Is a whole life a fit for me?

The primary value of a whole life insurance contract comes into effect on day one, when the entire death benefit becomes payable to your heirs as an income tax-free lump sum. However, every month you'll pay more into the policy than the "cost of insurance," and that extra sum can help you build cash value. This cash value is tax-deferred and grows at a stable, guaranteed rate, insulated from market fluctuations. While the flat premium payment never changes, the percentage allotted to cash goes down as you get older. At first, a larger percentage of your premium is applied to your cash value. As you get older, the insurance company's risk increases, so more of your premium payment is applied to insurance costs. However, your cash value will still grow every year. 

How cash value builds

Your cash value will grow at a guaranteed rate, and the money is tax-deferred, so you don't pay income taxes as it grows. This helps money grow faster. With guaranteed, compounded, tax-deferred growth, your cash value can grow to a significant sum over time.

The actual amount of cash value will be determined by several factors, including how long you've had the policy, the cost and amount of your policy, terms of the contract, guaranteed interest rates, and the insurance company itself, which may or may not pay dividends to policyholders. While every whole life policy has a cash value component, they don't all pay dividends. That's why you should consider purchasing your policy from a mutual insurance company (such as Guardian). Mutual insurance companies are owned by their policyholders, so their policies can earn annual dividends – a part of the insurer's profits. Dividends can increase policy value beyond the guaranteed growth rate. While annual dividends are not guaranteed, Guardian has paid them every year since 1868.

Here are some things to consider if you're thinking about getting a whole life policy:

How old and healthy are you?

If you are young, a non-smoker, and in excellent health, then getting whole life while you are in the prime of your life can be a valuable move, even if it's a smaller policy. Not only can it provide your loved ones with protection should something happen to you, but you can also start building tax-deferred cash value that you can use later in life. Your insurance premium will likely never be lower than it is right now, and you'll have more time to build your cash value – and possibly accrue dividends – over a longer length of time.

Can you afford enough insurance to meet your family's needs? 

As age increases, whole life premiums increase to the point that you may not be able to afford all the coverage you need to protect your family. In this case, you might consider looking at term life, or possibly a combination of term plus a smaller whole life policy. 

How long until you retire? 

If you are getting older and looking only to maximize retirement savings, whole life may not be your best option. While the policy can build cash value, other options may help you build more savings faster, particularly if your employer has a matching program. You can also consider a smaller policy for burial expenses.

Have you maxed out your other contributions?

If you're in a high-income bracket and have already maxed out your 401(k) plan or IRA options, whole life can be part of a wealth-building strategy, especially if you also want to provide a death benefit for your family. 

What factors impact my whole life insurance rates?

The coverage amount affects life insurance rates in an obvious way: the bigger the death benefit, the higher the premium. But many other factors come into play as well, including:

Age. 

No matter your current age, your monthly premium will likely never be lower than it is today. Good health and life expectancy lower the cost of insurance, so the younger you are, the less you'll typically pay for a policy. Taking out a whole life policy when you are young also makes it easier to qualify for coverage and gives you more time to build your cash value. 

Gender. 

When it comes to life insurance, men and women are not equal. According to the Centers for Disease Control, in 2018, the average life expectancy for men in the U.S. was 76.2 years, while women averaged 81.2 years. A longer life equals more monthly premiums paid, which leads to lower rates per month.

Tobacco use. 

Whether you smoke, vape, or dip, using tobacco increases your medical risks and life insurance costs. Tobacco users often pay two to three times as much for life insurance as non-users. Even if you've quit using tobacco, you will usually need to be tobacco-free for at least a year to qualify for non-smoking rates. When you apply for coverage, insurance companies typically require a physical, including a nicotine usage test. Blood and urine tests can show other signs of nicotine use for longer. It's essential to give full disclosure about your tobacco usage when applying. Providing false information could mean forfeiting a payout to your beneficiaries if something were to happen to you.

Risky occupations and hobbies.

Certain work environments, such as oil rigs, have hazards known to increase death or injury risk, affecting rates. Similarly, certain hobbies such as scuba diving can also lead to higher rates.

Health. 

When you apply for a policy, there is an "underwriting" process in which life insurance companies assess mortality risk, based on the factors noted above, as well as your medical condition. As we've mentioned, you'll likely be required to answer health questions and take a medical exam before a policy is approved. After assessing the results, the insurance company will assign you to a classification, such as: 

Preferred Plus 

This is the best classification with the lowest premiums possible. These individuals are in excellent condition, fall under healthy BMI ratings, have no major family history issues, and live a clean and healthy lifestyle. 

Preferred 

These individuals typically have minor medical issues, such as high blood pressure or cholesterol. People who fall into this class won't quite get the best rates, but they will still be relatively low. 

Non-Smoker 

Individuals in this category are in relatively good health but may have a few medical issues, such as being overweight. However, there are no major health issues.

