Our first pick, Northwestern Mutual, dominates the market in terms of whole life coverage. It offers the most policy options of any company we looked at, with add-ons like Accidental Death, Disability Income, and Critical Illness riders that protect you against every contingency. It also has rock-solid financial ratings and garners high customer satisfaction scores. The one catch? We found its support to be lacking. If you’re an insurance first-timer with a lot of questions, NWM may not be your best bet.
MassMutual, on the other hand, is a great choice if you need help setting up a policy. We were consistently impressed with the responsiveness of its reps and the helpful information they gave us. And although it has a smaller policy selection than NWM, MassMutual has upheld better dividend rates in recent years. If your eye is set on the “cash value” part of whole life, we recommend you start looking here.
Of course, there’s more than one way to structure whole life investments. For a wider range of premium payment models, you might want to check out Guardian Life. This company offers eight different payment structures (compared to MassMutual’s five and NWM’s three) that allow you to set individual investment goals. For example, you could choose a to pay all your premiums in the first ten years and then build up savings.
Just remember: Life insurance policies and pricing are super personal — premiums depend on how individual companies assess your “risk factors.” No matter where your priorities lie, it always pays to shop around and get quotes from multiple companies. Our top picks are a great place to start.
The Best Whole Life Insurance
- Northwestern Mutual: Best Policy Options
- MassMutual: Best Recent Dividend Performance
- Guardian: Most Premium Payment Models
What is whole life insurance, and who should get it?
There are two major types of life insurance to consider: Term and Permanent.
- Term life insurance provides coverage for a set timeframe — anywhere between five and 35 years. If you outlive it, the policy expires with no cash value.
- Permanent life insurance never expires, so long as you keep paying the premiums. This option guarantees a payout to your family, but the tradeoff is that it’s costly — up to 10 times the price of term.
Whole life insurance falls under the umbrella of permanent life. It’s generally much pricier than term insurance — think $200-300 per month, rather than $20-30. This is because part of the premium for whole life insurance gets invested into a savings account. This account, otherwise known as your policy’s “cash value,” grows with every premium payment and accrues interest over time. The perks of cash value: You can take loans from it tax-free or use it to offset premium payments; it can even act as a channel for retirement savings or estate planning.
So, is whole life insurance the right choice for you? Financial experts generally counsel that, as far as savings go, it’s more profitable to pay for a cheap term life policy and invest the difference into traditional accounts like a mutual fund or 401(k). If you’ve already contributed heavily to retirement funds, though, or have complex estate planning needs, investing in whole life insurance can be the right choice.
“Stage in life and lack of other tax-efficient alternatives (maxing out 401(k) contributions or no access to similar investment vehicles) can certainly warrant exploring permanent life insurance. And in other cases, such as the funding of a trust, paying estate taxes, or complex estate planning, permanent life insurance is not only appropriate but absolutely necessary.”
It’s important to correctly evaluate your investment options and life insurance needs before making the commitment to whole life. Remember, those premiums are steep: According to insurance literacy advocate Tony Steuer, a whopping 20% of whole life policies lapse in their first year due to policyholders’ inability to make payments. Ohmann recommends working with a qualified estate planner like an attorney, CPA, or CFP, who can break down all the options and help you find exactly the right life insurance to suit your needs.
When it’s the right fit, whole life insurance is a great option. It ensures a death benefit payout to your beneficiaries, which is padded by the financial security of extra savings (all of which gets passed down tax-free). We set out to find the providers with the strongest whole life insurance offerings — from robust policies, to financial security, to customer satisfaction.
Guaranteed Universal Life insurance (GUL) is the other popular type of permanent life. It technically has an expiration date, but that date is set between 90 and 120 years of age, so it’s expected to have a payout. We recommend GUL primarily for seniors — you can learn more about it here.
How We Found the Best Whole Life Insurance
When we reviewed the Best Life Insurance Companies, we vetted 71 providers to find the best life insurance offerings. First, we made sure that they provide coverage in at least 40 states with no special eligibility requirements for customers — they need to be available to be the best. We also verified that they all sell individual policies. If you purchase life insurance as part of a group plan with your employer, your options will be limited to the provider it partners with.
