Best whole life insurance companies of December 2023 - CNN Underscored
Whole life insurance is a type of permanent life insurance offering lifetime coverage and a cash value account. Although term life insurance is the right choice for most, some will find the benefits of whole life insurance are worth the higher premium cost.
Learn which companies offer the best whole life insurance policies, including why we chose each winner, who the company is best for and each winner's pros and cons.
Methodology
To choose our winners for the best whole life insurance insurers, we analyzed dozens of companies and narrowed down our list to the top 11. From there, we judged each company across seven categories essential to good policies. We analyzed more than 220 data points and used more than a dozen primary data sources during our research.
Securian
Best all-around whole life policies
Why we picked it
Securian's combined Veralytic scores in financial strength, cost competitiveness, accuracy of predictions for how your policy will perform, and the ease with which you can access your cash value were the highest out of the 11 companies we analyzed. Veralytic is a trusted independent firm that scores insurance companies based on their performance and in comparison with other insurers, and we use their scoring to rank companies that offer permanent life insurance.
Securian's main drawback is that its complaint rate is higher than expected for a company of its size. The National Association of Insurance Commissioners collects complaints that consumers file with their state insurance office, then provides an "index" that reflects the company's complaint rate in relation to how big it is, how big other insurers are, and how many complaints other insurers get. An index of 1 indicates a company gets the number of complaints you'd expect it to get for its size. Securian's index is nearly six, which means its complaint rate is around six times higher than expected.
Pros
- Excellent financial strength
- Accurate predictions of a policy's value over time
- Low fees in relation to premiums
Cons
- Significantly high complaint rate for a company of its size
State Farm
Best customer service
Why we picked it
Since 2020, State Farm has earned J.D. Power's No. 1 spot for customer satisfaction in the U.S. Life Insurance Study. J.D. Power ranks life insurance companies according to their customer service performance in several categories: product availability, customer interactions, communication, price and policy statements. This multilevel approach to rating customer service makes J.D. Power a great source for how well a company treats its customers.
Pros
- Ranked No. 1 for J.D. Power customer satisfaction from 2020 to 2023
- Fewer complaints than expected for a company of its size
- Superior financial strength
Cons
- Living benefits are not automatically included in whole life policies
- Life insurance products not available in Massachusetts
Transamerica
Excellent for accurate predictions of your policy's value
Why we picked it
Transamerica's policy illustrations consistently provide a level of accuracy that can help you understand how much value your policy can build over its lifetime. This advantage is an important one when you want to get a sense of what your policy's value might be in your retirement years.
Pros
- Top-three policy illustration accuracy score
- Among the best financial strength scores
Cons
- Cash value access score lagged behind leading companies
- J.D. Power customer service score was considerably lower than the group average
Midland National
Best value
Why we picked it
Midland National earned a 100% score from Veraltyic for its cost competitiveness, a category that encompasses more than just premium prices. Cost competitiveness includes how much of your premiums go toward fees. Midland National's fees in relation to premiums were better than the industry average.
Pros
- 100% score for cost competitiveness
- Low complaint rate
- Above-average score for the ease with which customers can access their cash value accounts
Cons
- Below-average J.D. Power customer satisfaction score
- Low financial strength score
MassMutual
Excellent for financial strength
Why we picked it
MassMutual was one of nine companies to earn a 100% rating from Veralytic for its financial strength, a metric that takes into account financial strength ratings from several rating agencies (organizations that evaluate a company's ability to pay out claims over the next few years). Additionally, MassMutual earned an A++ (Superior) rating from AM Best, which means the company's chances of not paying your policy's death benefit because of financial trouble are incredibly small.
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On the downside, the policy illustrations MassMutual uses to help you understand how your whole life policy will grow in value aren't always accurate. The company had the lowest policy-illustration reliability score in our study.
Pros
- 100% score for financial strength
- Earned highest rating available from AM Best
- Top-three for how easy it is for customers to access their cash value account
Cons
- Policy illustrations may not be as accurate as other companies
- Premiums and fees scored among the bottom four in the group
Northwestern Mutual
Best if you want to access your policy's cash account
Why we picked it
Of the best whole life insurance providers we reviewed, Northwestern Mutual received a near-perfect score from Veralytic for access to cash value. After completing the necessary paperwork, you can withdraw from your cash value account in as little as 48 hours, in some cases.
