CIPS-L4M7-Assets candidate - CIPS Level 4 L4M7 Whole-life Assets Management Updated: 2024
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CIPS Whole-life candidate
Other CIPS exams
A8 Preparing and Managing ContractsCIPS-L4M7-Procurement CIPS Level 4 L4M7 Diploma in Procurement and Supply
CIPS-L5M2-MSCR CIPS Level 5 Managing Supply Chain Risk
CIPS-L4M7-Assets CIPS Level 4 L4M7 Whole-life Assets Management
CIPS-L5M5-ADPSC CIPS Level 5 Advanced Diploma in Procurement and Supply Core
Which of the following costs does the EOQ minimise?
A. Total cost of safety stock
B. Total cost of ordering inventory
C. Total cost of annual inventory cost
D. Total cost of carrying stock
Answer: C
Explanation:
Economic order quantity (EOQ) was developed in 1913 by Ford W. Harris and has been refined over time. The
formula assumes that demand, ordering, and holding costs all remain constant. The EOQ minimizes the total annual
inventory cost.
EOQ formula is as follow:
LO 2, AC 2.3
Question: 15
A major investment bank is planning to purchase a complex banking system that will interface with multiple
applications at varying times of the day. Before deploying the system, there are various levels of testing that must be
performed through joint testing between the in-house team and off-shore testing consultants. The testing will be
performed in a resource-constrained shared environment and managed by the on-shore development team.
The costs for testing are generally classified as...?
A. Insurance
B. Maintenance costs
C. Acquisition costs
D. Purchase prices
Answer: C
Explanation:
In the scenario, the buying organisation (investment bank) must conduct various types of testing before the deployment
of the software system. These tests can be functional testing, factory acceptance testing and/or user acceptance testing.
The costs for all these types of testing are classified as acquisition costs with regards of total cost of ownership.
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Reference: CIPS study guide page 150-152
LO 3, AC 3.1
Question: 16
What is the stock turn for a store holding products to the value of £250,000 with annual sales of these products
amounting to £1,000,000?
A. 10
B. 4
C. 0.25
D. 0.4
Answer: B
Explanation:
Calculating Inventory Turnover (Stock Turn)
As with a typical turnover ratio, inventory turnover details how much inventory is sold over a period. To calculate the
inventory turnover ratio, cost of goods (COGS) is divided by the average inventory for the same period.1
Cost of Goods Sold ÷ Average Inventory or Sales ÷ Inventory
In this exercise, the stock turn equal to sales divided by inventory, or 1,000,000:250,000 = 4.
Reference: CIPS study guide page 131
LO 2, AC 2.3
Question: 17
Which of the following is essential to effective implementation of just-in-time?
A. Regular machine changeovers
B. Larger warehouse for larger amount of inventory
C. No need for smoothing production
D. Strong links between the suppliers and the buying organisation
Answer: D
Explanation:
For JIT manufacturing to succeed, companies must have steady production, high-quality workmanship, glitch-free
plant machinery, and reliable suppliers.
JIT production systems cut inventory costs because manufacturers do not have to pay storage costs. Manufacturers are
also not left with unwanted inventory if an order is canceled or not fulfilled.
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Reference: - Just in Time (JIT)
- CIPS study guide page 122-124 LO 2, AC 2.3
Question: 18
The amount of inventory available at the start of an accounting period is known as...?
A. Buffer stock
B. Work-in-progress
C. Opening stock
D. Closing stock
Answer: C
Explanation:
Opening stock is the starting amount of inventory that a business has at a fixed moment in time. This could be the start
of a financial year, another reporting period or ad hoc stocktake. The concept of opening stock mush not be confused
with raw materials
Closing stock is the inventory held at the end of the period under consideration. Thus, the closing stock of one period
is automatically the opening stock for the next.
Work in progress is the stock part-way through a manufacturing process; in the service sectors the term is also used for
anything between order and delivery.
Buffer stock (safety stock) is the stock held as a contingency or insurance against disruption or unexpected demand.
LO 2, AC 2.1
Question: 19
To test the product durability
A. 1 and 2 only
B. 3 and 4 only
C. 2 and 3 only
D. 1 and 4 only
Answer: C
Explanation:
It would be really convenient if we could just hand our products directly to the customers, but thats not possible.
Packaging needs to be done for several reasons.
Here are some of the most prominent ones:
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Question: 20
There are no duplicate product codes
A. 2 and 4 only
B. 3 and 4 only
C. 1 and 3 only
D. 1 and 2 only
Answer: C
Explanation:
The product code is often the key to obtaining documentation relating to products.
Product codes are often use to link to internal processes. Some computerised inventory systems trigger alerts when
specific items or volume are ordered - this could be an out-of-stock warning or potential volume errors.
In many cases, an organisation will use its own product code system. The organisation constructs a code that is
effective and fits with its software and the variety of items covered. So these codes may or may not comply with any
international standards (such as GS1 specifications, ISO standards, etc.). As organisations make up the code
themselves, the codes may look identical to others.
For example, SKU414675 reveals that it is used for many items, including the following:
- A UK wholesaler's six-pack of branded cola
- An Australian snack food
- UK flower seeds
- An Italian desk sold in Japan
- A Brazilian light fitting
Reference: CIPS study guide page 33-42
LO 1, AC 1.2
Question: 21
Which of the following statements is true?
A. All indirect supplies are independent demand items
B. Number of independent demand items may be derived from the forecast
C. Dependent demand items are not directly correlated with production rate
D. Car engine is an example of independent demand items in a car assembly plant
Answer: B
Explanation:
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Dependent demand is the requirement for stock item which is directly related to and therefore de-pendent upon the rate
of production (examples are: raw materials, components, energy). Independent demand is the requirement for stock
item which is not directly related to, and is therefore independent of rate of production.
'Number of independent demand items may be derived from the forecast': Although independent demand is called thus,
it can still be influenced by economic factors external to the demand-supply model such as general consumer
sentiment and consumers' available disposal income. However, businesses that need to predict the number of products
with independent demand needed to sate their customers have it easier than businesses that must calculate the demand
for products with dependent demand because there are fewer factors to consider.
'Dependent demand items are not directly correlated with production rate': As mentioned above, dependent demand
items are directly correlated with production rate.
'All indirect supplies are independent demand items': Though most indirect provider are inde-pendent demand, some
are determined by the production rate, i.e. energy consumption of a major machinery.
'Car engine is an example of independent demand items in a car assembly plant': Car engine is a component in car
which is the finished good of a car assembly plant, it is a dependent demand item. LO 2, AC 2.1
Question: 22
Which of the following correctly describes the triple bottom line?