Then we checked every provider for financial strength and stability. Whole life insurance is a lifelong commitment, so you want to be sure the company you choose is around for the long haul. It has to be able to pay out on your policy, whether it’s needed five years from now or 50. We looked for “excellent” financial strength ratings from at least two of the major independent agencies. These ratings measure insurance company’s current and long-term solvency.
The Best Whole Life Policy is Financially Sound
Sources: A.M. Best Company, Standard & Poor’s Financial Services, and Moody’s Investors Service
Fifteen life insurance companies met our initial criteria. From there, we dug deep into policy options to find the providers with the most customizable whole life insurance: policies that can offer anyone a level of coverage they’re comfortable with (and comfortable paying for).
The 15 Providers We Considered for the Best Whole Life Insurance
- Massachusetts Mutual Life
- Minnesota Life/Securian
- Mutual of Omaha (United of Omaha)
- New York Life
- Northwestern Mutual, Ohio National
- Penn Mutual
- State Farm
- TIAA Life
- Western & Southern Financial Group
We required a strong record of customer satisfaction.
Great customer interaction is two-fold: Your insurance company should act as a support system throughout your policy, helping you find the right coverage, answering questions, making billpay a breeze. It should also be easy to work with when the time comes to actually pay out.
Since you can’t take a policy for a trial run (that would be insurance fraud), the best way to ensure great customer service is by relying on others’ experience with the company. We looked at a few different metrics.
First, we collected J.D. Power Customer Satisfaction scores for all of our contenders. J.D. Power asks policyholders to rate their life insurance provider based on price, billing and statements, policy offerings, customer service, and overall satisfaction. We only considered companies that scored above the national average of 785/1000 points.
The Best Whole Life Company is Easy to Work With
Source: JD Power 2017 US Life Insurance Study
Our top picks all weigh in above the mean, and Northwestern Mutual even made J.D. Power’s second highest ranking: “Better than most.” This test did cut some big names from the running — like Prudential, Minnesota Life, and Primerica — but it’s imperative that your lifelong insurance provider treats you well.
That’s why we also considered individual “Complaint Ratios.” The National Association of Insurance Commissioners gets this ratio by stacking the number of complaints against a company upheld by state regulators against the company’s market share. The national median is 1. We saw some companies, like Transamerica, with ratios as high as 1.23. Others were in the more respectable neighborhood of New York Life’s 0.22. But we didn’t settle for anything less than the best: All three of our top picks ring in at a 0.00 complaint ratio.
We looked for Waiver of Premium and Long Term Care riders, so you’ll be covered no matter what.
It’s may feel like we’re harping, but whole life insurance is really expensive. If someday you can’t afford steep premiums because you’re unable to work, you shouldn’t have to worry about your coverage lapsing. In such an event, life insurance may be more crucial than ever. The best companies offer riders that protect against policy lapses due to disability or illness.
“Request a ‘Waiver of Disability’ rider on your life insurance. In the case where the insured becomes disabled, this rider allows them to keep their insurance without having to pay premiums.”
A Waiver of Premium or Disability rider ensures that your coverage stays intact no matter what happens down the road. All of our top picks offer it. Northwestern Mutual goes above and beyond with an additional Disability Income Rider; it provides supplementary income (as a set percentage of your policy’s face value) if you become unable to work down the road.
Insurance experts also suggest looking for a Long Term Care (LTC) Rider. This one kicks in during your life to cover long-term care expenses, like assisted living or a nursing home. Although it requires additional underwriting and may make your policy a little pricier, LTC can help relieve your family of additional end-of-life expenses — which often add up quickly.
“LTC riders offer a great hybrid way to protect against two important risks — premature death and needing extended professional care.”
Northwestern Mutual, Guardian, and MassMutual all offer LTC riders. Coupled with Waiver of Premium, their whole life policies protect you against some of the biggest financial roadblocks that can come with advanced age.
We evaluated dividend performance to find the companies with the best returns.
Since the biggest perk of a whole life policy is its cash value, you’ll want to find a company that helps you maximize savings. Cash value is mostly determined by your premium: The more you pay, the more gets invested. But your provider can cushion that account with annual dividend payments. Look for a “Participating policy,” which pays dividends, as opposed to a “Nonparticipating policy.”
