Understanding whole life insurance rates & quotes

There are many different options when it comes to finding the right life insurance policy to financially protect your loved ones when you die. Whole life insurance is a life insurance policy that lasts your entire life, even though you only have to pay premiums until a certain age or for a certain number of years. The policy is permanent, and its premiums are typically more expensive than term life insurance, which is a policy that only lasts until a set expiration date.

Why are whole life insurance rates so high?

Permanent life insurance policies are costlier and have a higher premium than term life insurance policies. Here’s why: 

Whole life coverage lasts for life

Whole life insurance premiums are so high because the policy lasts your entire life and never expires. Typically, you only pay premiums for a whole life insurance policy until a certain age (such as 65 years) or for a period (such as 20 years). Unlike term life insurance where the policy expires or lapses if you do not pay the premiums, you retain the same amount of coverage even when you’re done paying premiums.

Whole life insurance has a cash value component

Each month, a certain portion of the premiums is paid into a tax-deferred savings account that functions similarly to an investment account, called the cash value. The exact amount that goes into savings is determined by your individual policy. With its annual dividends, the cash value and death benefit grow (or shrink) over time.

Generally, a cash value life insurance policy shouldn’t be used as a primary source of retirement income because it has limited investment options and relatively low rates of return (only 3 to 4%) compared to dedicated investment options, such as a 401(k) or IRA. There are better ways to invest than with a cash value policy.

What can you do with a whole life insurance policy’s cash value?

As your whole life insurance policy builds cash value, you can access the funds in a few different ways — each with its own risks.

• You can withdraw tax-free money. Though, if you surrender your policy or it becomes void, the money you have withdrawn will be considered taxable income.

• You can take out a loan. You’ll usually be able to do so with low-interest rates, but you will be borrowing against your policy and will accrue interest until you pay the loan off. Your dependents would also lose a part —or all — of the death benefit if you die before you’ve paid the loan back. Any amount you still owe will be deducted from the benefit to pay off the loan.

• You can surrender your policy and collect the cash value you’ve accumulated. The cash value of your policy will usually take two or three decades to grow, so if you surrender the policy early on, you’re unlikely to have accumulated much cash beyond what you’ve already paid.

→ Learn the ins and outs of the cash value here.

Whole life insurance sample quotes

When you compare typical term life insurance rates to the estimated costs of whole life insurance below, you’ll see that premiums for a whole life policy are a lot higher and fluctuate depending on your payment period. Keep in mind that when purchasing a whole life insurance policy, the insurer will set up quotes based on paying your premiums until you’re 65, 99, and 121.

Other non-traditional payment options for whole life policies (depending on the insurer) are:

• 10-year pay 

• 20-year pay

• Single pay (paying the entire policy’s lifetime premiums upfront)

You’ll spend more money each year for a policy that is paid up to age 65 or 10 to 20-year pay because the premium payments would end earlier in life and are therefore packed into a shorter period. You’ll spend the least amount of money annually if you purchase a policy that pays premiums until you are 121 (theoretically) because you have more time to pay off the policy.

How life insurance rates are determined

Your policy premium’s actual rates will be determined by the life insurance health classification you fall into. There are four life insurance classifications:

• Preferred Plus

• Preferred

• Standard Plus

• Standard

The type of life insurance classification you receive is based on several variables including age, health and lifestyle.

→ Find more information about life insurance classifications here.

Whole life insurance premium rates payable until age 65

Methodology: Rates are calculated for a male non-smoker in Columbus, Ohio, who qualifies for a Preferred Plus rate class, obtaining a $100,000 whole life insurance policy payable until age 65. Individual rates will vary as specific circumstances will affect each customer's rate. Rate illustration valid as of 2/9/2021.

Whole life insurance premium rates payable until age 99

Methodology: Rates are calculated for a male non-smoker in Columbus, Ohio, who qualifies for a Preferred Plus rate class, obtaining a $100,000 whole life insurance policy payable until age 99. Individual rates will vary as specific circumstances will affect each customer's rate. Rate illustration valid as of 2/9/2021.