A. Professional, Planet, Profit
B. People, Planet, Project
C. People, Product, Profit
D. People, Planet, Profit
Answer: D
Explanation:
The triple bottom line is a sustainability framework that examines a companys social, environment, and economic
impact (or People, Planet, Profit).
Reference:
- 25 Years Ago I Coined the Phrase Triple Bottom Line. Heres Why Its Time to Rethink It.
- CIPS study guide page 202
LO 3, AC 3.3
Question: 23
Which of the following should be considered when an organisation plans for disposing obsolescent and redundant
stock? Select TWO that apply.
A. Financial costs
B. Economic order quantity
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C. ABC analysis
D. Takt time
E. Environmental issues
Answer: A,E
Explanation:
If the planning and mitigation measures fail and redundant or obsolete stock is identified, it needs to be removed from
the current inventory location as quickly as possible. There are some methods to deal with these types of stock. The
worst case scenario is disposal to landfill, which is inadvisable if it can be avoided, both from environment point of
view and the financial costs of such disposal.
For example, the problem of obsolete pesticides remains extremely serious and urgent. Many of the stocks identified
continue to deteriorate thereby giving rise to an ever escalating source of severe pollution and posing a threat to human
health, the environment and development in particular. To reduce the impact of obsolete pesticides on environment,
FAO initiated a project in Yemen in which a total of 262 tonnes of obsolete pesticides were removed from 20 different
sites and successfully disposed of between March and June 1996. The major field operation was completed in six
weeks during which period almost all obsolete pesticides were brought to a central location and subsequently shipped
to the United Kingdom for incineration.
Reference: CIPS study guide page 89
LO 2, AC 2.1
Question: 24
Finished goods
A. 1, 3 and 4
B. 1, 2 and 4
C. 2, 3 and 4
D. 2, 3 and 4
Answer: A
Explanation:
The normal breakdown in a manufacturing organisation would be raw materials, components, work in progress and
finished goods.
Following are the different types of inventory:
Raw materials are the basic materials that a manufacturing company buys from its suppliers, and that is used by the
former to convert them into the final products by applying a set of manufacturing processes. For example, aluminum
scrap is the raw material for a company that produces aluminum ingots. Flour is the raw material for a company that
produces bread or pizza. Similarly, metal parts and ingots are the raw materials bought by a company that
manufactures cars, and crude oil is the raw material for an oil refinery.
Work in progress inventory can also be called semi-finished goods. They are the raw materials that have been taken
out of the raw materials store and are now undergoing the process of their conversion into the final products. These are
the partly processed raw materials lying on the production floor. And they have also not reached the stage where they
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have been converted into the final product.
Finished goods are indeed the final products obtained after the application of the manufacturing processes on the raw
materials and the semi-finished goods discussed above in the article. They are saleable, and their sale contributes fully
to the revenue from the core operations of the company.
Reference: - Types of Inventory
- CIPS study guide page 82-83 LO 2, AC 2.1
Question: 25
Do all types of warehouses require access to daylight to reduce the cost of electricity?
A. No, because only ventilation can help to reduce the humidity in the warehouse
B. No, because some types of stock are sensitive to sunlight
C. Yes, because sunlight sterilises inventories in damp conditions
D. Yes, because organisation's need for artificial lighting and heating will reduce
Answer: B
Explanation:
The design of a building should consider the advantages of natural light as this can reduce the cost of artificial lighting
and Excellerate the environmental performance of the building. Daylight entering the building can also help reduce
heating costs. Unfortunately some stocks react badly to direct sunlight, and some stock reacts badly to extreme of
temperature or may require a specific temperature for storage. Some stock may require a warmer temperature than the
ambient temperature and other stocks may require cooler temperature. For example, fabric and garment are sensitive to
direct sunlight as ultraviolet light catalyses a reaction between the water present in all fabrics and atmospheric oxygen
to create hydrogen peroxide. This is a bleaching agent and breaks down the chemical bonds that deliver dyes their colour.
Reference: CIPS study guide page 12
LO 1, AC 1.1
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If you want life insurance that won’t expire within a few years or decades, consider a whole life insurance policy. It’s the most common form of permanent life insurance, but it’s expensive.
To find out if you’re a good candidate for this type of coverage, learn how whole life insurance works and the policy features to look for.
Key terms in this article
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A savings component within a permanent life insurance policy that grows over time. You can generally use your policy’s cash value to withdraw money, take out a loan and more. |
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The price you pay for life insurance, usually monthly, quarterly or yearly. Premiums for whole life insurance stay the same for the life of the policy. |
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Life insurance that only lasts a set number of years, such as 10, 20 or 30. Term life insurance is suitable for most people. |
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A type of permanent life insurance that comes with a cash value savings element. Whole life insurance typically lasts for your entire life as long as you pay your premiums. |
What is whole life insurance?
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It generally lasts your entire life. Just be aware that many policies end if you reach age 100, and the payout may be reduced if you have outstanding loans when you die.
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It has level premiums. This means your premiums are locked in and won’t change as long as you have the policy.
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It has a cash value component. When you pay your premium, a portion goes to your policy’s cash value, which you can think of as a savings account that earns interest over time.
How does cash value in a whole life insurance policy work?
The cash value in a whole life insurance policy grows at a fixed rate set by your insurer — typically 1% to 3.5%, according to Quotacy, a brokerage firm. This sets whole life insurance apart from other permanent policies, which don’t certain returns.
Once you’ve accumulated enough cash value, you can start taking out loans against your policy. And when you die, your beneficiaries will typically receive a payout that isn’t subject to income tax.
Did you know...
If you have a whole life policy with a mutual life insurer — meaning the company is owned by policyholders instead of investors — you might be eligible for annual dividends based on the company’s financial performance. You can choose to receive the dividend in cash, or use the funds to reduce your premium, repay cash value loans or buy additional coverage. Dividends are not typically taxed, but if you leave the funds in your policy to accumulate interest, you may be taxed on the earnings if or when you eventually withdraw the money.
What is the cost of whole life insurance?
In general, whole life insurance is more expensive than term life insurance. This is because it usually lasts your entire life and offers cash value growth, plus commission fees might be rolled into your total cost if you purchased the policy through a life insurance agent.
For a healthy applicant buying a $500,000 policy at 40 years old, the annual cost of whole life insurance is $7,028 compared with $312 for a 20-year term life policy. But whole life can be a good fit if you need lifelong coverage and want a guaranteed return on the policy’s cash value.
