Ah, whole life insurance. Few products are more controversial in the financial world. Critics say whole life insurance salespeople are simply doing the financial equivalent of selling ice to an Eskimo because most people don’t need these pricey policies. But for other people, whole life insurance can literally be a lifesaver under the right certain circumstances.
Whole life insurance costs a whole lot more than term life insurance — and you’ll be paying it for the rest of your life. So, it makes sense to take a few minutes up-front to see how you can select the best whole life insurance policy with the best rates.
Do you even need whole life insurance?
The truth is that most people don’t need whole life insurance. Think about the purpose of any life insurance: to provide income to any dependents in the event you die. Unless you plan on supporting other people with your income for the rest of your life, you’ll probably be better off with a term policy instead.
Some people like whole life insurance plans because it is a type of forced savings plan. A portion of your premium goes into a separate savings account each time you pay, and you can access that money under certain conditions. However, these “savings plans” offer very low returns compared to what you can get by saving on your own. Still, if you absolutely can’t save, it may be worth considering a whole life insurance policy.
If you do decide to go ahead and look for a whole life insurance policy, the first step is to get as healthy as possible, whether you need to stop smoking, start exercising, lose those extra pounds and eat a healthy diet.
This isn’t just feel-good advice, there’s a real financial stake here. To be approved for a policy and get the best rates possible, you will be required to take a medical exam. If you’re an unhealthy person you may be denied for a policy, and if you are approved, you’ll have much higher rates. And remember: you’ll be paying these rates for the rest of your life—so take some time to set yourself up right from the get-go.
Research whole life insurance companies
It’s often difficult to get a quote for whole life insurance online as you can with auto insurance or health insurance. That’s a deliberate move on the part of the insurance companies: these are super-complicated products, and they want to talk to you in person or over the phone to explain these policies to you.
So, you’ll need to pick a few life insurance companies up-front to get quotes directly from. Look for companies with a high A.M. Best rating. These are financially strong companies that are likely to be around for a long time. After all, you do want your loved ones to be able to file a claim eventually, but hopefully many years into the future!
After that, look up each company’s complaint record from the National Association of Insurance Commissioners. Simply do a search for the company you’re interested in checking out. Then select Closed Complaints from the search results, and then Closed Complaint Ratio Report. Companies with a ratio of less than one are good companies to work with because few customers have had problems with them.
Once you have a few companies selected, it’s time to contact them for quotes.
Understand your options
If you thought deciphering your health insurance was bad, wait until you try to figure out a whole life insurance policy. For this reason, it can help to consult a fee-only financial advisor.
Why fee-only? Whole life insurance typically comes with a huge kickback for the referring agent, and a commission-based advisor is more likely to try to sell you a product that will put more bucks back in their pocket, rather than what’s right for you.
The companies you select should require you to get a medical exam. This is why getting healthy in the first step will pay off. You can elect to buy whole life insurance that doesn’t require a medical exam but expect to pay a much higher premium for the rest of your life if you do.
Each company will have a selection of riders that you can choose from, like an a la-carte buffet. A rider is simply a benefit that you pay extra for. For example, a common rider is a waiver of premium clause that will allow you to continue your insurance without paying for it if you become disabled. Knowing which riders you need — and which you don’t — can save you big bucks over the years.
Make your selection
Make sure you fully weigh the cost of the premium with the benefits, because this is the policy you’ll have for the rest of your life as long as you keep up with the payments.
To learn more, check out SuperMoney’s list of reputable whole life insurance companies.
Lindsay is a recent college graduate living in Fort Collins, CO. She taught herself how to manage her money after a series of bad encounters with student loans, low-paying jobs, and a house from hell. Today, she’s working hard to pay off her debts, earn more money, and find her dream job as a wildlife biologist. You can find her work on many financial sites like Magnify Money, Credit Sesame, and Centsai.