Here are Forbes Advisor’s picks for the best whole life insurance companies:
- State Farm – Best Overall
- Northwestern Mutual – Best for Reliable Policy Illustrations
- Penn Mutual – Best for Historical Investment Performance
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Reviewed
Reviewed
Updated: Mar 1, 2024, 2:22pm
There are a lot of uncertainties in life, but life insurance doesn’t have to be one of them. Whole life insurance gives you the benefit of cash value along with built-in guarantees. The best whole life insurance company is State Farm, based on our analysis.
We evaluated life insurers based on key metrics over time for their whole life insurance policies.
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Here are Forbes Advisor’s picks for the best whole life insurance companies:
Mutual
A++ (Superior)
State Farm stands out from many competitors for its financial strength, which gives life insurance buyers confidence that the company will be able to meet its obligations many years down the road. Whole life insurance buyers can also benefit from State Farm’s highly reliable policy illustrations and cash value that builds well, even in the early years of the policy.
Types of Life Insurance Sold
Whole Life Policy Options
Life Insurance Riders Available
Availability of riders could depend on the type of policy.
State Farm Quick Facts
Mutual
A++ (Superior)
Northwestern Mutual provides a superior combination of high ratings for financial strength and good pricing on whole life insurance for many ages and health risks. The company also has whole life policies that can build cash value well in the early years and very reliable policy illustrations.
Read more: Northwestern Mutual Life Insurance Review
Types of Life Insurance Sold
Whole Life Policy Options
Life Insurance Riders Available
Availability of riders could depend on the type of policy.
Website Readability
VisibleThread, a provider of readability scores, analyzed Northwestern Mutual’s website at the request of Forbes Advisor.
Northwestern Mutual Quick Facts
Mutual
A+ (Superior)
Buyers of whole life insurance will appreciate Penn Mutual’s financial strength and its low internal costs, which means more money can go toward your cash value. Penn Mutual has been very good at investing its assets, which can result in better growth of cash value and death benefits and/or lower total premiums over the life of the policy.
Types of Life Insurance Sold
Whole Life Policy Options
Life Insurance Riders Available
Availability of riders could depend on the type of policy.
Penn Mutual Quick Facts
State Farm earns the top spot in our rankings of the best whole life insurance companies. Whole life insurance from Northwestern Mutual and Penn Mutual also topped our rankings.
Company | Company - Logo | Forbes Advisor Rating | Forbes Advisor Rating | A.M. Best financial strength rating | Learn More CTA text | Learn more CTA below text | LEARN MORE | Types of life insurance policies sold |
---|---|---|---|---|---|---|---|---|
State Farm | 5.0 | A++ (Superior) | Compare Quotes | Compare quotes from participating carriers via Policygenius.com | Term Whole Universal | |||
Northwestern Mutual | 4.5 | A++ (Superior) | Compare Quotes | Compare quotes from participating carriers via Policygenius.com | Term Whole Variable universal Fixed-rate universal | |||
Penn Mutual | 4.0 | A+ (Superior) | Compare Quotes | Compare quotes from participating carriers via Policygenius.com | Term Whole Indexed universal Guaranteed universal Variable universal |
Whole life insurance is a type of permanent life insurance designed for people with low risk tolerance and who want lifelong coverage with guaranteed premiums, death benefit and cash value growth.
Whole life insurance is one of the oldest forms of life insurance. For most of the 1900s, it was the most common form of life insurance in the United States. It continues to be popular today and represents 33% of total life insurance premiums, according to LIMRA, an industry-funded research group
A whole life insurance policy remains in force for the rest of your life as long as you pay the premiums. Before buying a whole life insurance policy, understand its cash value, living benefits, death benefits and dividends.
Each time you make a premium payment for a whole life insurance policy, part of that premium is put into a cash value account. The remainder of the premium goes to paying internal policy expenses.
The cash value account grows tax-deferred, based on a guaranteed rate of return that is typically low compared to other types of permanent life insurance. Because of slow growth, it can take a long time before the cash value surpasses what you’ve paid in premiums.