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Average monthly rate for men |
Average monthly rate for women |
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Source: Quotacy. Rates reflect the Preferred Plus risk class, the best risk class available. Valid as of December 4, 2023. |
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Is whole life insurance worth it?
Whole life insurance might be a good fit for you if:
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You can comfortably afford the higher premiums.
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You’re a high-income earner who’s maxed out your retirement accounts, like a 401(k) and IRA.
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You’re looking for a policy that offers guaranteed returns on cash value.
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You’re a wealthy individual who wants your life insurance policy to help your heirs pay estate taxes.
How to find the right whole life insurance policy
A whole life insurance policy is a pricey commitment, so make sure you research and compare policies before buying.
Choose the amount of coverage you need
Examine riders
Life insurance riders are coverage features you can add to a life insurance policy. Depending on the policy, they’re either included in the coverage or can be purchased at an extra cost. Examples include an accelerated death benefit or chronic illness rider, which lets you access some of the death benefit if you develop a chronic health condition or become terminally ill. Another add-on to consider is a waiver of premium rider, which lets you skip payments if you become disabled.
Available types and costs of riders vary by insurance company, so make sure your policy has the riders you want before you buy.
Look at the rate of return on cash value
With whole life insurance, a portion of your premium is added to your cash value, which typically grows slowly on a tax-deferred basis. You can borrow against the cash value or surrender the policy for the cash. The death benefit may be reduced if you don’t repay a loan, and it doesn't pay out if you surrender the policy.
Whole life policies certain a minimum growth rate on the cash value. If you bought a policy with a mutual life insurance company, it has the potential to earn dividends, which are portions of the insurer’s financial surplus. Life insurance dividends generally aren’t guaranteed, but they’re worth taking into account when you compare policies.
🤓Nerdy Tip
Life insurance companies sometimes provide projections of how each policy’s cash value could perform. These are known as life insurance illustrations. Always ask which parts of the projection are guaranteed.
Be aware of surrender charges
Whole life insurance policies typically have a surrender charge for the first 10-15 years. This means if you decide to cancel your coverage, you’ll need to pay a fee, which is a percentage of the cash value you’ve accumulated. In the early years, the surrender charge may be close to 100%. The surrender charge decreases each year until it no longer applies.
Understand the different approval processes
There are three main types of approval processes:
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Simplified issue whole life insurance involves answering some health questions, but there’s no medical exam.
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Guaranteed issue whole life insurance means you’ll be accepted with no medical exam and no health questions.
Even if you have some health issues, you’ll generally find the most competitive price with a fully underwritten policy.
Simplified issue and guaranteed issue life insurance policies are worth considering if you’ve been turned down for standard whole life coverage due to health problems, but be aware of the downsides. Death benefits on these policies are relatively small, and premiums can be expensive when compared with fully underwritten products. In addition, these policies don’t pay the full death benefit if you die of natural causes or suicide within the first few years of coverage.
Compare whole life insurance quotes
When you’re shopping for life insurance, get life insurance quotes for the same amount of coverage from several insurers to compare prices. You might find that rates for whole life insurance vary widely.
Check the insurer’s financial strength
Look up the financial strength rating of each whole life insurer you’re considering. You can find financial information through a rating firm such as AM Best. Financial strength is important because a strong company has a better chance of being around decades from now to pay claims.
Any company with an AM Best rating of B+ or higher has a good ability to meet its obligations, in AM Best’s opinion. NerdWallet typically recommends insurers with ratings of A- or higher.
Research the insurer’s reputation for customer service
You can look up an insurer’s complaint index on the National Association of Insurance Commissioners website. The score is based on the number of complaints filed against the insurance company with state regulators, adjusted for the company’s market share (based on premiums written). The average is 1, so a score higher than 1 means the company received more complaints than expected for its size.
Alternatives to whole life insurance
Whole life insurance fits the bill for some people, but term life insurance is sufficient for most families. While these policies have no cash value and will expire after the term is over, they also typically have much lower premiums than whole life insurance.
Another option is universal life insurance. These policies usually last your entire life and deliver you the flexibility to adjust your premiums and death benefit amount.
Use our tool below to find out which type of life insurance may be best for you:
More about whole life insurance
Learn more about how whole life works and where to find a policy.
What is whole life insurance?
Whole life insurance is a type of permanent life insurance that typically lasts your entire life, as long as you’ve kept up with your premiums. It also includes a cash value element that grows over time. Once you’ve earned enough cash value, you can use it to take out a loan, pay your premiums and more.
What is the difference between term and whole life insurance?
Unlike whole life insurance, term life insurance expires after a set number of years — typically 10, 20 or 30 — and doesn’t build cash value. It’s generally much cheaper than whole life insurance and is suitable for most people.
How much does whole life insurance cost?
A $500,000 whole life insurance policy costs around $586 a month for a healthy 30-year-old man. Like most types of life insurance, whole life insurance rates are based on factors like your age, health, lifestyle and smoking status.
What is whole life insurance?
Whole life insurance is a type of permanent life insurance that typically lasts your entire life, as long as you’ve kept up with your premiums. It also includes a cash value element that grows over time. Once you’ve earned enough cash value, you can use it to take out a loan, pay your premiums and more.
What is the difference between term and whole life insurance?
Unlike whole life insurance,
term life insurance
expires after a set number of years — typically 10, 20 or 30 — and doesn’t build cash value. It’s generally much cheaper than whole life insurance and is suitable for most people.
How much does whole life insurance cost?
A $500,000 whole life insurance policy costs around $586 a month for a healthy 30-year-old man. Like most
types of life insurance
, whole life insurance rates are based on factors like your age, health, lifestyle and smoking status.
Now that we’ve explained the basics of both policy types, it may help to do a side-by-side comparison. Here’s what you need to know when choosing between term and whole life insurance.
Policy Differences
Term and whole life insurance can both provide peace of mind for you and financial protection for your loved ones. Both policies generally feature fixed premiums and a level death benefit, though exceptions do exist. You can find flexible options in either category, such as modified premium whole life policies and decreasing term life policies.
Besides the cost, the biggest differences between these two types of life insurance lie in the coverage length and cash value. Like other types of permanent life insurance, whole life policies provide lifelong coverage. As long as you pay your premiums in full and on time, you will always be covered. Term life policies, on the other hand, provide temporary coverage for a specified period. Eventually, term life insurance will expire and leave you without protection.