Pros
- Withdrawals from cash value in as few as two days
- Interest rates are typically better than financial institutions
Cons
- Middle-of-the-pack cost competitiveness
- Historical performance lags behind competitors
Nationwide
Best if you want all your insurance with one company
Why we picked it
Nationwide offers a wide variety of insurance products, including home, auto, pet, and life. This isn't typical of insurers in the whole life space. Additionally, Nationwide achieved the highest score in our rankings of the best car insurance for new drivers and best car insurance for seniors. Additionally, Allstate achieved a perfect score in our analysis of the best renters insurance companies.
Pros
- Offers multiple insurance types beyond life insurance
- Top-rated in auto insurance in renters insurance
- Second-highest J.D. Power customer service score in group
Cons
- Below-average cost competitiveness score
- Below-average score for level of ease of accessing a policy's cash value account
Our picks at a glance
What is whole life insurance?
Whole life insurance offers permanent coverage that lasts your lifetime. It includes level premiums that never change and a guaranteed death benefit your beneficiary receives when you pass away, provided you pay your premiums.
The policy also has a cash value component that acts like a built-in savings account. It grows tax-deferred at a guaranteed interest rate, in most cases. You can withdraw funds or take a loan against the cash value for any purpose.
A whole life policy may also pay out dividends, which you can use to pay your premiums, buy more coverage or withdraw.
What are the benefits of whole life insurance?
- It doesn't expire: As long as you pay your premiums, your beneficiary will receive a death benefit when you die.
- Level premiums: Your premiums will remain the same for the policy's duration.
- Cash value growth: The policy will grow cash value at a guaranteed interest rate. You can use these funds while you're still alive via loans or withdrawals.
- May earn dividends: Mutual insurance companies may pay annual dividends, which you can take as cash, use to buy more life insurance or pay premiums.
- Estate planning: create a legacy for your family, provide a charitable gift or fund a special-needs trust.
How does whole life insurance work?
Whole life insurance is different from its popular alternative, term life insurance. Here's how the process of buying whole life insurance works:
- Apply for coverage.
- Complete the underwriting process, which may include a telephone interview and medical exam.
- Finalize the policy and make regular payments to keep coverage in force.
- In theory, the cash value will grow steadily with each premium payment you make. You can borrow from the cash value account or withdraw funds if needed.
- When you die, your beneficiary receives the death benefit amount, less any outstanding cash value balance.
The main difference between term life and whole life insurance is that whole life policies include a cash value component and cover you for your whole life.
Who needs whole life insurance?
A whole life insurance policy is for people who need permanent coverage and want to build savings. If you're considering whole life insurance, you're in good company. It's the most common type of permanent life insurance people buy, according to the Insurance Information Institute.
Whole life insurance may be a good option if you:
- Have serious health issues (there are whole life options with guaranteed insurability)
- Have people who depend on you financially
- Want to pay for your final expenses and funeral costs
- Have been turned down for a term life policy (if purchasing a guaranteed issue policy)
- Want to leave a financial legacy to a charity or your heirs
- Want to provide a guaranteed death benefit
- Are young and in good health (can help you get the best rate)
- Want to guarantee insurability for your child or grandchild while they're young
Types of whole life insurance
There are multiple types of whole life insurance. Limited pay whole life has higher premiums because you only pay for a certain number of years instead of over a lifetime. Single premium whole life is similar but only requires one lump sum payment and may have more tax implications than a standard whole life policy.
Survivorship whole life policies insure two people. It only pays the death benefit to the beneficiary after the second person dies.
For older adults who have serious health problems, a guaranteed issue whole life policy may be best. Acceptance is guaranteed, no matter what your health is like (although some may have waiting periods — such as two or three years — before the policy's beneficiary can receive the entire death benefit).
How much does whole life insurance cost?
Whole life insurance costs depend on several factors: your age, gender, health status, tobacco usage, occupation and lifestyle, driving record and family medical history. The type of life insurance, coverage amount, payment terms, policy features and insurance company will also determine your premium payments.
For a 25-year-old female who doesn't smoke and is in excellent health, the cost would be around $860 per year or around $72 per month. The same policy for a 55-year-old in the same health category would be $2,760 annually or $230 per month.
Alternatives to whole life insurance
Whole life insurance isn't for everyone. Luckily, there are alternatives to consider that might be a better fit.
A term life insurance policy is the most affordable type of life insurance. It typically lasts from 10 to 30 years. If you die while the term life coverage is still active, your beneficiary will receive the death benefit. But if not, the policy will expire.
Universal life insurance offers permanent coverage, like whole life, but has flexible premiums and death benefit coverage. Your cash value interest rate can vary, which might accelerate or slow down the account's growth.
