How to Choose the Right Whole Life Insurance in 5 Simple Steps

Summary: Whole life insurance offers the policyholder lifelong coverage, guaranteed benefits, and cash value accumulation, making it a valuable insurance planning tool. There are multiple types of whole life policies, all with fixed premiums and some without required medical examinations. These policies give policyholders the ability to build cash value over time while bringing financial security for their loved ones in the future.

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When it comes to protecting your family's future, whole life insurance is more than just a safety net. It is, potentially, lifelong peace of mind. Finding the right plan comes down to understanding the whole life insurance benefits and drawbacks and the death benefit amount that is right for you and your beneficiaries.

Whether you're planning for final expenses, looking to leave a legacy or searching for a reliable way to build cash value, the best whole life insurance policies address your needs.

Five steps to choosing whole life insurance

Whole life insurance is yours for your entire life and available for your loved ones when you pass away. Choosing the right policy is an important part of building a strong financial future and leaving a legacy.

However, finding the right policy may seem overwhelming. Here’s a step-by-step of factors to consider in whole life insurance policies.

1Determine your long-term goals

What are your long-term financial goals? Are you looking to leave behind a sizable inheritance to your children, grandchildren, or great-grandchildren? Or do you just want to cover your burial expenses so that surviving loved ones can focus on grieving?

Narrowing the focus onto the financial goals can help you zero in on the best whole life insurance plans based on your budget and death benefit needs.

2Consider who the policy is for

A key consideration when you shop for whole life insurance is the guaranteed death benefit. This means beneficiaries receive a guaranteed payout, which can help cover final expenses, resolve outstanding debts, or help provide for loved ones. How many beneficiaries do you have? How much do you want to leave them with? What role can a whole life policy play in satisfying that goal?

3Decide on a death benefit

The higher your death benefit, the higher your life insurance premium will likely be. The average death benefit varies widely by state, with places like Alaska averaging $285,000 in life insurance policies while others like Alabama averaging $66,000.⁽¹⁾

If you just want to have enough for end-of-life costs, funeral expenses with a casket and burial average $8,300, while a funeral with cremation averages $6,280.⁽²⁾ These costs don’t include grave marker expenses or interment costs. This can add another few thousand dollars to total burial costs. Our final expense calculator can help determine your death benefit needs for more accurate life insurance quotes.

4Choose a whole life policy matching your needs

Here’s a whole life insurance comparison to help you decide which policy might best suit your needs:

Did you know that you may be able to convert a term policy into a whole life policy? Learn the process of converting term to whole life insurance.

Here’s a closer look at the main types of whole life insurance.

Traditional whole life insurance

Whole life insurance is a type of permanent life insurance that pays a death benefit, locks in your life insurance cost, and accumulates cash value for as long as the policy is active. The cash value grows at a minimum guaranteed interest rate.

Traditional whole life policies generally have a wide range of death benefit amounts and lower premiums than other types of whole life insurance. However, your health is an eligibility factor, so you may need a medical exam and may not be accepted if you have certain pre-existing conditions or use tobacco products.

Guaranteed whole life insurance

There are medical conditions and behavior choices that can make obtaining life insurance difficult. If that’s the case, guaranteed issue policies are likely a better option to consider. No medical exams or health questions are required for acceptance. These policies can help cover funeral costs and build cash value over time.

Children's whole life insurance

Designed for children up to age 17, children's whole life insurance is a great way for parents and grandparents to set a child up for future success by building cash value that can be accessed later in life. Since it is a whole life policy, the premiums remain low and do not increase.

If an insured child passes away unexpectedly, the death benefit can be used to cover their final expenses. If the policy goes unused by the time they turn 18, you can transfer the ownership to them. They’ll have to continue making payments to keep the policy active, but premiums tend to be lower than other types of whole life bought later in life.

5Select your riders

Whole life insurance riders (or addons) are extra benefits you add to a policy for a fee. Choices differ by company, but a few you see may include:

• Paid-up additions: Uses dividends to increase the policy’s death benefit and life insurance cash value 
• Accelerated-death benefit: Allows you to use some or all of the death benefit** while alive if you’re terminally ill or have a qualifying life event, such as an organ transplant
• Long-term care rider: Uses your death benefit to pay for your long-term care if you meet the eligibility criteria
• Child term rider: Adds your children to your policy, avoiding having to buy separate policies for them and allowing for a small benefits payout if they pass away before a certain age, such as 25

How to choose the right life insurance company

Once you’ve narrowed down the type of policy you want and who offers it, the next step is making the final decision of which company to go with. Here are two key factors to consider to help guide your choice:

1Financial strength ratings

A.M. Best, Fitch, Moody’s, Kroll Bond Rating Agency (KBRA) and Standard & Poor's (S&P) are the five independent rating agencies scoring the financial strength of insurance companies.⁽³⁾ Each has its own scale and factors considered. Going with insurers that score highly with most or all rating agencies can provide better peace of mind that the insurer will be able to pay out benefits when the time comes.

2Dividend payouts

Insurance companies are usually structured in one of two ways: as a stock company or a mutual life insurer.

Stock insurance companies can be publicly or privately held. They’re owned by shareholders or stockholders. Public companies trade in the stock exchange. With this structure, policyholders don’t win or lose profits when the insurance company does.

Mutual insurance companies are privately held. They’re owned only by the policyholders and work in their interest. Each year, the board of directors and management determine how much of the company’s operating income is paid out as dividends to policyholders. While dividends aren’t guaranteed, larger national insurers like Mutual of Omaha have more financial resources to reliably pay dividends.

Frequently asked questions (FAQs)

How does whole life insurance compare to term life insurance?

Whole life insurance provides permanent coverage along with cash value accumulation and fixed premiums. Term life insurance differs from whole life insurance because it offers coverage for a period of time and does not build any cash value.

Can I borrow against my whole life insurance policy?

Yes, you can borrow against the accumulated cash value of your policy. However, if you do not pay off the loan, the unpaid amount may reduce the death benefit.***

How does cash value in a whole life policy work?

A key advantage of a whole life policy is what's called the living benefit or cash value. Here is how it works and is a benefit to policyholders:

• Tax-deferred growth: The cash value of the policy grows tax-free while in the account. There may be tax costs if you withdraw the money, take out a loan, or surrender the policy.
• Supplemental retirement income: A policyholder can utilize the cash value as an optional source of income during retirement.
• Emergency fund: If you face a problem and lack the funds to address it, you can borrow against the cash value.

Can I buy whole life insurance online?

United of Omaha lets you start the process by applying online. Or, if you prefer, you can speak with a licensed insurance agent* for personalized guidance and your recommended life insurance coverages.

Sources
(1) American Council of Life Insurers, Building Financial Security in Alabama, Accessed March 2025 
(2) National Funeral Directors Association, 2023 NFDA General Price List Study Shows Inflation Increasing Faster than the Cost of a Funeral, December 2023
(3) Insurance Information Institute, How to assess the financial strength of an insurance company