You can choose to tap into your cash value by making a withdrawal, taking a life insurance policy loan or surrendering the policy. Withdrawals will reduce the death benefit your beneficiaries will receive. So will a policy loan if it’s not paid back.
Whole life insurance policies generally offer living benefits. Living benefits allow you to access money in your own death benefit while you’re still living, under specific circumstances.
The most common living benefits let you access your own death benefit money for long-term chronic illness or terminal illness (called an accelerated death benefit). Make sure you ask your insurance agent what living benefits are available before you buy the policy.
When you buy a whole life policy, you’ll list a life insurance beneficiary (or multiple beneficiaries) who will receive the death benefit payout when you die. You should also list contingent beneficiaries who will receive the payout if your primary beneficiaries are already deceased.
It’s important to know that whole life insurance has a guaranteed death benefit amount (the policy’s face value), but that amount does not include the cash value in the policy, no matter how much you’ve accumulated. Some policies offer a rider that will add the cash value to the face value for the death benefit, but expect to pay more for this feature.
Dividends are common on whole life insurance policies. “Participating” whole life insurance policies pay a dividend and are offered by mutual insurance companies. “Non-participating” whole life insurance policies do not pay a dividend and are offered by stock insurance companies.
You’ll typically have a choice of how to use your dividends. Common options include:
Purchasing paid-up additions will increase the cash value and death benefit. If you have a policy loan out, dividends can be used to pay loan interest and to pay back the loan. Insurance companies may offer other dividend options.
The average cost of whole life insurance is $193 a month for a $250,000 policy for a 30-year-old female and $224 a month for a 30-year-old male.
Age | Average monthly cost for a female buyer | Average monthly cost for a male buyer |
---|---|---|
Age 30
|
$193
|
$224
|
Age 40
|
$280
|
$313
|
Age 50
|
$419
|
$470
|
Source: Forbes Advisor research. Average is based on the lowest quotes we found online for healthy nonsmokers.
The average cost of whole life insurance is $352 a month for a $500,000 policy for a 30-year-old female, and $394 a month for a 30-year-old male.
Age | Average monthly cost for female | Average monthly cost for male |
---|---|---|
Age 30
|
$352
|
$394
|
Age 40
|
$506
|
$564
|
Age 50
|
$752
|
$847
|
Source: Forbes Advisor research. Average is based on the lowest quotes we found online for healthy nonsmokers.
If you pay annually instead of monthly for a life insurance policy, you can receive a small price break.
The coverage amount you select will have a large impact on your premium. Other factors that typically affect whole life insurance premiums include:
Compare Policies With 8 Leading Insurers
Buying enough whole life insurance coverage is vital, but there are a lot of things to consider when deciding how much is enough. Our life insurance calculator can help simplify that decision.
A general rule of thumb for determining how much life insurance you need is to add up your financial obligations that need to be covered by life insurance (such as a mortgage), and then subtract your assets (such as savings and existing life insurance).
Speaking with a financial advisor is the good way to determine your life insurance needs within the broader picture of your personal finances.
Here are some points to consider when looking for the best whole life insurance policy:
The most important factor in choosing a whole life insurance policy is to “understand that the premium is not the ‘cost’ of a whole life insurance policy,” says Flagg. “The cost is what’s deducted from that premium for ‘cost of insurance’ charges and policy expenses.”
The cash value amount on an existing permanent life insurance policy such as whole life insurance is affected by how much is deducted from your premium for policy fees and charges, as well as how much you have in dividends.
To determine the costs on a whole life insurance policy, request that the company or life insurance agent provide a calculation of internal policy costs. For example, our data provider, Veralytic, can provide a report on your policy.
While whole life insurance may seem straightforward, there are things to know:
Whole life insurance isn’t the right life insurance for every situation. In some cases, other types of life insurance might be a better choice.
If you want lifetime coverage but also flexibility with premiums and the death benefit amount, and the ability to accumulate cash value, universal life insurance may be a good option.
Indexed universal life insurance connects a policy’s cash value to an index like the S&P 500. The index’s ups and downs influence the policy’s cash value amount. In that way, a policyholder’s investment choice directly affects an indexed universal life insurance policy’s value, which is unlike whole life.
