In this article, we’re going to look at the most common type and coverage amount of life insurance chosen by Americans today – $250,000 whole life insurance.
You’ll learn how it works, why it’s so popular, the different types, the cash value component, and the pros and cons of each.
Let’s get started.
Table of contents
- Quick Summary
- Overview of Whole Life Insurance
- How to Choose How Much Life Insurance You Need
- Pros & Cons of $250,000 Whole Life Insurance
- How to Access Cash Value
- Compare $250,000 Whole Life Insurance Rates EASY
- Best $250,000 Whole Life Insurance Companies
- $250,000 Whole Life Insurance FAQ
- Final Thoughts
- How Abrams Insurance Solutions Can Help
Whole life insurance provides financial protection with its guaranteed death benefit. Whether you develop health conditions later in life or just want enough life insurance to leave something for your loved one, you never need to worry about renewing or losing coverage since it’s locked in for life.
$250,000 is one of the most common amounts of coverage chosen today for both term policies and whole life. It’s always best to lock in your rates yesterday since every birthday you wait brings an additional cost.
Compare life insurance quotes using the free instant quotes tool on this page to see what whole life insurance coverage might look like for you.
Overview of Whole Life Insurance
People pick whole life insurance because the policies last for someone’s entire life. The second most popular type – term life insurance – only lasts for a set number of years before expiring.
While a term life insurance policy is cheaper, in most cases, you don’t get your money back at the end of the term. And if you need to renew, you’ll be stuck with higher premiums.
Whole life, on the other hand, lasts either your entire life or until a set age like 100 or 121, when the insurance company will give you your benefits. Good birthday present, right?
Whole life locks in the monthly premiums (what you pay each month for insurance) for as long as you have the policy. If you’re paying $140 a month right now for life insurance, you’ll be paying $140 a month in 30 years, and after inflation and pay raises, it’ll be a much smaller percentage of your income.
Whole life insurance also allows you to build up cash value within the policy.
Here’s the great part about cash value in a life insurance contract.
You can use it for anything you want. It works as a no-questions-asked loan from your insurance company. Because it’s a loan, the IRS doesn’t consider it income, so it’s tax-free.
And, if you don’t pay it back, so what? The insurance company deducts the amount from the payout to your beneficiaries.
For more information on tax-optimized income streams through life insurance, click here.
No Exam Whole Life Insurance
Another type of whole life, if you’re particularly busy, lets you skip the life insurance medical exam.
It’s called no exam insurance, or in this case, no exam whole life.
Insurance companies often charge a little more for skipping the medical exam. But with so many companies jumping into the no-exam market, the price has been coming down in recent years compared to traditional whole life insurance.
Most companies with no exam options will offer up to $500,000 of no-exam whole life insurance.
How to Choose How Much Life Insurance You Need
The old advice was to get life insurance at 3 – 20 times your annual income.
Huge range, right? It depended on who you asked. Most guidelines suggested 5 – 7x your annual income.
But how does that account for very different lives? A single accountant with no one depending on their income won’t need nearly as much as an accountant with three kids and student loans they’re still paying off.
Consider using a tool that tailors the benefit amount to your situation.
Try the free Life Insurance Needs Calculator.
It accounts for things like:
- Mortgage remaining
- Number of children
- Student loan debt
- Credit card debt
- How much savings you have
- How much you want to leave to provide for a spouse
Pros & Cons of $250,000 Whole Life Insurance
There are a lot of things to like about a quarter million dollar whole life policy. Depending on your goals, there are some disadvantages as well.
Benefits of Quarter Million Whole Life
It’s predictable. You know exactly how much you’ll pay each month and how much your beneficiary will eventually receive.
Quick cash for emergencies or opportunities. Cash value takes some years to build up, but it’s there in a pinch. It can even cover the cost of your premiums if you hit a rough patch.
Riders cover other risks. With the increasing cost of long-term care, many policies have an optional long-term care rider that will pay for long-term care that you may need later on rather than having it come out of pocket. Riders can also advance funds for terminal illnesses or expensive illnesses like cancer or strokes.
Simple. All of the contract terms are laid out when you get the policy. They don’t change. You know your interest rates, benefits, premium, and policy features upfront. Out of all of the types of permanent life insurance policies, whole life is by far the easiest to understand.
Drawbacks of $250,000 Whole Life Insurance
It takes time to build up cash value. Because the cash value growth is predictable, it can take nearly ten years to build it to a usable level.
More expensive than other options. Term can be 1/10th the price of whole life for the same $250,000 benefit. Or, your beneficiaries would receive a lot more cash for the same premiums on a term policy.
Minimal (if any) investment control. Your cash value builds when the insurance company pays dividends based on its annual performance. If you are looking to maximize your tax-free income, some other types of permanent life insurance may perform better.
How to Access Cash Value
After you’ve let your policy build the cash value for a while, you can start borrowing from it.