Mutual companies generally have the best participating policies. “Mutuality” means that the company is owned by its policyholders. Profits are paid back directly them in the form of annual dividends. All three of our top picks — Northwestern Mutual, Guardian, and MassMutual — are mutual companies who put their policyholders first.
We looked at historical dividend rates, focusing in on the most recent years, to see which of our top picks offer the best returns on your investment.
All three companies have held steady dividend records for the past six years, without any unexpected drop-offs. We expect that they’ll continue to put money back in policyholders pockets in the coming years. MassMutual stands out for being the only player that’s had an uptick in dividend rates, while Northwestern Mutual, Guardian, and the nine other companies surveyed have seen a slight downward trend.
Our Picks for the Best Whole Life Insurance
Best Policy Options: Northwestern Mutual
FORTUNE ranks Northwestern Mutual “Number One for Quality of Products and Services,” and we generally agree. This company ticked every box we looked for in whole life insurance: solid financial backing, highly-rated customer service, and plentiful policy options.
Northwestern Mutual has an impressive 15 of the 16 add-on riders we looked for, so you’d be hard-pressed to find a more customizable policy. Some options we didn’t see anywhere else; among these are an Accidental Death rider, which pays up to double the policy’s value if you die in an accident, a Critical Illness rider that pays a lump sum at the time of diagnosis, and a Disability Income rider to supplement your finances if you can’t work. With such a wide array of options, this company allows you to craft a truly individual policy. For a complete list of Northwestern Mutual’s offerings, see our life insurance buying guide.
The one place Northwestern Mutual didn’t totally sell us was its support systems. When we sent emails looking for policy information, Northwestern Mutual was the slowest responder (it took over a day to receive any response). And when we got its reps on the phone, they weren’t terribly accommodating. NWM did garner five stars in J.D. Power’s customer service poll, so maybe we caught it on an off day. Still, if it’s your first time buying life insurance, a more responsive company like Mass Mutual might be a better bet.
Despite the trouble we had getting in touch, we stand by the excellence of Northwestern Mutual’s whole life policies. This company is absolutely number one in terms of quality of products — any customer will be able to build a whole life plan that fits their individual needs. And, at the end of the day, the first priority of insurance is to keep you covered no matter what.
Best Recent Dividend Performance: MassMutual
MassMutual won us over with its recent dividend record. Not only are its dividend rates a percentage point or two higher than our other top picks, but they’ve also risen slightly in recent years. This caught our eye, especially considering that almost all of the 12 companies surveyed have seen a consistent decline in dividend rates. If you’re looking to make the most of a participating whole life policy, we recommend starting your search here.
Dividends aside, we couldn’t recommend MassMutual without its great whole life coverage. Although it doesn’t have as many riders as NWM, MassMutual hits all the important marks and then some. Alongside Waiver of Premium and LTC riders, some highlights include an Accelerated Death Benefit rider and a Term Rider that allows you to tack on extra coverage for a set number of year. This can increase policy value during a critical period of time, like while your kids are living at home.
MassMutual earns near-perfect financial scores, lagging only slightly behind Northwestern Mutual with an Aa2 from Moody’s. Admittedly, this company also ranked a couple notches below NWM and Guardian in J.D. Power’s customer survey. But we’re going to go ahead and contest that: When we reached out ourselves, MassMutual’s service was by far the best of the group. MassMutual’s friendly reps responded quickly and answered our questions comprehensively.
Most Premium Payment Models: Guardian
Guardian, in keeping with our high standards, enjoys top-notch financial strength and customer satisfaction ratings, coming in just six points behind NWM in overall J.D. Power score. And it’s almost on par with MassMutual for rider options; including, of course, Waiver of Premium and LTC. But where this company really stands out is its range of premium payment structures.
Guardian lets you choose from eight different cash-accumulation models, each designed to fit a personal savings goal. If you prioritize a cheaper premium and larger death benefit over cash value, choose its L121 policy. If your goal is to build cash value fast, Ten Pay Whole Life lets you pay all of your premiums over the first ten years. This is a unique system — by contrast, MassMutual has just five different structures, and Northwestern Mutual only three. To speak with an agent about the right payment structure for you, use Guardian’s Find an Advisor Tool.
