratings and an above-average rating when it comes to consumer complaints. 

To get a quote from Northwestern Mutual, you have to talk to one of its agents. However, you can browse information on its website and use the coverage calculator tool to estimate how much life insurance coverage is recommended for your family.

Best For
  • Affordable term life insurance that can be converted to a permanent life insurance policy later
  • Adding riders to a life insurance policy
Pros
  • Strong financial strength ratings and a low number of consumer complaints
  • Several types of life insurance policies available
  • Offers other financial planning, insurance and investment products and services
Cons
  • Lack of clarity about the product offerings on Northwestern Mutual’s website
  • Can’t get a quote or apply directly for a policy online

3. Allstate

Whole life policy premiums can be expensive. You can lower your premiums with a bundling package if you already have some form of insurance policy with Allstate. Allstate is a large, nationwide insurance company that offers nearly every type of insurance you might need.

You can bundle your life insurance with your car insurance, homeowners insurance, motorcycle insurance or even a boat insurance policy and save. Allstate also makes it exceptionally easy to save on almost all of its insurance offerings with generous discount lists. 

Age Requirements
N/A
N/A
1 Minute Review

If you already rely on Allstate for your Auto or Homeowners policy, why not look into adding your life insurance under the same insurer? Allstate is a trusted company with multiple offices across every state nationwide. Getting coverage is easy with their easy online process.

 

Best For
  • Easy online access
  • Multiple policy options
  • Multiple offices in states nationwide
Pros
  • Available in all 50 states
  • Multiple optional individual coverage choices
Cons
  • Possibly higher premium

4. Mutual of Omaha 

Many whole life insurance providers require a medical exam before they calculate your premium. Mutual of Omaha is one of only a few providers that don’t require a medical exam before you can get a quote. You don’t even need to answer any health-related questions before you get a policy.

Mutual of Omaha’s benefits are lower than most other whole life insurers — you can get a policy with a death benefit between $2,000 and $25,000. Do you have a chronic or life-threatening health condition and want a whole life policy? Mutual of Omaha might be the right choice for you.

Age Requirements
18 – 68
N/A
1 Minute Review

Purchasing life insurance requires you to be familiar with essential benefits. Different types of life insurance such as permanent insurance can give you peace of mind because you know your beneficiaries will receive death benefits, regardless of when you die.

For quality life insurance, look at Mutual of Omaha, which offers whole and universal life insurance policies that guarantee coverage for your entire life. A medical exam isn’t required, premiums don’t increase, you can access the cash-value portion of the policy in an emergency, and you can set a death benefit. Below is Benzinga’s list of pros and cons associated with Mutual Omaha life insurance.

Best For
  • Anyone entering their prime earning years
  • Customers willing to take on additional risks with their policy
Pros
  • Policies offer financial protection that last throughout your lifetime
  • Policies provide cash value that can be accessed while you are still alive
  • Universal life insurance policies enable you to adjust premium payments and frequency
  • You can decrease or increase the amount of your death benefit
Cons
  • Policy options are limited when buying online compared to purchasing through an agent.

5. MassMutual

Whole life insurance for seniors can be particularly expensive and hard to find. MassMutual policies are available for senior citizens and you can find a policy no matter how old you are.

MassMutual’s whole life insurance policies have the potential to earn dividends — which you can use to cover all or some of your principal expenses. It also offers retirement accounts and plan advice — it’s a one-stop-shop for your golden years. You may not be able to find cheap whole life insurance for seniors, but you can find the most affordable option.

Age Requirements
All ages
N/A
1 Minute Review

Mass Mutual is great for people who are looking for one-stop shopping for a range of insurance and financial products such as life insurance, disability income insurance, long-term care insurance, annuities and retirement plans.

Mass Mutual is the short version of Massachusetts Mutual Life Insurance Company, and it is one of the largest life insurance companies in the United States. 

Policyholders own the company as it is a mutual insurance company. When the company is prosperous, policyholders can expect to receive a dividend.   