Standard 

Higher-risk individuals. They may have the same medical issues as those in Standard Plus but have serious family history issues.  (Guardian NS is other carriers Standard with Tobacco and NT- I would recommend removing this and leaving Non-Smoker and Standard as the same)

It is also possible for those with serious medical issues to fall into a "substandard" category, which may not be insurable. These classifications vary somewhat by insurer, and it's important to remember that no life insurance company expects every prospective customer to be in peak medical condition.

Life insurance riders can also affect cost

Whole life insurance policies often come with add-ons, or "riders," either automatically included or available as an option for an additional cost5. Riders generally fit into one of two categories. 

  1. Living benefit riders allow you to use some of the benefit money while you are still alive.

  2. Death benefit riders are only used to help your beneficiaries after you die.

Added riders can affect premiums, but the cost can be worth the added protection provided. Here are some of the more common riders a company may offer with its whole life policies:

Accelerated Terminal Illness or Living Benefit rider allows you to access a portion of the death benefit if you have a terminal or serious medical issue. This can help with medical bills and hospice care and is deducted from the insurance policy's total amount.

Accidental death rider pays an added death benefit if you are killed in an accident.

Critical illness rider provides a lump sum that can be used to cover medical treatment if you are diagnosed with a life-threatening condition or illness. The amount used will be deducted from the total death benefit.

Guaranteed insurability allows you to increase your coverage at points in the future without requiring additional medical examinations.

Waiver of premium rider allows you to stop paying your premiums for a specified amount of time if you become unemployed or disabled6.

How much do people typically pay for whole life?

With so many factors affecting a policy's cost, it's impossible to know your exact monthly payments before applying for coverage and going through the underwriting process. However, a recent survey by the Top Whole Life insurance blog listed actual monthly premiums for current applicants in excellent medical condition. Here are some of the key examples:

 

Male Non-Smoker

$50,000 policy

Female Non-Smoker

$50,000 policy

Male Non-Smoker

$100,000 policy

Female Non-Smoker

$100,000 policy

Age 20

$40.24

$34.19

$65.86

$55.16

Age 30

$51.68

$45.11

$89.44

$80.40

Age 40

$72.95

$62.60

$135.63

$109.88

Age 50

$115.71

$91.70

$216.80

$172.78

Premium cost per month. Source: Top Whole Life How much does whole life insurance cost? Rates & charts

As you can see, the difference in monthly rates starts to make more significant jumps as the insured gets older. The monthly difference for $50,000 of coverage (male and female) only increases around $10 between ages 20 and 30. However, that jump is closer to $20 per month between ages 30 to 40, and $30 - $40 between ages 40 and 50. 

As applicants get older, the difference in rates between males and females also increases. At age 20, a $100,000 policy is around $10 more for males than females. By age 50, however, a $100,000 policy is $45 more for a man than a woman of the same age. 

Now, let's look at how medical issues and smoking can affect rates. This chart compares a 35-year-old man and woman with different rate grades wanting to take out $250,000 of whole life insurance coverage. As you'll see, smoking can raise rates substantially, in this case even more than an issue that lowers your medical rate classification to Standard.

 

Preferred /

Non-Smoker

Preferred /

Tobacco user

Standard /

Non-smoker

Standard / Tobacco user

Male

$260.57

321.68

279.49

338.65

Female

$218.59

254.91

N/A*

268.40

Premium cost per month. Source: Top Whole Life How much does whole life insurance cost? Rates & charts

* Standard non-smoker rates for females were not provided.

Talk to a life insurance professional about your needs

Life insurance can be a powerful financial tool to help protect your family and lifestyle. But your situation is unique, and guidance is needed to tailor a whole life policy to your needs and get a meaningful quote. Now would be a good time to discuss your situation with a financial professional who has helped others get whole life insurance coverage. If you don't know such a professional, ask friends or colleagues for a recommendation. Or, Guardian can connect you to a financial representative who can help.

Frequently asked questions about life insurance costs

What is the average cost of whole life insurance per month?

Quote costs vary widely depending on the coverage amount and applicant's age, medical status, and other terms and factors. A recent survey found that a 20-year-old female could pay about $55/month for $100,000 of whole life coverage. Insurers could quote a 50-year-old male for almost four times that cost – about $217/month.

Is a whole life policy a fit for me?

The primary value of whole life insurance is that it can provide lifetime coverage with the potential for a full benefit payout from the insurance company on the first-day coverage is in effect. However, these policies also have a cash value component that can help you steadily build wealth that is insulated from market fluctuations.

How much does whole life insurance usually cost?

The cost for premium payments varies widely depending on a number of factors, and there are differences between insurers. However, term coverage for the same death benefits will typically be a more affordable life insurance option.

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Disclaimer

1All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.

2Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.

3Dividends are not guaranteed. They are declared annually by Guardian’s Board of Directors.

4Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.

5Riders may incur an additional cost or premium. Riders may not be available in all states

6A Waiver of Premium rider waives the obligation for the policyholder to pay further premiums should he or she become totally disabled continuously for at least six months. This rider will incur an additional cost. See policy contract for additional details and requirements.

2021-127092  20231031