Whole life insurance premium rates payable until age 121

Methodology: Rates are calculated for a male non-smoker in Columbus, Ohio, who qualifies for a Preferred Plus rate class, obtaining a $100,000 whole life insurance policy payable until age 121. Individual rates will vary as specific circumstances will affect each customer's rate. Rate illustration valid as of 2/9/2021.

10 Pay and 20 Pay whole life insurance rates

People who want to expedite the payment process can purchase a type of whole life insurance called “10 Pay” or “20 Pay” life insurance, where you pay for 10 years or 20 years, respectively. These policies are mostly only useful to people who have a disposable income over that period because the premiums are often higher than if you pay up to age 65, 99, or 121. Like other whole life products, 10 Pay or 20 Pay life insurance policies offer an additional tax-advantaged savings account, which can be useful if you’ve maxed out all other investment options.

10 Pay whole life insurance rates

Methodology: Rates are calculated for a male non-smoker in Columbus, Ohio, who qualifies for a Preferred rate class, obtaining a $100,000 whole life insurance policy payable within 10 years. Individual rates will vary as specific circumstances will affect each customer's rate. Rate illustration valid as of 2/9/2021.

20 Pay whole life insurance rates

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Methodology: Rates are calculated for a male non-smoker in Columbus, Ohio, who qualifies for a Preferred rate class, obtaining a $100,000 whole life insurance policy payable within 20 years. Individual rates will vary as specific circumstances will affect each customer's rate. Rate illustration valid as of 2/9/2021.

Whole life insurance rates vs. term life insurance rates

Term life insurance lasts for a set period, after which the policy expires; usually anywhere from 10 to 30 years. It lacks additional components, like a cash value. Term life insurance rates are generally a lot cheaper than whole life insurance, making it a more affordable coverage option for most people.

The permanent nature of a whole life insurance policy, alongside its cash value and finite payment structure, makes it much more expensive than term insurance.

How much more? Over 20 years, a healthy 30-year-old male would pay $145.44 per month for $100,000 of whole life coverage (shown in the chart above for 20-year pay), when he could be receiving five times that coverage ($500,000) for $28.34 per month with a 20-year term life policy.

The graph below shows the comparatively low prices for a 20-year term life insurance policy across age and gender.

Methodology: Sample premiums are for non-smokers with a Preferred health rating based in Columbus, Ohio; Life insurance averages are based on a composite of policies offered by Policygenius from AIG, Banner, Brighthouse, Lincoln, Mutual of Omaha, Pacific Life, Principal, Protective, Prudential, SBLI, and Transamerica and may vary by insurer, term, coverage amount, health class, and state. Not all policies are available in all states. Rate illustration valid as of 2/9/2021.

→ For a deeper look, read our full guide on term life vs. whole life.

Whole life insurance vs. other types of permanent life insurance

Whole life insurance is one of several types of permanent life insurance policies. These policies include universal life insurance and guaranteed universal life insurance. Check out the chart below to see how whole life stacks up against universal life insurance and guaranteed universal life insurance for a $750,000 death benefit. 

Methodology: Rates are calculated for a 40-year-old male non-smoker in New York, New York, who qualifies for a preferred rate class. Life insurance averages are based on a composite of whole life insurance, universal life insurance, and guaranteed universal life insurance policies offered by Policygenius and may vary by insurer, term, coverage amount, health class, and state. Not all policies are available in all states. Rate illustration valid as of 2/9/2021.

→ Learn more about permanent life insurance policies.

Is whole life insurance worth the cost?

A whole life insurance policy probably isn’t for the average person, but there are reasons that someone would want to pay the costlier premiums.

As Patrick Hanzel, Policygenius’ Advanced Planning Specialist and Certified Financial Planner, explains, "It's typically a good option to consider if you have a significant annual income or assets, complex estate planning needs, or a special needs dependent."

An individual with a high net worth who has already maxed out other savings accounts could use whole life insurance as an additional estate planning resource, making the high premium costs worthwhile.

Individuals who are leaving behind dependants with special needs may also find that whole life insurance is a better life insurance policy option for them, as it never expires and will always cost the same price for premiums.