Find the Best Whole Life Insurance for Your Client
Life insurance products can be a great way for your clients to plan for the future. In many cases, life insurance is a cost-effective option to guard against the repercussions of an unexpected death of a loved one or business partner. Life insurance can also function as a valuable asset for retirement and estate planning. When properly managed, life insurance provides peace of mind for your client and their loved ones.
Finding the right life insurance policy for each client’s situation is simple and straightforward. There are four primary types of life insurance policies. They are term, universal, whole, and group life insurance. Each of these types of insurance policies has distinct advantages and disadvantages. Whole life insurance is perhaps the most well-known type.
What is whole life insurance?
Whole life insurance offers the strongest guarantees of any life insurance product. There is both a guaranteed death benefit and guaranteed cash value offered. Some whole life insurance has the potential for additional non-guaranteed cash value accumulation via dividends. Paid premiums are for periods including one year, ten years, 20 years, up to age 65, or for life. While these policies can be rigid in structure, they are also very stable. Therefore, they are popular for individuals who want a conservative policy that guarantees life coverage. Depending on the type of whole life insurance, policies can also be a vehicle for life insurance retirement planning.
What are the different types of whole life insurance?
There are two basic types of whole life policies. Participating whole life and non-participating whole life. We will explore each below.
Participating Whole Life
Participating whole life policies accumulate additional non-guaranteed cash value in addition to the premiums paid into the policy via dividends. Participating whole life plans include a dividend at a crediting rate set by the carrier issuing the policy. While these dividends may fluctuate, they are historically very stable. Dividends make participating whole life unique, because they can be used in a variety of ways. Dividends can:
- Reduce premiums
- Buy paid-up additions
- Accumulate as cash value
- Make payments lower, and
- Buy one year term
These dividend features make participating whole life very popular.
Non-Participating Whole Life
Non-participating whole life insurance policies have all the same guarantees but forgo the non-guaranteed dividends. These plans are structured with a cash value accumulation rate determined when the policy is issued.
How is whole life insurance different from other types of life insurance?
Whole life insurance is different from other types of insurance by virtue of the breadth of its guarantees. One of the most common misconceptions is that whole life insurance is the same product as universal life insurance. Both are permanent products with guaranteed death benefits, and both are used to accumulate cash value over time. Universal life insurance policies tend to be more flexible and less expensive. They offer fewer guarantees and may have more variable rates of return on investment, which is why whole life is seen as a stable alternative.
Whole life insurance plans may have an increasing death benefit. The death benefit increases over time as the cash value increases. Additionally, dividends can be used to purchase paid-up additional (PUA) insurance, which increases the death benefit, and the guaranteed cash value. Together these features provide a powerful engine to increase both coverage and cash.
In contrast, universal life insurance plans usually have a level death benefit, which usually does not increase in value over time, unless the option for increasing death benefit is selected when applying for universal life.
What are the benefits of whole life insurance?
Whole life insurance has many benefits. Whole life is the oldest type of permanent life insurance available, so it has a long track record. Some of the benefits are stability and low risk. As mentioned, these policies are defined by a guaranteed death benefit, a guaranteed cash value accumulation, and additional flexibility due to dividends.
Is whole life insurance right for my client?
To determine if a whole life life insurance policy is right for a client, will depend on the specifics of their situation, including their goals, income, net worth, health, and family needs. When considering whole life, you and your client should understand how whole life plans differ from universal life insurance.
One of the most significant factors when purchasing any life insurance is the age of the client; however, in the case of whole life insurance this is particularly important. All life insurance products get more expensive with the age of the insured individual. Whole life is usually the most expensive type of insurance at every age.This may make whole life insurance less attractive to older clients, particularly those above 50 whose goal is securing a guaranteed death benefit.
On the other hand, whole life products have a niche among more conservative people who view the cost as a worthwhile expense for the certainty and breadth of coverage it provides.
Whole life can also be an attractive product for younger shoppers because it gradually builds cash value over time. Unlike universal life insurance, there is no surrender period. Moreover, a whole life policyholder usually can expect to recoup their cost-basis in the form of the cash value within about ten years, meaning the premiums have effectively paid for themselves.
How do I find the best whole life insurance policy for my client?
Finding the best whole life policy is different for every client. Consider your client’s goals, insurability, finances, health, lifestyle when comparing policies. While whole life products are well-known and conservative, they may vary from one another based on details such as dividend options and riders. Each carrier may have different restrictions on dividends. This can affect whether the policy meets your customer’s goals or not. It is also important to evaluate critical riders when recommending whole life policies. Riders examples include guaranteed insurability, long-term care, disability, accidental death, and critical illness.
Working with an insurance brokerage agency may be the best way to shop multiple carriers. The best brokerages will work closely with the carrier to design the best solution for your client and can be the difference between purchasing a great fit that meets their goals and an inferior product with insufficient protection.
Frequently asked questions about whole life insurance.
Does whole life insurance expire?
No, whole life insurance does not expire, as long as the terms are met and the premiums are paid.
Is it possible to outlive your whole life policy?
No, it is not possible to outlive your whole life policy. Whole life insurance is permanent. This means that as long as the premium is paid, the death benefit is guaranteed for life.
Can you cash out whole life insurance?
Yes, you may cash out whole life insurance. You can surrender your policy at any time; however, surrenders in the early years mean a policyholder generally will not get back all of the premiums paid into the policy.
Does whole life insurance pay dividends?
It depends. If it is a participating whole life policy, then yes. If not, then no. Dividends are a key feature of whole life insurance and are used in several ways. There are five ways to use dividends: to reduce premiums, purchase paid-up additions, reduce policy loans, add to cash value, and buy one-year term insurance.
Can whole life be combined with other life policies?
Yes, permanent policies are commonly combined with term life insurance policies or group plans. Whole life insurance may be combined with other policies.
How much whole life coverage should you have?
How much whole live coverage depends on the individual. A brokerage agency can perform a needs analysis to help you determine how to meet your client’s needs.
How do I find the best whole life insurance broker?
There are a few ways to find high-quality whole life insurance brokers. One approach is to ask around your network for referrals. You can also connect with NAILBA, a leading insurance industry organization promoting consumer choice.
You can also do your research by researching several insurance brokerages in your area. We recommend looking for these qualities in a broker:
Back-office support. What happens after an application is submitted? EMG handles the implementation. This is a critical and often overlooked service, but it may be critical to getting the right offer for the policyholder.
A good team instead of just a good salesperson. Make sure that the service is as good as the pitch.
Investing in the business. Do the owners invest back into the agency or focus on paying themselves?
You can also learn a lot about the brokerage agency by calling them up and asking pertinent questions, such as:
- How long have you sold whole life insurance?
- Have you had any complaints with the state?
- Who are your primary carriers?
- What are the carrier ratings?
- What types of products are the affiliate carriers selling?
Do your homework. Most importantly, visit the agency. Do an onsite visit and speak with the owners in person.
EMG can help.
As a brokerage general agency, EMG handles everything from submission to commission. We have strong relationships with over 30 carriers, allowing us to help choose the best carrier for your clients based on the purpose of coverage, product type, and underwriting obstacles. We will work closely with you throughout the process. We customize solutions tailored to the needs of each client.
Our dedicated sales team offers customized proposals, case designs, product alternatives, and comparisons for each of your clients.
We have access to carrier underwriters who will review a client’s specific medical situation to determine possible ratings.
You will have access to a dedicated case manager that will follow your case from submission to final approval and placement.
This highly personalized approach gives us the ability to tailor solutions to each client. Connect with us by phone, online, or in-person, or schedule a consultation with your sales director today on how to grow your business.