A whole life insurance policy has both a face value and a cash value. That means in addition to a death benefit that pays out to your beneficiaries when you die, it also provides benefits while you are still alive. You can withdraw from or borrow against the cash value, using it as a safety net for large, unexpected expenses, such as medical bills. A term life insurance policy does not have a cash value.
Price Variations
Whole life insurance costs more than term life insurance. However, if you purchase life insurance while you are relatively young, it could be a more cost-effective choice in the long run. You can also take advantage of different payment structures, such as the limited, modified or single premium options mentioned above.
Dollar-for-dollar, term life policies are more affordable. The shorter the term, the more noticeable the price difference will be. For anyone who does not need or cannot afford permanent life insurance, term life insurance can be a great solution. If the initial quotes you receive do not fit your budget, you can tweak not only the coverage amount but also the coverage length to achieve lower premiums.
Regardless of which type of insurance you choose, your age will impact your premiums. When you purchase a whole life policy, you can lock in a rate for the rest of your life. A term life insurance policy will eventually expire, leaving you with the option to renew or apply for a new policy. Either way, your life insurance rates will increase due to your age.
Both policies will pay out a guaranteed amount if the policy is in effect at the time of your death. However, a few circumstances could affect the final death benefit. If you choose a decreasing term policy, the potential payout will drop over time. Your beneficiaries will also receive less if you took advantage of an accelerated death benefit or accessed the cash value of your whole life policy.
Investment Opportunities
Many people view whole life insurance as an investment. However, other permanent life insurance policies offer more flexibility and potential in this regard. Because term life policies do not have a cash value component, they are not typically considered investments.
With whole life insurance, the cash value of your policy will grow at a fixed rate, insulated from market conditions. It typically takes at least 10 years, if not longer, for the balance to grow enough for you to access it.
Once the cash value is accessible, you have two main options. First, you can make a withdrawal. If you withdraw less than you have paid into the policy, the funds will not be subject to income taxes. The second option is to take out a loan. The insurance company may or may not charge interest on your loan, but either way, policy loans do not count as taxable income. Remember that any amount not repaid before you die will be deducted from the death benefit.
In most cases, the death benefit paid out by a term or whole life policy will be tax-free. You can learn more on the IRS website.
Customer Profiles
Not everyone needs permanent life insurance coverage. If your primary goal is to cover outstanding debt, such as your mortgage, or ensure your children are cared for until adulthood, term life insurance offers an affordable solution.
If you are focused on retirement planning or leaving behind an inheritance for your children no matter their age, then whole life insurance makes more sense. It offers permanent coverage and a cash value that you can tap into later. Whole life insurance is also the right choice if you have a lifelong dependent, such as a child with disabilities.
Convertible term life insurance can be a particularly attractive option for younger adults, who may have a tight budget now but want the option of switching to whole life insurance later.
The average cost of a 20-year, $500,000 term life insurance policy for a healthy 30-year-old is $229 a year. A whole life insurance policy for the same amount will cost a healthy 30-year-old an average of $373 a year.
However, several factors contribute to your policy premium, including your age, health and desired type and amount of coverage. We’ve analyzed rates from top life insurance companies so you can get an idea of how much you may need to budget for life insurance costs.
Why trust our insurance experts
Our team of experts evaluates hundreds of insurance products and analyzes thousands of data points to help you find the best product for your situation. We use a data-driven methodology to determine each rating. Advertisers do not influence our editorial content. You can read more about our methodology below.
- 1,837 rates reviewed.
- 28 insurers evaluated.
- 5 levels of fact checking.
How much is life insurance?
For a 20-year, $500,000 term life insurance policy, a 30-year-old woman can expect to pay an average of $205 a year. A man of the same age can expect life insurance costs of about $352 a year.
Whole life insurance, which is a type of permanent life insurance, offers long-term protection but at a higher rate. A 30-year-old woman shopping for a $500,000 whole life policy can expect an average life insurance rate of $352 per year. The same policy would cost a 30-year-old man an annual average of $394.
Average annual cost of a $500,000 life insurance policy by age, gender and policy type
Term life insurance rates by age
Term life insurance rates are cheaper than those for permanent life insurance. The younger and healthier you are when you purchase a policy, the lower your rates for term life insurance will be.
Term life insurance costs for women — 20-year life insurance policy
Term life insurance rates are generally cheaper for women. The table below provides the average cost of term life insurance for women from age 30 to age 60, with coverage amounts from $250,000 to $2 million.
Term life insurance costs for men — 20-year life insurance policy
When compared to term life insurance rates for women, men tend to pay more, and the difference increases with age. The table below provides the average cost of a 20-year term life insurance policy for men from age 30 to age 60, with coverage amounts from $250,000 to $2 million.
Life insurance costs by term length
The term length you choose will play a major factor in your life insurance cost, with longer terms leading to higher rates when all other factors are the same. The table below shows average life insurance rates for a $500,000 life insurance policy based on the term length.
Life insurance cost without a medical exam
Many life insurance companies offer no-exam life insurance. This life insurance product allows eligible individuals to skip medical exams, which are required for life insurance policies that undergo traditional underwriting.
The table below shows the average cost of no-exam life insurance policies with a 20-term and $500,000 in coverage.
Average permanent life insurance rates
Permanent life insurance is more expensive than term life coverage because it lasts a lifetime and typically includes a cash value component in the form of a savings or investment account.
There are multiple types of permanent life insurance, including whole life insurance, universal life insurance, guaranteed universal life insurance and indexed universal life insurance. The type of coverage you choose is one of the factors that will dictate your life insurance costs.
Average cost of a whole life insurance policy by age
Whole life insurance is more expensive than term life insurance because it includes a cash value component and lasts a lifetime. The tables below provide average whole life insurance rates by age and gender.
Life insurance rates of a whole life policy for women
Life insurance rates of a whole life policy for men
Factors that affect life insurance rates
Insurers use several factors to determine how much life insurance costs. When you purchase a policy, your life insurance cost will be based on:
- Age. The younger you are, the lower your premium.
- Gender. Women tend to pay less than men for coverage.
- Policy type and coverage amount. Term life insurance is cheaper than permanent life insurance policies, and the more coverage you buy, the higher your premium will be.
- Height and weight. Insurers use your height and weight as a baseline indicator of your health. People with a higher body mass index (BMI) typically have higher rates.
- Health. The healthier you are the more likely you are to qualify for lower rates when compared to someone with health issues. People with a history of health issues or chronic, critical or terminal illnesses may also find it difficult to be approved for some types of life insurance.
- Health history of your immediate family. If your parents or siblings have health issues, you may pay more than someone without that history.
