The 30-Second Review
Whole life insurance, like its name suggests, is designed to last for your whole life — and the most important factor in picking a policy is whether or not you can afford paying for it your whole life. It's worth it to shop around for the lowest price, but the best whole life insurance provider will also have a wide range of coverage values, high marks in customer satisfaction, the right riders, and (if you're lucky) decent dividends too. Get quotes now.
It has the best financial strength ratings of any of our top picks, coupled with the highest customer satisfaction score from J.D. Power. It also has a fairly steady record of dividends over the past five years, and includes a must-have waiver of premium rider to protect your investment in the event of a disabling injury.
Most Premium Payment Models
Eight unique policies give you more options.
Best Recent Dividend Performance
It's the only one of our top picks with rates that have increased.
To find best whole life insurance companies, you’ll have to shop around for a policy that has the right coverage for your unique circumstances — and the lowest costs. Our top pick is a good place to start. Northwestern Mutual leads the pack in financial reliability, the single most important factor for a product meant to last a lifetime. It also has a handful of coverage values, ranks high in customer satisfaction and low in consumer complaints, and can cover your premium payments if you become disabled. But you can also shop around by using this quote tool to find more options.
How We Found the Best Whole Life Insurance Companies
To come up with our initial list of contenders, we used A.M. Best’s Rating Services tool to pull the 67 top-rated life insurance companies in the United States. We then checked each to see whether they offered traditional whole life insurance (many don’t, including some big names from our review of the best term life insurance policies. like TIAA and Lincoln Financial). For the ones that did, we screened for the following to find the best:
Why we didn’t factor in price. Like all life insurance, the cost of whole life is determined by a range of factors that vary greatly among individuals. Age and health are at the top of the list, but heredity, driving record, and even your credit score matter too. To find the best policy for you, you’ll have to compare quotes built for your exact insurance profile — there’s just no other way.
Financial stability. What good is whole life insurance if you can’t count on it to pay out? We checked the financial strength grades issued by the major ratings agencies (A.M. Best, Moody’s, and Standard & Poor’s) for each provider, and threw out ones that didn’t get top marks from at least two out of three.
Nationwide availability. We only considered companies that are licensed to write whole life insurance in at least 40 states, with no special eligibility requirements.
Death benefits from $25,000 to at least $1 million. We looked for companies that offer a wide range of death benefits. After all, the amount of insurance you buy depends on your budget and goals, which are different for everyone. We eliminated companies that only issue small amounts, as well as those with high minimum requirements.
Waiver of premium rider. The Council for Disability Awareness estimates that one in four of today’s 20-year-olds will become disabled before they retire. We made sure our top picks each offer an inexpensive rider to forgive policy premiums if you become disabled before age 60. Without such protection, loss of income could make it very hard to keep your policy active, potentially forcing you to surrender it before it returns much value.
"A waiver of premium rider is an inexpensive way to help keep your policy active should you become disabled during your working years."Steven Weisbart, Ph.D. CLU Senior Vice President and Chief Economist, Insurance Information Institute
Strong record of customer satisfaction. After weeding out all but a handful of whole life companies, we looked at how satisfied customers have been with our top contenders. J.D. Power’s 2015 U.S. Household Insurance Study scores companies based on their policyholders’ contentment with price, policy offerings, interaction, and billing. Meanwhile, the National Association of Insurance Commissioners’ “Complaint Ratio” is the number of consumer complaints against a company that were upheld by state regulators in 2015, divided by market share. The national median is 1, so a score lower than 1 means the company had fewer complaints than most. Our top three picks all have ratios of 0.05 or lower, putting them in the top tier of companies for this metric.
Recent dividend performance. We looked at historical dividend rates for our remaining top companies to see how they’ve performed in the last five years. Dividends are the money that’s left over from your insurance company’s investment earnings after it covers things like overhead and claims. Not all companies pay them, and they’re never guaranteed. When they occur, though, they can be used to offset premiums or increase your policy’s death benefit. While past performance doesn’t guarantee future earnings, a strong dividend record is a vote of confidence for a company’s overall investment strategy.
Our Picks for The Best Whole Life Insurance Companies
Best Overall - Northwestern Mutual
Northwestern Mutual was founded in 1857 and is the largest direct writer of life insurance in the United States today. That’s impressive in and of itself, but those traits really mean something when you’re talking about whole life insurance — they vouch for the company’s business practices over the long haul.
