Whole life insurance offers guaranteed cash value growth, level premiums for the entire term of the policy and a death benefit. Depending on your unique needs, whole life may be the better choice over term life insurance.
Financial strength is a factor to consider when choosing a whole life policy, as you want to be sure you’re buying from a reputable company. MoneyGeek’s analysis of third-party ratings, dividend payouts and customer satisfaction scores help you find the best whole life insurance for your needs.
1. Financial strength
The best whole life insurance should provide you with coverage for decades and offer a cash value that grows over time. It should also have a high financial strength rating. This means the company can meet its obligations and pay out claims, even after a catastrophic event.
You should also look for a company that offers free living benefits, such as chronic, critical or terminal illness riders that allow you to receive a portion of your death benefit early if you become ill. These features can give you peace of mind knowing that your family will have financial support in case you aren’t around to take care of them.
Another factor that should be considered is whether or not the insurer pays dividends to its policyholders. These dividends can help boost your policy’s cash value and death benefit, especially when the market is booming.
Many life insurers offer whole life policies with dividends, including Northwestern Mutual. While this may make their premiums more expensive, it can be a good option for people who want to build up their cash value and death benefit over time without having to worry about paying the premiums outright in retirement.
As with any investment or insurance product, the most important factor to consider is the company’s financial strength. This is evaluated by insurance ratings agencies, such as AM Best and Standard & Poor’s. They rate companies on a scale from A++ (Superior) to D (Poor).
It’s also helpful to choose an insurer that offers a flexible payment schedule, such as New York Life. The company allows clients to customize their premium payments with its Custom Whole Life option, which may make it easier for you to keep up with your payments and avoid having your policy lapse.
Another insurer that should be on your list is State Farm, which ranks number one in the J.D. Power study and boasts an A++ (Superior) financial strength rating from AM Best. The company has a wide range of whole life policy options, including guaranteed issue and simplified issue, and provides excellent customer service. It also offers a number of rider options for its whole life insurance policies, including chronic, critical and terminal illness riders.
2. Policy flexibility
One of the best things about whole life insurance is that it offers a number of policy options and riders. These include a waiver of premium, long-term care, renewable term and accelerated death benefit. Some insurers offer these riders as standard, while others may require a medical exam before you can apply for them.
While most people choose whole life insurance because they want a reliable death benefit that will never depreciate, it’s important to also consider the amount of flexibility that it offers. This is especially true with universal life insurance, which allows you to adjust your premiums as your financial needs change over time.
For example, you can reduce your death benefit as your debts decrease, and you can even skimp on the premiums if you find yourself in a tight spot. Universal life policies also allow you to build up cash value that earns a money market interest rate. This is the best way to build a retirement nest egg, but be sure to watch out for surrender charges that may occur on your policy when you sell it.
As you look at different whole life insurance companies, consider their product options and their third-party customer satisfaction ratings. A good place to start is AM Best, which awards top marks to a handful of providers.
In the end, what really matters is which company delivers on your specific financial needs. You can get a quote online, but don’t be afraid to ask questions of the people who work at these companies. You might be surprised at what they have to say about the best whole life insurance providers. This will help you make the most informed decision possible.
3. Policy riders
If you’re looking to add more life insurance coverage to your policy, there are several options available. One option is a long-term care or living benefit rider that pays a portion of your death benefit for qualified long-term care expenses. Another is a waiver of premium rider that will pay your policy’s premium if you become disabled or unable to make payments due to a qualifying event.
Other popular riders include a guaranteed insurability rider, which allows you to buy additional whole life insurance at any time without undergoing a medical exam. Also, a renewable term rider gives you the ability to switch between whole life and term policies.
The best whole life insurers offer a variety of options, including no-exam and simplified issue policies, that allow you to customize your life insurance. For example, Mutual of Omaha offers a simplified issue life insurance plan that makes you answer a few simple health questions without requiring a medical examination.
Some of these policies even come with free funeral cost assistance. For instance, New York Life’s Funeral Advantage policy includes a free membership to the Funeral Consumer Guardian Society (FCGS), which will help you price shop for your funeral and pay for related costs.
For the most part, best whole life insurance companies provide a great product and excellent customer service. That being said, some policies do not meet your needs, and it can be difficult to find the right one for you.
To help you narrow down your search, MoneyGeek compiled a list of the best whole life insurance providers. These are the companies that have the highest financial strength, most flexible policies and best customer service.
4. Premiums
Whole life insurance is a form of permanent insurance that covers the entire insured’s life. Compared to term life insurance, which pays out only when the insured dies during the coverage period, whole life offers the highest level of protection and can help with long-term goals like retirement or estate planning.
The premiums associated with best whole life insurance are often higher than those of term life insurance, so it’s important to consider whether you actually need this type of coverage or if you can afford it in the short run. The most common reason for a person to purchase whole life insurance is to provide cash for their beneficiaries upon their death.
Another common reason is to cover final expenses, which can include funeral costs and medical bills. This type of insurance is also useful for business owners who want to have a policy in place in case anything happens to a key employee.
Depending on the specific type of whole life insurance you buy, your premiums may be fixed or variable. In both cases, your premium payments help build up a cash value that increases with interest.
However, the rate of return on your cash value will vary, so you should consider how that will impact your overall financial plan. If you’re considering this kind of coverage, be sure to take into account all your tax-advantaged investments, such as 401(k) and IRA accounts, as well as any other savings and investment plans that you have.
Some whole life policies pay dividends to the policyholder, which can help reduce your annual premium. These dividends are not taxable, but they do reduce your out-of-pocket cost.
Many whole life policies also feature a loan option that allows you to borrow against the cash value of your policy. This feature is similar to an IRA or 401(k) and can be beneficial if you need to access some of your funds during a tough financial time.
Whole life policies can be complicated, so it’s a good idea to speak with an expert before making any decisions. You should also consider the amount of your monthly payments, how much money you have available to invest in the future and how your policy can help meet your short- and long-term financial goals.
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