- Nicotine or marijuana use. If you smoke or use other forms of tobacco or nicotine, such as vaping or chewing tobacco, you will pay more for coverage. Using marijuana can also increase your life insurance rates.
- Risky occupations and hobbies. Some jobs and hobbies are riskier than others. If you are a police officer, you may pay more for life insurance than an accountant, for instance.
What’s the right amount of life insurance for me?
The amount of coverage you need often depends on your reason for buying a life insurance policy. You might be looking to ensure your loved ones have enough coverage to manage the loss of your salary or cover a mortgage when you die. Or you may want life insurance so your family can cover the cost of your funeral expenses.
To determine how much coverage is right for you, identify and add up the expenses you want to cover or the income you want to replace.
Some factors to consider include:
- Your earnings over the expected course of your working life. If you expect to work until age 60, add up your projected earnings over that time so your loved ones can continue to depend on that income.
- Financial goals and obligations. Do you have a mortgage? Plan to pay tuition for your child’s education? Your existing and expected financial obligations can help you determine how much life insurance coverage you need.
- How long you want to support your family. Do you want your benefits to support your loved ones for a few years or for a decade or more? The longer your timeline, the more coverage you need to ensure adequate support.
- Inflation. A death benefit of $250,000 today likely won’t go as far 10, 20 or 30 years from now. Though you can’t predict the exact amount of inflation, it’s worth considering it when you’re selecting a coverage amount.
Another more straightforward way to choose a coverage amount is to multiply your annual income by 10. Just keep in mind that this method is best used as a starting point rather than a final solution. Otherwise, you may not choose a policy with enough coverage, especially if you are planning to have kids or are expecting to earn a higher income in later years.
Are life insurance costs worth it?
A life insurance policy and the associated costs can be worth it, especially if any of the following are true:
- You have dependents that rely on you for financial support.
- You have a mortgage and want to ensure your loved ones can maintain payments after you die.
- You want to provide a means to pay for a child’s education if you die before they graduate.
- You are a business partner and are considering life insurance as part of a succession plan or buy/sell agreement.
Life insurance costs may not be worth it if you don’t have dependents who rely on you or if you have other means to support loved ones after your death, such as money in savings or a retirement account.
The best way to determine if life insurance is worth it for you is to speak with a trusted financial advisor who can look at your entire financial picture and discuss your goals while alive and in the event of your death.
How can I lower my life insurance rates?
The best way to get the cheapest life insurance rates is to purchase coverage when you are young and healthy. Other ways to lower your life insurance costs include:
- Improving your overall health and eliminating risk factors, like smoking.
- Choosing a term life insurance policy over a permanent life insurance policy.
- Lowering your coverage amount or reducing your policy term, though always weigh the pros and cons before making these decisions.
- Shopping around and getting at least three quotes before you choose a policy and life insurance company.
- See if you’re eligible for any discounts, such as a bundling discount if you purchase a life insurance policy from the same company from which you purchase other types of coverage, such as homeowners insurance or auto insurance.
Our insurance experts evaluated the rates for more than 20 life insurance companies to determine the average cost of term and whole life coverage for individuals of varying ages. Our evaluation included rates for both males and females at ages 30, 40, 50 and 60 for coverage amounts between $250,000 and $2 million. Rates are based on healthy applicants who do not use nicotine or tobacco products.
Average life insurance rates FAQ
It’s best to buy life insurance when you’re young, such as in your 20s or 30s. Life insurance premiums are lower the younger you are. Purchasing a policy earlier in life can help you find the cheapest life insurance policy for the amount of coverage you want and save you substantial money over the course of your lifetime.
Males typically pay more for life insurance than females. However, life insurance rates depend on numerous factors, including your age, health, smoking or nicotine use status and the type and amount of coverage you want. That’s why it’s so important to shop around for coverage and compare life insurance quotes before you make your decision.
While most life insurance companies won’t factor in your credit score when determining your life insurance rate, some aspects of your credit history may be factored in. For instance, a life insurance company may look at your credit history to see if you’ve filed for bankruptcy, and they may factor certain attributes into your overall risk factor.
It’s important to note that all life insurance companies set their own approach to the underwriting process, what factors they will consider and how they weigh those factors.
Protective has the best life insurance, based on our analysis. However, the best company for you will depend on the type of coverage you want.
If you’re looking for the best term life insurance, Symetra may be a good fit.
If you’re shopping for the best whole life insurance, State Farm or Northwestern Mutual are worth considering.
Compare life insurance quotes to determine which company best meets your unique needs and offers coverage at an affordable price.
The average cost of life insurance for a healthy 30-year-old woman buying a 20-year, $250,000 term life insurance policy is $12 a month. A healthy man of the same age would pay an average of $14 per month for the same policy.
How much you pay for coverage will depend on your age, height and weight, overall health, family health and your nicotine or marijuana usage status, among other factors.
The type of life insurance policy and amount of coverage will also impact your rates.
Average monthly cost for a 20-year term life insurance policy
The table below shows average monthly rates for $250,000 and $500,000 20-year term life insurance policies for women and men at ages 30, 40 and 50.
Average monthly cost for a whole life insurance policy
The table below shows average monthly rates for $250,000 and $500,000 whole life insurance policies for women and men at ages 30, 40 and 50.
Term life insurance is a policy that locks in rates and coverage for a set period of time, or term. If you die during the term, your beneficiaries will receive a death benefit.
When the term is up, you can usually renew the policy, for a higher rate. If you don’t renew it, your policy will expire and your beneficiaries will no longer receive a death benefit when you die.
Learn more: How life insurance works.
We analyzed the monthly rate for a 20-year, $500,000 life insurance policy and found that:
- A healthy, 30-year-old woman can expect an average monthly rate of $17.
- A healthy, 30-year-old man can expect an average monthly rate of $21.
How much you pay for a $500,000 life insurance policy will vary depending on the type of coverage you purchase as well as other factors, such as your age, health and gender.
Here are some examples of how much a $500,000 policy may cost depending on your age, gender and selected policy type.
Average monthly cost of a $500,000 term life policy for a woman
Average monthly cost of a $500,000 term life policy for a man
Average monthly cost of a $500,000 whole life policy by gender and age
Life insurance provides your loved ones with financial support should you unexpectedly pass away. It can also help them finance your funeral, cover your children's college tuition or pay off any debts you leave behind.
It's for these reasons that more than half of Americans currently have a life insurance policy, according to LIMRA.
