What Is Whole Life Insurance?
Whole life is a permanent life insurance policy that provides coverage throughout your entire life. With a whole life insurance policy, premiums are usually a bit higher compared to a term life insurance plan, but whole life insurance may be more beneficial and more suitable depending on your goals and needs.
How whole life insurance works
Whole life insurance rates are determined by you gender, age, medical history, and your coverage goals. Once that has all been established, your premiums are then fixed for the entire life of the policy,and the death benefit is definite. With most insurance companies, you have the option in making your premium payments either monthly, quarterly, or biannually.
Cash Value
A major benefit with permanent whole life insurance, is the cash value a whole life policy generates as time goes by. Think of the cash value as an emergency fund. Part of your premium payments that you pay, are put into an account that accumulates over time, tax free.
This can give you a possible tax advantage because your cash value can grow at a faster pace since there are not any fees being taken out. Once the cash value builds up high enough, you have the option of making partial withdrawals, you can borrow against the cash value, withdraw all the cash and surrender the policy, and you can even use it to put towards your premium payments.
Of course, there are drawbacks to cash value life insurance. The first drawback is the length of time you must wait in order to have access to the cash value. On average, it takes between 2-5 years for the cash value of a whole life policy to become accessible to the policyholder. The exact length of time a person must wait, varies from insurance company to insurance company, and varies from policy to policy.
The second drawback is if you make a withdrawal from the cash value and don’t repay it, the withdrawals will reduce the death benefit of the policy. Furthermore, if you decide to borrow or take out a loan against the cash value, you will have to repay the loan with interest. if you don’t, then the outstanding loan will subtract the outstanding loan amount from the death benefit.
Since permanent whole life insurance earns money that the policyholder can use whenever they need, whole life will always be more expensive over term life insurance. However, the premiums are fixed, it guarantees a fixed rate of return on the cash value, and it lasts the entire life of the insured policyholder that never expires at a specific time like term life insurance does.
Whole Life Insurance Rate Charts According To Gender, Age and Amount Of Coverage
$5,000 whole life rating chart
| Age | Male | Female |
|---|---|---|
| 35 | $12 | $11 |
| 40 | $14 | $12 |
| 45 | $15 | $13 |
| 50 | $17 | $14 |
| 55 | $20 | $15 |
| 60 | $23 | $18 |
| 65 | $29 | $22 |
| 70 | $37 | $28 |
| 75 | $50 | $37 |
| 80 | $69 | $51 |
| 85 | $95 | $68 |
| 89 | $181 | $139 |
$10,000 whole life rating chart
| Age | Male | Female |
|---|---|---|
| 35 | $21 | $18 |
| 40 | $24 | $21 |
| 45 | $26 | $23 |
| 50 | $31 | $24 |
| 55 | $36 | $28 |
| 60 | $43 | $33 |
| 65 | $54 | $41 |
| 70 | $70 | $53 |
| 75 | $97 | $71 |
| 80 | $134 | $98 |
| 85 | $187 | $132 |
| 89 | $357 | $275 |
$15,000 whole life rating chart
| Age | Male | Female |
|---|---|---|
| 35 | $29 | $25 |
| 40 | $34 | $29 |
| 45 | $37 | $32 |
| 50 | $44 | $35 |
| 55 | $52 | $40 |
| 60 | $63 | $47 |
| 65 | $79 | $59 |
| 70 | $103 | $78 |
| 75 | $144 | $105 |
| 80 | $200 | $145 |
| 85 | $279 | $195 |
| 89 | $535 | $411 |
$20,000 whole life rating chart
| Age | Male | Female |
|---|---|---|
| 35 | $37 | $31 |
| 40 | $44 | $37 |
| 45 | $48 | $42 |
| 50 | $57 | $44 |
| 55 | $67 | $51 |
| 60 | $83 | $61 |
| 65 | $104 | $77 |
| 70 | $135 | $102 |
| 75 | $190 | $138 |
| 80 | $264 | $191 |
| 85 | $352 | $259 |
| 89 | $678 | $521 |
$25,000 whole life rating chart
| Age | Male | Female |
|---|---|---|
| 35 | $45 | $39 |
| 40 | $54 | $45 |
| 45 | $60 | $52 |
| 50 | $71 | $55 |
| 55 | $84 | $64 |
| 60 | $103 | $76 |
| 65 | $130 | $97 |
| 70 | $169 | $127 |
| 75 | $238 | $172 |
| 80 | $330 | $239 |
| 85 | $464 | $324 |
