Whole Life Insurance Calculator
This whole life insurance calculator is a tool that helps individuals estimate the coverage and premiums for whole life insurance policies. By inputting information like age, gender, and desired coverage amount, this calculator provides users with an estimate of the cost and benefits of a whole life insurance policy.
What is Whole Life Insurance?
Whole life insurance is a type of permanent life insurance that provides coverage for the insured’s entire lifetime as long as premiums are paid. It also includes a cash value component that grows over time and can be borrowed against. This type of policy offers both death benefit protection and a savings component.
How Does Whole Life Insurance Work
Whole life insurance provides coverage for the entire lifetime of the insured. It combines a death benefit with a cash value component, which grows over time. Premiums are typically higher than term life insurance, but a portion goes towards building cash value, similar to a savings account. Policyholders can borrow against this cash value or withdraw it.
Whole Life Insurance Example Of Cash Value Growth
Scenario:
- Policyholder: Jordan
- Age at Purchase: 30 years old
- Policy: Whole Life Insurance
- Death Benefit: $200,000
- Monthly Premium: $200
How It Works:
- Premium Payments: Jordan starts paying $200 monthly. Part of this premium covers the insurance cost, and the rest goes into the cash value of the policy.
- Cash Value Accumulation: Over time, the cash value portion of Jordan’s policy grows. This growth is typically at a guaranteed rate set by the insurance company, which is often conservative but steady.
- Interest Compounding: The cash value earns interest. For example, if the policy guarantees a 2% annual growth rate, and Jordan’s cash value is $10,000 at the end of the first year, it will grow to $10,200 (excluding additional premium contributions).
- Tax-Deferred Growth: The growth of the cash value is tax-deferred. Jordan won’t pay taxes on the growth unless he withdraws it.
- Dividends (If Applicable): If Jordan’s policy is a participating whole life policy, it may earn dividends based on the insurance company’s performance. These dividends can be used to purchase additional death benefits, reduce premiums, or increase the cash value.
- Long-Term Growth: As Jordan continues to pay premiums and the cash value continues to earn interest and possibly dividends, the cash value grows. This growth happens over many years, and the longer the policy is held, the more significant the growth due to compounding.
Example of Growth Over Time:
- After 10 Years: Jordan has paid a total of $24,000 in premiums. The cash value of his policy might have grown to, say, $30,000 due to interest and dividends.
- After 20 Years: Jordan has paid a total of $48,000 in premiums. The cash value could be significantly higher, say $70,000, due to continued premium payments, interest accumulation, and dividends.
Key Points:
- Access to Cash Value: Jordan can borrow against the cash value or even surrender the policy for its cash value (subject to surrender charges and policy terms).
- Death Benefit Unaffected by Loans: If Jordan takes a loan against the cash value, the death benefit remains unaffected unless the loan isn’t repaid.
- Impact of Withdrawals: Withdrawals from the cash value can reduce the death benefit.
Types of Whole Life Insurance
- Continuous Premium Whole Life: Continuous premium whole life is the most common type of whole life insurance. With this policy, you make payments over the entire life of the insured person.
- Limited-Payment Whole Life: There are different types of limited-payment whole life policies. You can pay for the policy in a shorter period or until a certain age.
- Single-Premium Whole Life: A single premium whole life policy is one where you only have to pay one premium instead of many. This usually costs a lot of money all at once, but the policy will continue to work, and you will still be covered even if you don’t make any more payments.
- Current Assumption Whole Life: Current assumption whole-life policies (also known as interest-sensitive whole-life) offer flexible premium payments that depend on the current interest rate.
- Economatic: An economatic policy is a whole life-type policy with a term rider. This means the policy will last your life, and you can add more coverage by paying a small fee.
- Multiple Protection Life Insurance: Multiple protection life insurance policies provide coverage for a person’s entire life.
- Funeral Insurance: Funeral or preneed burial insurance is a type of whole life insurance that pays for the insured person’s funeral.