If you're not one of them, it may be time to invest in life insurance. Just make sure to shop around to ensure you get the best coverage and premiums. Not sure where to start? Below we will analyze the best life insurance companies in six different categories: flexibility, term life insurance, whole life insurance, no-exam life insurance, comprehensive coverage and overall cost.
If you're in the market for life insurance then start by getting a free price quote now.
Best life insurance companies
According to our comprehensive analysis, here are our picks for the best life insurance companies.
Best for flexibility: Ladder
If you're looking for a life insurance company that allows you to change your plan and premium as often as your life changes, then Ladder is your best bet.
With Ladder, you can step up or step down your coverage (just as you'd climb up and down a ladder) as your needs evolve. If you pay down a good chunk of your mortgage, for example, you can ladder down, reducing your coverage and your premiums to boot. If you have another child, on the other hand, you might choose to ladder up, increasing your coverage to account for the extra dependent.
Ladder's policies — which are all term life insurance plans — go up to $8 million. If your policy is under $3 million, no medical exams are required.
Get a free price estimate from Ladder to see if their policies work for you.
Best for term life insurance: Haven
Haven only offers term life insurance, and it comes in two forms: Haven Term and Haven Simple.
With Haven Term, you can get up to $3 million in coverage for 10, 15, 20, 25, or 30 years, and consumers up to age 64 are eligible. The plan also offers fixed premiums for the entire policy term, and it comes with extras — like a digital will and free annual fitness app membership.
Haven Simple is another term life policy Haven offers, but with no medical exam whatsoever (Haven Term's exams are "likely" but not required on every policy). Because of this, you can apply for a Haven Simple plan and get coverage immediately — all online.
Simple policies go up to $1 million and are available in 5-, 10-, 15-, and 20-year terms. Only consumers age 20 to 55 are eligible.
You can get a Haven price quote here now.
Best for whole life insurance: Amica
If whole life insurance is what you're looking for, Amica has a number of options to choose from. The right fit just depends on your budget.
With Whole Life 20, for example, your payments are done in 20 years, and you enjoy continued coverage — up to $1 million — for the remainder of your life. Consumers up to age 80 can qualify. Whole Life 65 is a similar option, though it aims for payment completion by retirement age (65) rather than in 20 years flat. This can help you free up cash flow in retirement and ensure long-term coverage for your loved ones.
Finally, there's Whole Life 100, the company's lowest-cost option. With this one, you'll be done paying your premiums at age 100.
In all cases, your premiums are set for the entire term you agree to. Policies also have a cash value that can be borrowed from. They also come with a terminal illness rider that allows you to receive a portion of your death benefits early if you're diagnosed with a terminal illness.
Learn more about Amica's whole life insurance policies.
Best for no-exam life insurance: Ethos
Many life insurance providers require medical exams before you can get coverage. With Ethos, that's not the case — on any of their plans. The company offers term life insurance and whole life insurance for seniors, and policies go up to $2 million in coverage.
No matter which you choose, you'll never need blood work or a medical exam. "Ethos never requires a medical exam for anyone," the company states. "Regardless of your health status, with Ethos, you are eligible for a no-medical-exam life insurance policy."
Ethos policyholders also get access to free will and estate planning tools.
Learn more about Ethos' no-exam policies here now.
Best for comprehensive coverage: AIG
AIG offers a whole host of life insurance options. If you're looking for the most comprehensive coverage, the company's permanent life insurance plans — which includes whole life, guaranteed issue and universal life — may be a smart choice.
All three offer coverage for your entire lifetime, boast fixed premiums, and have a cash value that accumulates over time. On the universal life and whole life plans, you can get coverage up to $10 million. There are no age restrictions, either.
AIG also offers "quality of life" insurance, which provides you with financial support — or "living benefits" — prior to your death.
Explore your life insurance options with AIG today.
Best for overall cost: Fidelity
Out of all the insurance providers we analyzed, Fidelity had the lowest premiums.
On a 20-year, $1 million term life insurance policy for a healthy 43-year-old woman from New Jersey, the monthly premiums were a mere $60 per month. The other providers we looked at ranged from $90 per month to $132 for the same policy.
Fidelity's term life policies go up to $10 million and come in 10-, 15-, or 20-year terms. Fidelity life insurance also offers universal and hybrid life insurance options.
Compare your options
Shopping around is critical for any insurance policy, so while our best life insurance companies are great starter points, make sure to include a few other companies, too. This will ensure you're getting the absolute best premiums and coverage. If you need assistance, consider working with an independent insurance agent who can guide the way. You can use the table below to get started now.
State Farm is the best whole life insurance company, according to our analysis.
We evaluated top insurers to determine the best whole life insurance based on cost competitiveness, access to cash value, reliability of policy illustrations, financial strength and historical performance.
The best whole life insurance companies of 2024
Why trust our insurance experts
Our team of experts evaluates hundreds of insurance products and analyzes thousands of data points to help you find the best product for your situation. We use a data-driven methodology to determine each rating. Advertisers do not influence our editorial content. You can read more about our methodology below.
- 3,000+ whole life insurance policies evaluated.
- 13 million+ life insurance policy features analyzed.
- 5 levels of fact-checking.
Top-rated whole life insurance companies
Compare best whole life insurance companies
To determine the best whole life insurance companies, our life insurance experts evaluated data provided by Veralytic, an independent publisher of life insurance research and analytics.
Each life insurance company included in our evaluation had the opportunity to earn up to 100 points, based on the following factors.
Cost competitiveness of cash value policies: 35 points. We looked at internal policy costs, such as administrative fees and policy charges, to determine the competitiveness of permanent life insurance policies.
Historical performance: 25 points. Our analysis took into account the historical performance of the life insurance company’s investments to determine how an insurance company’s performance and therefore cash growth potential compared to its competitors.
Reliability of policy illustrations: 20 points. We evaluated the accuracy of each life insurance company’s policy illustration, a document that shows projected cash value growth, to determine which companies provide the most reliable outlooks.
Financial strength: 10 points. There are four major rating agencies — AM Best, Fitch, Moody’s and Standard and Poor’s — that evaluate an insurer’s financial strength, a factor that indicates an insurer’s ability to pay out a claim years from now. We took this into consideration to account for the likelihood an insurance company is able to meet claim obligations.
Cash value: 10 points. Cash value policies grow at different rates, and we factored the liquidity of a cash value policy into our analysis. Some policies have a cash value that grows faster in the early years. Others have slower cash value growth in the early years, and policyholders must wait a significant period of time before having access to a sizable cash value. Whole life insurance policies with cash value that grows faster in the early years received more points.
What is whole life insurance?