The company is popular because it offers a wide range of products, and the customer service department is reliable and responsive. 

Best For
  • Males or females over the age of 18
  • Customers seeking a large offering of life insurance products
Pros
  • Wide range of life insurance products for term life, whole life and universal life
  • Claims accepted via email
  • No medical exam in some cases
  • Online applications
  • Dividends paid to policyholders
  • Competitive premiums
Cons
  • Medical exam generally required
  • No online application for some plans

Whole Life Insurance Isn’t a Good Fit? Check out Bestow Life

Whole life insurance isn’t for everyone. You may decide that a term policy might be better for you. If so, be sure to get a quote from Bestow. Bestow is a company committed to making sure that getting term life insurance is less stressful and more human.

You don’t need to worry about an invasive medical exam and you can cancel your plan at any time. You can choose a plan with a term as long as 20 years or you can take a plan as short as 2 years while you figure out a long-term insurance solution. 

Get the most affordable, no medical exam life insurance. With just a few clicks, you can quickly find out whether you qualify for whole life coverage. The entire process is online, so you don’t have to talk to an agent, do paperwork or get a medical exam!

Get started securely through Bestow Life Insurance’s website
Disclosure: *excludes New York
Age Requirements
18-59
N/A
1 Minute Review

Bestow offers 2 kinds of life insurance policies: 20-year level term policy or a 10-year level term policy.

Through its policies, you may qualify for up to $1 million in term life insurance. That may seem like a sizeable sum, but if you have a spouse and children, you have to consider the cost of things beyond your mortgage, such as daycare and eventually college, as well as the loss of wages over time.

Bestow uses its proprietary technology to underwrite your insurance policy, so the application process is much faster than with traditional life insurance companies. They’re also backed by Munich Re and North American Company for Life and Health Insurance, 2 A+ rated insurance companies.

Best For
  • People who are looking for short-term life insurance
  • Individuals who don’t want to go through the hassle of having a medical exam or blood work done to get coverage
Pros
  • Plans start at just $8/month
  • Decent coverage options if you need insurance quickly and without hassle
Cons
  • Offers 2 types of plans; does not offer whole or universal life insurance policies
  • The 10- and 20-year plans not available to users under 21 or older than 55

Protect Your Family for the Future

It’s important to know all of your options before you decide on any life insurance plan. Getting a quote for a whole or term life insurance policy is simple — many companies now allow you to see all of your options online in as little as a few minutes. Be sure to get at least a few quotes from competing companies before you choose a policy. This will ensure that you get the best coverage option available to you without breaking the bank. 

Frequently Asked Questions

Q

Can you cash out a whole life policy?

1
Can you cash out a whole life policy?
asked
A
1

In short, yes. Usually, you can withdraw a set amount of cash from your policy — typically, this is the amount you’ve paid in premiums and this is tax-deferred.

You can withdraw by surrendering the policy, withdrawing cash or taking out a loan. If you’d like your beneficiaries to receive the full death benefit when you pass, be sure you don’t surrender your policy or owe interest on the loan. However, the cash value portion typically isn’t passed along to beneficiaries, so it’s usually a smart move to withdraw this when appropriate.

answered
Q

Is whole life insurance worth it?

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Is whole life insurance worth it?
asked
A
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It depends, but the higher cost when compared to term life insurance does come with a guaranteed death benefit. Whole life insurance can also act as an investment or credit line because it includes a cash value accumulation.

If you are the main provider for your family, can afford the monthly premiums and you’d like your beneficiaries to receive a guaranteed death benefit, this type of plan may be worth it.

answered
Q

Can you pay off a life insurance policy early?

1
Can you pay off a life insurance policy early?
asked
A
1

Yes, you can completely pay off a life insurance policy before you pass away. This means the life insurance policy stays active, but you no longer have to pay monthly premiums. This is considered a “paid-up” status policy.

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Methodology

Benzinga crafted a specific methodology to rank life insurance. To see a comprehensive breakdown of our methodology, please visit our Life Insurance Methodology page.