Whole Life Insurance Rates
Whole life insurance premiums, sometimes called straight life insurance, are typically fixed and do not adjust over time like universal life insurance. These are sample monthly premium rates based on age, gender, coverage amount, Preferred status, and non-tobacco consumers.
| Age | Gender | $250k | $500k | $750k | $1,000,000 |
|---|---|---|---|---|---|
| 25 | Female | $108.50 | $211.75 | $315.00 | $418.25 |
| Male | $120.97 | $236.69 | $352.41 | $468.13 | |
| 35 | Female | $163.41 | $321.56 | $479.72 | $637.88 |
| Male | $179.16 | $353.06 | $526.97 | $700.88 | |
| 45 | Female | $255.72 | $506.19 | $756.66 | $1,007.13 |
| Male | $281.75 | $558.25 | $834.75 | $1,111.25 | |
| 55 | Female | $417.38 | $829.50 | $1,241.63 | $1.653.75 |
| Male | $462.66 | $920.06 | $1,377.47 | $1,834.88 |
Related Reading: Get the most competitive life insurance quotes tailored to your specific needs.
the Benefits of Whole Life Insurance
A whole life insurance policy offers a range of benefits and features for the policy owner. Here’s a comprehensive list:
- Death Benefit: The primary purpose of whole life insurance is to provide a death benefit to beneficiaries upon the policyholder’s death. This benefit is generally tax-free.
- Cash Value Accumulation: Whole life policies include a savings component, known as cash value, accumulating over time on a tax-deferred basis similar to an annuity. This cash value can grow at a guaranteed rate.
- Borrowing Against Cash Value: Policyholders can borrow against their policy’s cash value, often at a lower interest rate than other loan types. However, unpaid loans with interest can reduce the death benefit.
- Dividend Payments: Some whole life policies are “participating” and may pay dividends. These dividends can be taken in cash, left to accumulate interest, used to pay premiums, or to buy additional insurance.
- Fixed Premiums: Premiums in whole life policies are typically fixed and do not increase as the policyholder ages.
- Lifetime Coverage: Coverage lasts for the life of the insured as long as premiums are paid.
- Tax Benefits: Death benefits are usually income tax-free to beneficiaries. The policy’s cash value grows on a tax-deferred basis, and policy loans are generally not taxable.
- Estate Planning: Whole life insurance can be used as a tool for estate planning, providing liquidity to pay estate taxes and other expenses.
- Guaranteed Cash Value Growth: The cash value of a whole life policy grows at a guaranteed rate set by the insurance company.
- Policy Surrender: If a policy is no longer needed or affordable, it can be surrendered for its cash value, less any surrender charges.
- Riders and Add-ons: Policies can often be customized with riders that provide additional benefits, like accelerated death benefits, child riders, or long-term care riders.
- Collateral for Loans: The cash value of a whole life policy can be used as collateral for loans.
- Living Benefits: Some policies offer accelerated death benefits, allowing the policyholder to access a portion of the death benefit if diagnosed with a terminal illness.
- Non-Forfeiture Options: If you stop paying premiums, options like reduced paid-up insurance or extended-term insurance can still provide some level of coverage.
- Predictability: Since whole life insurance offers fixed premiums and guaranteed cash value growth, it provides a predictable element in financial planning.
Is Whole Life Insurance Worth It?
Whether life insurance is worth it depends on your financial goals and circumstances. It is an excellent tool if you want guaranteed lifelong coverage and a steadily growing savings mechanism. However, it comes with higher premiums than term life insurance due to its lifelong coverage and cash value feature.
Next Steps
Understanding whole life insurance is the first step toward making an informed decision. With lifelong coverage, a savings component, and the ability to cater to your changing financial needs, a whole life insurance policy can provide peace of mind for your financial future. However, like all financial tools, it must align with your goals, needs, and financial circumstances to be worth it. So, before committing, ensure you fully understand what a life insurance policy entails, its benefits, and potential drawbacks.