Normally, there is a minimum time or value before the insurer allows policy loans. Most commonly, five years or $10,000.
Then, all you do is contact your insurance company and ask for a policy loan. They’ll send you the details on how much you can access and the interest rate.
You fill out the paperwork, send it back, and the insurer sends the money right to your account.
You pay it back as you have the funds or don’t pay it back. Although paying it back allows you to access more in the future.
Your beneficiary will receive the face amount minus any outstanding loans and interest.
The cash value can also be used to create a paid-up policy, which lowers future premium payments.
Compare $250,000 Whole Life Insurance Rates EASY
The fastest (and easiest) way to compare whole life insurance rates is using a quoter from an independent insurance agent, such as the one on this page.
We’re including some sample rates for $250,000 whole life policies and highlighting three of the companies we end up working with the most often due to a combination of low rates and great policy features.
Best $250,000 Whole Life Insurance Companies
Companies have different underwriting guidelines. What might be best for many people may be different for you, depending on your health and hobbies.
The three companies below work well in many cases. Still, if you have specific concerns like getting life insurance with a medical condition, then it’s best to call an agent and have them do the comparison shopping for you.
Assurity has some of the strongest customization options in the life insurance market. Between their return of premium riders, disability income, and living benefits, you can shape the policy to cover your family’s needs without paying for extra fluff.
You also have a few different types of whole life to choose from. You can choose from regular whole life insurance, accelerated underwriting (aka no exam), or single premium.
Assurity’s whole life policy pays dividends, a share of the company’s profits that year. You have a few choices of what you want to do with the dividend. You can:
- Reduce premiums
- Purchased more paid-up benefits
- Boost your cash value
- Take the cash
Corporate responsibility offers another reason for considering Assurity. They’re a certified B Corporation, a certification that companies can earn with commitment to environmental sustainability and community focus. Basically, if a company gets certified as a B Corporation, it probably treats its employees well and takes some responsibility for environmental stewardship.
Other points of note. Assurity has an A- from AM Best and an A+ from the Better Business Bureau.
Foresters has several policies to meet the varying needs of different people. They have a final expense (aka burial insurance), children’s whole life, and standard whole life insurance with cash value.
Depending on the type of whole life contract, you can choose from a bunch of different riders to customize it. Many of their available riders are included with the policy.
National Life also offers options for dividend-paying whole life as well as no exam policies. Its no exam benefits have fairly high limits compared to the average no exam policy – $3 million if you’re under 50 and $1 million if you’re 60 or younger. $250,000 easily falls into that category, so it can get “buy life insurance” off your to-do list fast.
National Life also has some unique riders that you don’t find with other companies. They have a Lifetime Income Benefit Rider, which will pay you income for life (similar to an annuity) based on your policy’s cash value.
You can also add a Charitable Matching Gift Death Benefit rider. Since you can name as many beneficiaries as you want on a policy, if you add a charity as a beneficiary with this rider, National Life will match some of the benefits going to the charity.
$250,000 Whole Life Insurance FAQ
How much does $250,000 whole life insurance cost?
For a $250,000 whole life policy, for someone in generally good health, it could be anywhere from $200 to $500 a month. Most of that depends on your age. A healthy 25-year-old might be looking at around $180 a month, whereas someone in their 50s might be closer to $600 a month.
What affects the cost of life insurance?
Your age, gender, and health are the big three. The type of policy (whole life or term, for example) will also play a big difference. Finally, the premium will depend on the amount of death benefit.
How long does a whole life insurance policy last?
Insurance companies build whole life policies to pay out eventually. Nobody (we know of) lives forever yet. Most whole life insurance policies will endow at age 100.
How long does it take for whole life insurance to build cash value?
Most whole life insurance policies take about ten years to build a usable cash value. Many insurers will place limits on when you can begin borrowing from it, somewhere between five and ten years.
What is a good amount of whole life insurance?
$250,000 is a popular choice for whole life insurance. But sitting down to calculate how much would take care of your family and any financial expenses gives you a better idea of what you need. Try using a life insurance needs calculator.
There are many types of life insurance that have their advantages for various specific needs. A term life policy has the lowest premium payment, but if you renew, it will be at higher rates. Whole life has a simple plan that will last for your entire life. Indexed universal life works best for people looking to build up a cash-value-focused policy.
Determining your financial needs is a good starting point for finding the best option. Whole life has advantages for more financially conservative families or someone who worries about how their health status might change later in life.
How Abrams Insurance Solutions Can Help
We help people find the right insurance at the lowest possible premiums. Whether it’s the comfort of a whole life policy, the cash value focus of an IUL, or the affordability of term insurance, we’ll compare policies from 70+ companies for you to find the right one.
Give us a call today at (858) 703-6178 with questions, or use the free instant quotes tool on this page to compare rates for a $250,000 whole life insurance policy.