| 89 | $889 | $683 |
$50,000 whole life rating chart
| Age | Male | Female |
|---|---|---|
| 35 | $90 | $78 |
| 40 | $108 | $90 |
| 45 | $120 | $104 |
| 50 | $142 | $110 |
| 55 | $168 | $128 |
| 60 | $206 | $152 |
| 65 | $260 | $194 |
| 70 | $338 | $254 |
| 75 | $476 | $344 |
| 80 | $660 | $478 |
| 85 | $928 | $648 |
| 89 | $1,778 | $1,366 |
$75,000 whole life rating chart
| Age | Male | Female |
|---|---|---|
| 35 | $135 | $117 |
| 40 | $162 | $135 |
| 45 | $180 | $156 |
| 50 | $213 | $165 |
| 55 | $252 | $192 |
| 60 | $309 | $228 |
| 65 | $390 | $291 |
| 70 | $507 | $381 |
| 75 | $714 | $516 |
| 80 | $990 | $717 |
| 85 | $1,362 | $972 |
| 89 | N/A | N/A |
$100,000 whole life rating chart
| Age | Male | Female |
|---|---|---|
| 35 | $180 | $156 |
| 40 | $216 | $180 |
| 45 | $240 | $208 |
| 50 | $284 | $220 |
| 55 | $336 | $256 |
| 60 | $412 | $304 |
| 65 | $520 | $388 |
| 70 | $676 | $508 |
| 75 | $952 | $688 |
| 80 | $1,320 | $956 |
| 85 | $1,856 | $1,296 |
| 89 | N/A | N/A |
How Does Whole Life Insurance Work?
Whole life insurance is a type of permanent life insurance policy that is designed to provide coverage to you for the entirety of your life. Whole life insurance is designed with, and includes built in guarantees that no changes will ever be made to your policy. Your premiums will never increase as long you pay your premiums, the death benefit will never decrease (as long you don’t have any outstanding or unpaid loans on the policy), and your policy will never be canceled or terminated due to age.
The policy will ultimately pay out the death benefit to your beneficiary in the form of a tax free check. Your beneficiary can then use the proceeds to cover funeral costs, medical bills, financial debts, or any other financial obligations they may have. It is fully up to them.
How To Avoid A Two Year Waiting Period
Some life insurance coverage has an exclusionary period of two years for natural causes of death. It’s commonly referred to as a “waiting period.”
A policy with a waiting period will only refund your premiums plus a small amount of interest for any non-accidental death.
Only after the waiting period expires will the life insurance company pay the full death benefit.
Remember, not all life insurance policies have a waiting period, but some do.
To get a plan with no waiting period, you must apply with an insurance provider that requires you to answer health questions.
You don’t have to take a medical exam. However, you must complete a health questionnaire and subsequently be approved. It’s also worth noting that you don’t have to be in good health with an immaculate medical history.
People with health conditions like heart disease can still qualify for an immediate coverage policy.
Also, seniors over 80 or 85 years old can get life insurance with no waiting period, even with pre-existing conditions.
Comparison Of Whole Life And Term Life Insurance
Term life insurance is a temporary plan that lasts a specific period. Compared to other types, it is the most affordable type.
Whole life insurance is the opposite because it lasts your entire life.
Term coverage can last for a certain number of years, such as:
- 10-year term policy
- 20-year term policy
- 30-year term policy
It can also last until a certain age, such as 65 or 80. Once you reach the term length, the policy terminates, and you no longer have coverage.
Now, one type of policy is not better than the other.
Some insurance agents such as Dave Ramsey will disagree and argue that one is better than the other.
The key is to select the correct type of policy that is best suited to accomplish your goal.
Here’s a simple rule to follow to decide which policy type is best for you:
- Term: The best life insurance to cover temporary financial obligations such as income replacement for your dependents or paying off a debt such as a mortgage.
- Whole: Best to solve permanent issues such as estate planning or funeral expenses.
In short, buy term for a temporary need and buy whole life for a permanent condition.
Don’t be lured solely by the cheaper 20-year term life insurance rates. When deciding, consider all variables and not just the price.