Being a type of universal life policy, policyholders with an indexed universal policy can often change death benefits and premium payments, too.
Variable life insurance and variable universal life are forms of permanent life insurance. They require you to take an active role choosing investment options for your cash value and monitor performance. With whole life insurance, you don’t choose investments.
Term life insurance is often the cheapest of life insurance, but it won’t guarantee coverage for the rest of your life like whole insurance can. It offers level premiums during a specific period of time, such as 5, 10, 15, 20 or 30 years. After the level term period, rates go up substantially every year if you renew. With whole life insurance, your premiums stay the same each year for the duration.
Term life insurance can be optimal if you need coverage until large debts, like a mortgage, are paid off or until your children are through college. Term life insurance does not include a cash value component.
Whole life insurance can be a great option for people seeking fixed premiums with the low-risk benefit of guaranteed cash value accumulation and a guaranteed death benefit. Since it is a type of permanent life insurance and offers lifetime coverage, you only have to purchase it once. Premiums for whole life insurance are often high, so be sure to consider affordability before buying a policy.
Compare Policies With 8 Leading Insurers
To find the best whole life insurance, we used data provided by Veralytic, an independent publisher of life insurance research and analytics. Veralytic measures the competitiveness of permanent life insurance products. Veralytic can provide a customized analysis of life insurance policies to life insurance buyers and current policyholders.
Cost competitiveness of whole life insurance policies (30% of score): This measures the level of premiums and internal policy charges, including the cost of insurance, fixed administration expenses and cash value-based wrap fees.
Historical performance (25% of score): This measures whether the historical performance of the company’s investments that fuel cash value growth are superior to other companies’ comparable products.
Reliability of policy illustrations (25% of score): This factor measures the reliability over time of the company’s illustrations for its permanent life insurance products. When you plan to be holding on to a policy for decades and counting on cash value to accumulate, you want an illustration that’s accurate.
Financial strength (10% of score): This measure incorporates the insurer’s financial strength ratings from four major ratings agencies: AM Best, Fitch, Moody’s and Standard and Poor’s. Financial strength is particularly important when you’re relying on a company’s ability to pay claims many decades from now.
Access to cash value (10% of score): This measure evaluates the liquidity of cash value and a policyholder’s access to it. Some policies will build cash value better in the early years, and with other companies, you may be waiting several years before you have meaningful cash value within a policy. Generally speaking, the higher the liquidity, particularly in early policy years, the better—but some insurers charge more for greater liquidity, so consider the possible tradeoff.
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Your policy choice should be driven by your needs. If you’re buying life insurance coverage for a specific concern, such as providing a financial safety net for your family during your working years, term life insurance is a good fit. Whole life insurance is for people who want to build cash value and want lifelong coverage.
The debate over term life vs. whole life insurance also ignores an important contender in the market: Universal life insurance.
Universal life can offer lifelong coverage at a better price than whole life.
The death benefit paid to your beneficiaries is tax-free. But there are situations that could lead to a tax bill, such as withdrawing cash value from the policy or surrendering it.
See our guide to life insurance and taxes.
If you have cash value in a whole life insurance policy you can take a loan against the money or withdraw it. This money can be used for anything from supplementing retirement savings to paying for a child’s college tuition.
When you buy a whole life insurance policy, your policy illustration will show you how fast your cash value will build over the years.
Single premium life insurance is a policy that is paid with only one premium payment. You will make one lump sum payment instead of the standard monthly, quarterly or annual premium payments.
Whole life insurance is a type of permanent life insurance designed to stay in force until you die, assuming you pay the premiums due.
As with all types of life insurance, the younger you are when you purchase whole life insurance, the lower your premium will be. But in addition to lower premiums, buying a policy when you are younger also means there should be more time for your cash value to accumulate. So, while there is no specific best age to buy whole life insurance, the sooner you can buy it, the better.
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Amy Danise is the managing editor for the insurance section at Forbes Advisor, which encompasses auto, home, renters, life, pet, travel, health and small business insurance. She is a highly experienced editor, writer and team leader with an extensive background in the insurance sector. With a career spanning more than three decades, she has focused her work on consumer-oriented publications.