Whole Life Insurance Quotes
Feel free to contact us for quotes for whole life insurance. The service is free of charge.
Frequently Asked Questions
Can I cash out my whole life insurance policy?
Yes, there are three main ways to get cash out of your life insurance policy. You can borrow against your cash account with a low-interest loan, withdraw the cash as a lump sum or in regular payments, or surrender your policy.
What happens if I outlive my whole life insurance policy?
At age 100, whole life insurance generally expires. When a policyholder outlives the coverage term, the insurance company may pay out the entire cash value to the policyholder (which, in this situation, equals the coverage amount) and cancel the policy. Some policies extend the period when premiums are paid by allowing premium payments to continue until a policyholder dies. Others keep collecting premiums but maintain the contract active until it is required.
What happens to cash value in whole life policy at death?
When you die, the insurance company will assume ownership of your whole life insurance policy’s cash value, and your beneficiary will receive the death benefit.
How long do you pay premiums on whole life insurance?
Average premiums for whole life insurance are paid throughout a person’s life span. Limited-pay whole-life policy premiums are paid just for a specific number of years. Single-premium whole-life premiums are usually paid in one large payment.
Is whole life insurance a good investment?
Whole life insurance is not typically considered a good investment because the cash value component grows slowly and is subject to fees. Whole life also generally has higher premiums than other types of life insurance. However, the whole life does have some advantages. For example, it provides a death benefit guaranteed to be paid, regardless of market conditions, and it can help policyholders meet their long-term financial goals.
What is the disadvantage of whole life insurance?
Whole life insurance has a few disadvantages. First, it is one of the most expensive types of life insurance. Second, because it covers your entire life, it can be difficult to cancel or change if your needs change. Finally, whole life insurance policies typically have high fees and commissions, affecting the policy’s cash value.
How long does a whole life insurance policy last?
Whole life insurance policies last for the insured person’s entire life. The policy does not expire as long as the premiums are paid.
What is the difference between whole life insurance and term life insurance?
The main difference between whole life insurance and term life insurance is that whole life insurance covers you for your entire life, while term life insurance only covers you for a set period. Whole life insurance is also generally more expensive than term life insurance.
Can you withdraw money from whole life insurance?
Yes, you can withdraw money from whole life insurance. However, there may be taxes and fees associated with the withdrawal. Therefore, it’s essential to check the terms of your policy to see what is allowed.
What is the cash value of whole life insurance?
The cash value of whole life insurance is the portion of the policy that gains interest over time. You can use this money for anything you want, but you must pay taxes if you withdraw it.
How long does it take for whole life insurance to build cash value?
It typically takes several years for whole life insurance to build cash value. The exact amount of time it takes depends on the terms of your policy.
What happens to cash value in whole life policy at death?
When the policyholder dies, the cash value stays with the insurance company. The beneficiary only receives the death benefit, which is the face value of the policy.
What is the difference between whole life insurance and term life insurance?
Whole life insurance is a type of permanent life insurance that remains in force for the duration of your life. On the other hand, term life insurance is temporary life insurance that only lasts for a period, such as 10 or 20 years.
Which is better, term or whole life?
Term life insurance may be better if you need coverage for a specific period, such as when you’re starting a family or have a limited budget. On the other hand, whole-life insurance may be a better option if you need coverage for your entire life or want to build cash value.
What does whole life mean in insurance?
An insurance policy that covers the insured for their entire life.
What are the disadvantages of whole life insurance?
High premiums, low returns, inflexibility, and complexity.
Do you pay whole life insurance forever?
Premiums are payable for the policy’s life or until it is fully paid.
How much is whole life insurance?
Whole life insurance cost varies depending on factors such as age, health, and coverage amount. Premiums for whole life insurance tend to be higher compared to term life insurance, as they offer lifelong coverage and a cash value component. It’s recommended to get quotes from multiple providers to find the best whole life insurance cost for your needs.