Besides earning elite financial strength ratings from every major agency, Northwestern Mutual had the highest customer satisfaction score of any of our finalists on the J.D. Power survey. It also had a microscopic complaint ratio in 2015 (0.04 vs. a median of 1), and a fairly steady record of dividends over the past five years. And like all our top picks, it offers a best-in-class “waiver of premium” rider that will cover premiums for as long as you’re disabled prior to age 60, and up to age 65 if the disability occurs after your 60th birthday.
Best Choice in Premium Payment Models - Guardian
Guardian matched Northwestern Mutual in practically everything except J.D. Power rating, and edged it out in complaints with a perfect score
of 0(!) in 2015. Its financial strength is exemplary, but what really differentiates Guardian’s whole life offerings is the wide selection in premium structures. You can choose from eight different cash-accumulation models, each designed to fit a specific personal goal for cash buildup (by contrast, Northwestern Mutual has three and MassMutual five). If you prioritize cheaper premiums and guaranteed death benefit over cash value, choose its L121 policy. If your goal is to build cash value faster, Ten Pay Whole Life lets you pay all your premiums over the first 10 years. Of course, higher cash growth demands higher premiums, but if you’ve got it to spend, Guardian lets you tailor your policy more than any of our other finalists.
Best Recent Dividend Performance - MassMutual
Another behemoth in the whole life market, MassMutual ties our other top picks in financial strength, but was slightly below average in customer satisfaction from J.D. Power. Still, it beat all other finalists in one area important to policyholders: recent dividend performance. In fact, MassMutual is one of a very few whole life companies that’s actually seen a dividend uptick in the past five years (most others have dipped or held steady).
Dividend rates for our three top picks from 2011-2016. A longer history of dividend rates can be found here .
Did You Know?
It typically takes about 15 years for your whole life policy to return value on its investment.
Whole life insurance has significant built-in setup 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). Your premium is also split into two funds: one for the insurance itself (the death benefit) and one for the cash savings component. In the beginning of the policy, the cash component grows very slowly as it takes time for earnings to compound. So unless you’re paying a boatload in premiums, you won’t have much cash to 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 (the time before the cash value starts to balance out the cost of insurance).
All this means that if you cancel your policy in the first 15 years, you’ll probably lose money on it. You will have gotten some value simply from being insured, but term life insurance is a much cheaper way to get temporary coverage. The only way a whole life policy is worth its high price is if you own it for a long stretch (e.g. your whole life). It’s vital to make sure you’ll be able to afford the premiums for at least 15 years.
Unfortunately, not being able to keep up with premium costs is pretty common. The insurance research organization LIMRA found that 4 percent of whole life policies lapse each year. and the bulk of them are less than 5 years old. Because of the way whole life is structured, that effectively means those policyholders just handed their money over to the insurance companies — not quite the goal they had in mind.
Dividends can boost your policy’s value, but they’re not guaranteed.
While every whole life policy has a guaranteed minimum cash growth, the actual amount can be higher if the company pays dividends. Not every whole life insurance company pays dividends, but most mutual companies do (including all three of our top picks). Policies that pay dividends are called “participating” because the policyholders participate in the company’s investment fortunes.
Despite projections, it’s impossible to know what your actual rate of return will be.
Whole life policies guarantee a minimum amount of cash gain (generally something like 3 percent a year), but providers often paint a much rosier picture, showing what could happen in a best-case scenario. These projections assume both 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.
The problem is that neither of these things is guaranteed to happen. Also, even if the company’s portfolio performs well, it could still raise the cost of insurance due to revised mortality expectations. If this happens, your premium won’t go up, but less of it will go toward the cash component.
Policy loans 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, and you technically never have to pay it back. But if you don’t, interest on the loan will snowball to the point where it eats away the remaining cash, and if that happens, you’re in a pickle. You can either pay back the loan with interest (which is pricey), or give up the policy (and potentially pay surrender charges). For this reason, you should be very careful when deciding to take out a loan from your policy, and have a solid plan for paying it back.
"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."
You should prioritize your need for insurance today over your desire for long-term cash value.
If your death would cause financial stress to your dependents, your first order of business should be to get enough coverage to take away that risk. If you can’t afford the high price of whole life, that means your best option is probably term.
If you’re absolutely set on permanent coverage, another option to consider is a guaranteed universal life (GUL) policy. Just like whole life, GUL premiums don’t change — the key difference is that these policies don’t build much cash value. In exchange, though, you get the same death benefit for much less in premiums. Read more about GUL policies in our review of the best life insurance for seniors .
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 to find the best coverage for you at the cheapest price, you’ll need to shop around and compare quotes. Feeling a little lost? An experienced advisor not only understands the marketplace better, but also can point you to the companies that have the most competitive rates for your specific health concerns. The Society of Financial Service Professionals can help you find a broker you can trust.