Whole life insurance is a permanent life insurance policy with the following features:
- Coverage that lasts your lifetime, as long as you pay your premiums.
- A guaranteed premium, meaning your payments won’t go up over time.
- Guaranteed death benefit.
- Cash value you can access while alive.
- Guaranteed rate of return on the cash value account.
How does whole life insurance work?
When you purchase a whole life insurance policy, you make premium payments in exchange for coverage that will last your lifetime. In most cases, a whole life insurance policy also includes a cash value component.
If you die and your policy is in good standings — meaning your premium payments are current — your beneficiary will receive a guaranteed death benefit. You can choose more than one beneficiary to receive the death benefit and dictate how the benefit is divided. For instance, you could leave your spouse 50% of the death benefit and two children 25% each.
The cash value of your whole life insurance policy will accumulate over time according to the policy’s guaranteed rate of return. When enough accumulates, you may be able to use it to cover your premium payments or borrow against, depending on your policy terms.
Who needs whole life insurance?
Whole life insurance is best if you want a policy that doesn’t expire — as long as you pay your premiums — and offers an additional savings vehicle.
Mark Friedlander, the director of corporate communications at the Insurance Information Institute, echoes this sentiment.
“Permanent life insurance is ideal for a consumer who wants life insurance for as long as they live,” he says. “They’re also best for those who want lifetime protection since you never have to worry about renewing or outliving your coverage.”
Whole life insurance can also be a good fit if you want to:
- Cover end-of-life expenses, such as funeral costs, regardless of when you die.
- Cover estate taxes, especially if your estate exceeds the federal estate tax or you live in a state with lower state tax limits.
- Build a trust or inheritance to provide for your children after you die or leave them with a lump sum of cash as an inheritance, though you may want to speak to a financial advisor who can determine if this is the best option for your intentions.
- Create a business continuity plan for a business partner that uses the death benefits as part of a buy-sell agreement, allowing the surviving partner to purchase the other’s share.
Still, whole life insurance isn’t for everyone.
Whole life insurance also may not be the right choice if you’re only looking for life insurance coverage for a specific period of time, such as until you pay off your mortgage, your spouse’s retirement benefits kick in or your child finishes school. In that case, a term life insurance policy may be a better, more affordable option.
How much does whole life insurance cost?
Whole life insurance rates are higher than term life insurance rates because of the duration of coverage and the cash value component.
How much you pay for a policy will depend on a number of factors, including your age and gender. The younger you are, the lower your rate will be, and men typically pay more for a whole life insurance policy than women.
For instance, a 30-year-old woman can expect to pay an average of $180 a month for a $250,000 policy, based on our analysis. If that same woman waited until she was 40 to purchase the policy, her rate would increase to $262, per month on average.
A 30-year-old man in good health purchasing a $250,000 policy can expect an average monthly premium of $201 a month. At 40, he’d pay about $293 for whole life insurance.
Whole life insurance rates
Here are the average monthly premiums for whole life insurance policies of different coverage amounts, by age and gender.
It’s important to note that policy premiums only tell a part of the “cost” story. When considering a whole life insurance policy, you should also look at:
- Internal policy fees and charges.
- The portion of your premium that goes toward your cash value account.
Ask the insurer for a detailed expense page that allows you to compare not only your premium, but internal fees as well.
Factors that impact the price of whole life insurance
How much you’ll pay for whole life insurance will depend on several factors, including your:
- Age and gender.
- Height and weight.
- Medical history.
- Medical history of your parents and siblings.
- Prescription history.
- Nicotine and marijuana use status.
- Substance abuse.
- Credit history.
- Desired amount of whole life insurance.
- Add-ons or riders selected.
- Hobbies or profession, if considered high-risk.
- Driving record, especially high-risk risk offenses like DUIs or speeding tickets.
According to the 2023 Insurance Barometer Study by Life Happens and LIMRA, only a quarter (24%) of people correctly estimated the true cost of a policy for a healthy 30-year-old, which is around $200 a year. More than half of Gen Z adults (55%) and 38% of Millennials thought it would be $1,000 or more.
How much whole life insurance do I need?
Your whole life insurance coverage needs are unique to your financial situation and your reasons for wanting coverage. There are several considerations that can help you determine how much coverage you need, including:
- How much of your salary you’d want to replace and for how long.
- Any debts you want to be covered, such as a mortgage, child care expenses or tuition.
- End-of-life expenses you want to be covered, such as the cost of a funeral.
- Any intention to use life insurance as an inheritance or trust.
- Existing assets, such as savings or retirement accounts that may reduce your whole life insurance needs.
How to choose the best whole life insurance company
If you’re thinking of purchasing a whole life insurance policy, there are a few key steps you can take to ensure you find the best policy and plan.
1. Decide how much whole life insurance coverage you need. Alison Salka, Ph.D., senior vice president and director of research at LIMRA, suggests the best place to start is by understanding what your financial goals are. Ask yourself what you want this product to accomplish for you.
You can start with a needs assessment on your own, but Salka recommends working with a financial professional who can take a holistic look at your entire financial picture to see how life insurance fits. That’s particularly true for permanent life insurance products, she says, since they can be more complex than term life insurance.
As mentioned above, there are several factors that dictate how much whole life insurance you need, including your income replacement goals, existing debts, existing assets and any other intentions you may have for the death benefit, such as covering a child’s tuition or your funeral expenses.
2. Evaluate insurance companies. Doing online research is a great way to start your search. You can also reach out to friends and family or a financial expert for feedback and recommendations.
Once you have a list of potential insurers, turn to websites like AM Best to check each whole life insurance company’s financial strength rating, which will tell you the likelihood of a company being able to pay out on a life insurance claim.
3. Get and compare life insurance quotes. Get quotes from each whole life insurance company on your shortlist, making sure to request quotes for the same type and amount of coverage.
Some whole life insurance companies offer online quotes, though you may need to speak directly with an agent to complete the quote process.
Don’t stop at comparing whole life insurance rates, however. Extend your comparison to include any internal fees charged by the life insurance company, as these can reduce the portion of your premium that goes toward the cash value of your policy.
4. Compare policy features and benefits. If you’re having a tough time narrowing down your options, even after comparing rates and fees, take note of any features and benefits available. One whole life insurance company may include some add-ons with a policy while another might charge an additional fee for the same riders.
Is whole life insurance worth it?
Whole life insurance may be worth it if you want coverage for life and a cash value component that grows tax-deferred and can be tapped into while you’re alive.
If a cash value component is important to you but you want more control over how it grows, consider other permanent life insurance policy types, such as variable life insurance or universal life insurance.