Methodology
To find the best whole life insurance companies, we examined 11 leading insurance companies that offer whole life policies
For each company, we analyzed seven crucial categories, leveraging data from trusted life insurance analytics specialist Veralytic, complaint data from the National Association of Insurance Commissioners (NAIC) and study data from customer-research firm J.D. Power.
Overall, we worked through more than 220 data points to identify winning companies. The following sections describe the category we scored and the weight we gave that category in our scoring model.
Cost competitiveness (20%)
For cost competitiveness, we used data from Veralytic, which calculates a policy's fees and costs per $1 of death benefit. It then compares a company's aggregate and individual expenses to industry averages.
Illustration reliability (20%)
An insurer's illustration is a document that shows you all the important metrics you need to know about your policy, including the benefits your policy offers, your premiums, expenses you'll pay through your premium, how long you'll pay premiums and the policy' projected death benefit and cash value. Because illustrations are critical to your buying decision, we've included a score for them. The score is based on a policy accuracy analysis from Veralytic, which scores a company based on how accurate its illustrations' cash value and death benefit predictions are.
Access to cash value (20%)
Building cash value is part of the appeal of a whole life policy, but a policy can be frustrating if your options for accessing your cash value are limited. For this category, we used Veralytic data that rated companies higher if their cash values were higher and had greater liquidity than what's typical for the industry.
Historical performance (12.5%)
We used Veralytic ratings to judge a company's historical performance. The ratings measure the average return for the past five years in an insurer's cash value policies compared to the average returns of other insurers. Although past results don't guarantee future performance, a life insurance company with a history of assets that have performed well can be a positive sign for policyholders.
Financial strength (12.5%)
Because whole life policies are designed to last your entire life, a company's ability to pay out your claim decades from now is a key point of trust. We used Veralytic scoring for financial strength, which compares an insurer's ratings from AM Best, Fitch, Moody's and Standard & Poor's to other insurers. Each agency's ratings reflect the rated company's ability to fulfill its financial obligations and weather economic turbulence.
J.D. Power score (10%)
J.D. Power scores insurance providers based on five factors that are a key part of the customer experience: communication, interaction, price, product offerings and statements. We include J.D. Power ratings in our scores because they help you gauge what an insurer's typical customer experience is like.
NAIC index (5%)
The National Association of Insurance Commissioners (NAIC) calculates an index for insurance companies based on the company's share of premiums and complaints filed with the NAIC. An index of 1.00 indicates the insurer received the expected number of complaints for a company of its size. An index below 1.00 means the company received fewer complaints than expected for a company of its size and vice versa. We took the average index for each company from the past three years.
What didn't make the cut
Of the 11 whole life insurance companies we analyzed, four were left out of our top picks: Guardian, New York Life, Penn Mutual, and Ameritas. Each of these companies' overall scores suffered from poor performance in heavily weighted categories such as cost competitiveness, illustration reliability and access to cash value.
Frequently asked questions (FAQs)
Term life insurance only lasts a set number of years and doesn't build cash value like whole life insurance. Depending on the term policy, you may be able to renew it after the initial term expires, but you'll pay based on your current age — and the policy may renew annually at a higher rate.
Whole life insurance typically has fixed premiums and a cash value component and covers you for your entire life.
Whole life insurance is worth it for some people. Although it's more expensive than term life, it locks in your premiums for life at your current age and health and provides a cash value component. If you want to pay for your funeral and end-of-life expenses, worry about your future health or have a permanent financial dependent, whole life insurance may be worth it.
How much whole life insurance you need will depend on what you want to leave behind for your beneficiaries. You can use a life insurance calculator to determine your coverage needs or work with a financial advisor to come up with the amount.
For example, if you want to replace your income for five years to help your spouse care for the children and not have to get a job, multiply your annual salary by five. If you want to pay for your funeral, determine the approximate cost. The 2021 median funeral cost with viewing and burial was almost $8,000, according to the National Funeral Directors Association.
Yes, you can cash out a whole life insurance policy through a process called "surrender." When you surrender a whole life policy, you will get the net cash surrender value — the cash value amount minus any outstanding loan balance or unpaid premiums. The insurance company may deduct surrender fees or federal income taxes, depending on how long you've had the policy and how it's structured. Other cash-out options include taking a loan against, withdrawing a portion of or covering your premiums with your cash value.
A whole life insurance policy is designed to last your entire life but may only pay until a certain age, usually up to 121. These policies may require you to pay until you die or reach one of those ages, or they may have a shortened payment schedule, like a limited pay whole life insurance policy that only requires 20 years of payments until the policy is paid in full.
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