Keep in mind that rapid cash value accumulation will always mean higher premiums. Guardian’s savings-heavy premium structures are the best fit for folks who have a chunk of capital to invest right off the bat. If you’re not ready for that commitment, though, there’s a good chance you’ll find a match with one of its entry-tier policies. Guardian’s website is light on the details, so we recommend making a call to see what this whole life insurance company can offer you.
Know Your Whole Life Insurance Policy
Whole life insurance is a complicated product. It can be hard to wrap your head around its ins and outs — Consumer Reports even calls this the “most misunderstood coverage.” Here are a few of the things we learned over the course of our research that may help you understand your new whole life policy a little bit better.
It typically takes about 15 years for a whole life policy to return value on your investment.
It starts with the setup process. Whole life insurance has significant front-end costs, including agent commissions that can be 130–150 percent of the first year’s premium. You can’t really get around these; they go to whomever sells you the policy. That means with any whole life insurance, you won’t be able to start saving until these hefty agent fees are out of the way.
Once you’re past the setup costs, your policy’s cash value begins to grow. Since investments are only part of each premium — the other part goes towards your death benefit — cash value builds very slowly at first. It takes time for those earnings to compound. Unless you opt to pay bigger premiums up front, as with Guardian’s Ten Pay Whole Life plan, you won’t have much cash access in the first few years.
On top of that, most companies charge “surrender fees” to discourage people from canceling their policies in the first 15 years. That’s the point at which your cash value is expected to balance out the cost of premiums.
All of this means that if you cancel your policy in the first 15 years, you’ll most likely have lost money. The only way a whole life policy is worth the cost is if you own it for a long stretch. It’s vital to make sure you’ll be able to afford the premiums for at least 15 years. If you’re hesitant about making such a big commitment, term life insurance is a much cheaper way to get coverage during the most critical years.
Dividends can boost your policy’s value, but they’re not guaranteed.
All three of our top picks offer Participating whole life policies. They’re called “Participating” because policyholders “participate” in the companies’ investment fortunes: In other words, they get a share of profits in the form of annual dividends. Not every whole life provider offers this option, but most mutual companies do — including all three of our top picks.
Despite projections, it’s impossible to know what your actual rate of return will be. Emory Smith calls dividends “a bit of a black box — there isn’t a simple way to describe how they work.” Your policy guarantees a minimum amount of cash gain, generally something like three percent a year. But providers often paint a rosier picture, showing what could happen in a best-case scenario. These projections assume that the company’s investments will perform as expected and that you’ll reinvest dividends into your policy, bumping up its earning potential each year.
“Policyowners have the flexibility to take dividends as cash payments, use them to reduce future premium payments, or have them added to the death benefit each year.”
The problem is that neither of these things is guaranteed to happen. You may choose a cash dividend instead of putting it towards your policy. And, even if the company’s portfolio performs well, it could still raise the cost of insurance due to revised mortality expectations. Your premium won’t go up if this happens, but less of it will go toward the cash component.
We still recommend choosing a mutual company, like one of our top picks, for a shot at good dividends. Just be aware that the advertised returns may not be 100% true for every policy.
Policy loans are an option but should only be taken out in emergencies.
Once you’ve built up cash value in a whole life policy, you can use it as collateral for a loan from the insurance company. These loans are taken tax-free, and you technically never have to pay them back. But if you don’t, interest on the loan can snowball to the point where it eats away at the policy’s remaining value and reduces the amount your beneficiaries will be paid.
“A policy loan is effectively a cash advance on your death benefit, so if you don’t pay it back, it’s costing your heirs.”
If you do pay the loan back, you have two options: You can pay it with interest, which gets pricey fast, or you can give up the policy and potentially pay surrender charges. In all three cases outlined, your insurance policy loses value and coverage is weakened. For this reason, insurance experts caution against taking policy loans except in cases of serious need.
The Bottom Line
Whole life is only valuable in the long run, so make sure you can afford the hefty premiums before buying. Our recommended companies are solid picks, but remember: To find the best coverage for you at the cheapest price, you’ll need to shop around and compare quotes.
Feeling lost? Experienced advisers understand the marketplace and can point you towards the companies that have the most competitive rates for your specific needs. The Society of Financial Service Professionals can help you find a broker you’ll trust.
Our Whole Life Insurance Review: Summed Up
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