If you only want life insurance coverage for a short period of time, such as 20 or 30 years, consider a term life insurance policy. Term policies are cheaper than permanent life insurance options, though they don’t carry a cash value component.
Whole life insurance: Pros and cons
Alternatives to whole life insurance
Whole life insurance isn’t for everyone, and there are plenty of alternatives that may better suit your financial needs or long-term goals. Here are a few options worth considering.
- Other permanent life insurance products. Universal life, variable life and other similar products provide lifelong coverage and a cash value component.
- Term life insurance. You may want to consider choosing term life insurance if you only want to lock in your life insurance rates for a specific amount of time, you have a limited budget or you have other investment vehicles your loved ones can rely on after your death.
- Traditional or Roth IRAs. These individual retirement accounts allow you to save up to $6,500 ($7,500 if you’re 50 or older) annually, according to current IRA contribution limits. The account is designed to accommodate your financial needs during retirement, but you can name a beneficiary who could receive the funds and then use them much like they would a life insurance death benefit.
- Employer-sponsored 401(k) plans. Like IRAs, a 401(k) caters to your retirement needs but the funds can be left to a beneficiary if you die before depleting the account. The beneficiary can use these funds to cover expenses as needed.
- Fixed annuities. Fixed annuities are investment accounts that offer a specific rate of return and stream of income during your retirement years. Like other retirement accounts, the funds can be left to a beneficiary to use as a death benefit.
Best whole life insurance FAQs
State Farm has the best whole life insurance, based on our analysis of whole life insurance companies. To determine the best whole life insurance company, we evaluated multiple top permanent life insurance companies based on their financial strength, cost competitiveness, reliability of policy illustrations and cost competitiveness.
Northwestern Mutual and Penn Mutual also receive top scores in our whole life insurance ranking.
Whole life insurance pays a death benefit for your beneficiaries when you die, no matter your age, as long as you are current on your payments. In addition, whole life insurance also has a cash value component that you can withdraw or borrow from while you’re alive.
Term life insurance allows you to lock in your premiums for a specific period of time, or term. Your beneficiaries will only receive the death benefit if you die with that term, unless you renew your policy or convert it to a permanent life insurance policy.
Yes, in most cases you can still get life insurance if you’re one of the millions of United States residents who have contracted COVID-19. However, depending on when you were diagnosed with the virus and when you’re applying for life insurance, the underwriting process may take longer.
In some cases, your premiums may also be affected. This is particularly true if you have an underlying condition that can worsen after a COVID infection or one that was triggered by your bout with the virus.
Cash value is the savings component of a permanent life insurance policy. When you purchase cash value life insurance, a portion of your premiums will go toward the cash value account. The cash value grows over time, and you can access it while you’re alive.
Cash value growth depends on the type of life insurance policy you have. The cash value of a whole life insurance policy grows at the fixed rate of return determined by the insurer. If you have a variable life insurance policy, you make decisions about how the money is invested, and the account can grow or decrease based on how those investments perform.
It’s best to buy whole life insurance when you are younger, such as in your 20s or 30s, as you’ll be able to secure lower rates. For instance, a 30-year-old woman pays an average of $180 for a $250,000 whole life insurance policy, while a 40-year-old pays an average of $262 for the same amount of coverage.
The best way to decide between a term life insurance and a whole life insurance policy is to examine your budget and reason for purchasing coverage.
If you’re on a tight budget but want to secure some type of life insurance coverage, a term life insurance policy will be more affordable. Term life insurance also is a good option if your goal is to maintain coverage for a specific period of time, such as until a child graduates school.
A whole life insurance policy is a better option if you want coverage that will last your lifetime or if you simply don’t want to worry about renewing your policy. It’s also a better option if you want access to a cash value component that you can access while you’re alive.
For a $250,000 whole life policy, a 30-year-old woman can expect to pay $180 per month and a 30-year-old man will pay $201 per month on average.
Yes, you can usually take a tax-free loan from the cash value of your whole life insurance policy.
Loans from your policy need to be repaid, with interest. Failure to do so will reduce the death benefit.
Single premium whole life insurance is a type of life insurance policy that requires a single premium payment. Instead of making regular payments, such as on a monthly basis, you pay for the policy in full, up front.
Learn more about life insurance
A whole life insurance policy remains in force for the rest of your life as long as you pay the premiums. Before buying a whole life insurance policy, understand its cash value, living benefits, death benefits and dividends.
What Is Whole Life Insurance Cash Value?
Each time you make a premium payment for a whole life insurance policy, part of that premium is put into a cash value account. The remainder of the premium goes to paying internal policy expenses.
The cash value account grows tax-deferred, based on a guaranteed rate of return that is typically low compared to other types of permanent life insurance. Because of slow growth, it can take a long time before the cash value surpasses what you’ve paid in premiums.
You can choose to tap into your cash value by making a withdrawal, taking a life insurance policy loan or surrendering the policy. Withdrawals will reduce the death benefit your beneficiaries will receive. So will a policy loan if it’s not paid back.
What Are Whole Life Insurance Living Benefits?
Whole life insurance policies generally offer living benefits. Living benefits allow you to access money in your own death benefit while you’re still living, under specific circumstances.
The most common living benefits let you access your own death benefit money for long-term chronic illness or terminal illness (called an accelerated death benefit). Make sure you ask your insurance agent what living benefits are available before you buy the policy.
What Are Whole Life Insurance Death Benefits?
When you buy a whole life policy, you’ll list a life insurance beneficiary (or multiple beneficiaries) who will receive the death benefit payout when you die. You should also list contingent beneficiaries who will receive the payout if your primary beneficiaries are already deceased.
It’s important to know that whole life insurance has a guaranteed death benefit amount (the policy’s face value), but that amount does not include the cash value in the policy, no matter how much you’ve accumulated. Some policies offer a rider that will add the cash value to the face value for the death benefit, but expect to pay more for this feature.
What Are Whole Life Insurance Dividends?
Dividends are common on whole life insurance policies. “Participating” whole life insurance policies pay a dividend and are offered by mutual insurance companies. “Non-participating” whole life insurance policies do not pay a dividend and are offered by stock insurance companies.
You’ll typically have a choice of how to use your dividends. Common options include:
- Taking the dividend as cash
- Putting it toward your life insurance premiums
- Purchasing paid-up additions
Purchasing paid-up additions will increase the cash value and death benefit. If you have a policy loan out, dividends can be used to pay loan interest and to pay back the loan. Insurance companies may offer other dividend options.
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