What Is Universal Life Insurance?
Universal life insurance is one of the two primary types of permanent life insurance: the other being whole life insurance. Like whole life, universal life insurance gives you the same lifelong protection while building tax advantage cash value. Universal life insurance offers you the flexibility to raise or lower your premiums within certain limits, which means UL can cost less than whole life coverage.
However, the biggest drawback to universal life insurance, is that it offers fewer guarantees than whole life insurance because if you make minimal premium payments for too long, it can impact cash value growth and the size of your death benefit.
Reasons Why People May Choose Universal Life Insurance
- Lifetime Protection
From the first day the policy is in effect, UL can provide an income tax-free death benefit to help protect your family’s financial wellbeing.
And as long as you keep a positive cash value amount, your coverage can’t be cancelled.
- Adjustable Premium Payments
Universal Life allows you raise or lower your payments within certain limits as your circumstances change. While you may eventually have to pay higher premiums to keep your coverage, that flexibility can make it easier to keep your insurance policy in force if your earnings vary.
- Cash Value
Like all permanent life insurance, it has a built-in cash value that grows over time and earns interest. You can take out policy loans against the cash value, use it to pay your premiums, or even use your coverage for cash to supplement your income in retirement.
- Tax Advantages
The policy’s cash value grows on a tax-deferred basis, so no taxes are owed on current earnings or interest. Also, the death benefit is paid income-tax-free to beneficiaries.
Is Universal Life Insurance Right For Me?
| What I want: | What I should get: |
|---|---|
| I want lifelong protection | Whole or Universal Life |
| Build tax-efficient cash value | Whole or Universal Life |
| I want access to policy cash while I'm alive | Whole or Universal Life |
| I want flexibility to raise or lower my premiums | Universal Life insurance |
| I want cost efficient permanent coverage | Universal Life insurance |
| I want guaranteed cash value growth | Whole Life insurance |
| I want a guaranteed death benefit | Whole or Term Life |
| I want guaranteed level premiums | Whole or Term Life |
| I want the biggest death benefit per premium dollar | Term Life insurance |
Universal Life Insurance Vs Whole Life Insurance
To be truthful, Universal life insurance is a fairly complicated product. Quite frankly, a very large portion of seasoned insurance agents who have been in the insurance industry for years, have a very hard time understanding, and even explaining universal life insurance products. As already mentioned, Universal life is a type of permanent whole life insurance that offers flexibility premium payments which gives you the option to adjust your premiums within certain limits.
Like whole life, a UL policy builds cash value that the policyholder can withdraw and use the funds and use it for whatever they want to use it for. The rate at which the cash value grows in a UL policy heavily influences how long it will last.
Another important factor to remember; when you the cash from the cash value, more than likely the policy will collapse later on in life, which means you will end up having no coverage.
There are a few different types of UL policies that are available, which include:
- Indexed Universal Life
- Variable Premium Universal Life
- Guaranteed Universal Life
Each universal life insurance policy of course, has their own pros and cons.
For instance, guaranteed universal life guarantees that the policy cannot prematurely expire or have an increase in the cost. But, you cannot adjust your payments the way you can with say, a flexible premium UL policy.
The main difference between whole and universal life is the guarantees.
Whole life insurance guarantees that your premium, death benefit, and policy will never change. Even if you withdraw the cash from the cash value, it will never change.
Universal life does not come with these guarantees.
A Universal Life plan (does not matter which plan) will always cost about 15-30% less than whole life.
However, do you believe a moderately lower rate would be worth getting if the policy can potentially end later in life?
If your answer is yes, then maybe consider a Universal Life plan. If not, then you should choose whole life instead.
Term Life Vs. Whole Life Insurance
A term life insurance policy is a policy that lasts for specified number of years, which is why it is called “term” life insurance.
Whole life insurance is the exact opposite because whole life last the entirety of your life.
The three main types of term life policies that are written are:
- 10 year term life policy
- 20 year term life policy
- 30 year term life policy
It can also last until a certain age, such as 65 or 80. Once you reach the term length, the policy terminates, and you no longer have coverage.
Keep in mind that whole life will always be more expensive than term life insurance (and for the same amount of coverage as a term policy) because whole life lasts for your entire life. Term life expires after the specified number of years.
