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Hey Mark. Thanks for the kind words and you make a great point! That’s a big reason for #5 in the article. With the speed at which life can change, locking yourself into paying those premiums for decades is just so limiting. And you go even further than that here with simply wanting to invest the money you’ve already put in differently, and I couldn’t agree with you more. It adds a lot of inflexibility to your planning which can make figuring out the other pieces a lot more difficult.
Permanent insurance (specifically maximum funded participating Whole Life and Indexed Universal Life) is the most versatile product that I have ever analyzed, but it needs to be designed to optimize cash accumulation if you’re going to be going in that direction. If not designed optimally from a short list of insurers, then yes…it’ll probably suck as a place to put money and earn a decent rate of return.
I am an agent with one of the top companies and have been for 5 years. The “buy term and invest the rest” sounds like a great idea but here’s what I have found. People don’t actually do it. You cannot change human behavior. I try to hold my clients accountable and want them to do the same for me. If a client is a spender, they will never stop being a spender. For those people we design a savings plan that let’s them spend their money guilt free, as long as they hit their monthly savings goal, they can spend what they wish.

Insurance Services Office Company


None of the below should be taken as actionable advice. You should consult someone who you know and trust before making any important financial decisions. This is just a window into how I made my decision, so you can see some things I considered. I might be wrong about some of these things, but everything I’ve written below is what I believe today based on my current understanding and the guidance of my own advisers. Please note that I do also max out my 401k and IRAs and keep a modest taxable account as well, so whole life is just one piece (albeit a fairly sizable one) of my portfolio.
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Deciding whether to purchase whole life or term life insurance is a personal decision that should be based on the financial needs of your beneficiaries as well as your financial goals. Life insurance can be a very flexible and powerful financial vehicle that can meet multiple financial objectives, from providing financial security to building financial assets and leaving a legacy.

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Qualifying status is determined at the outset of the policy if the contract meets certain criteria. Essentially, long term contracts (10 years plus) tend to be qualifying policies and the proceeds are free from income tax and capital gains tax. Single premium contracts and those running for a short term are subject to income tax depending upon the marginal rate in the year a gain is made. All UK insurers pay a special rate of corporation tax on the profits from their life book; this is deemed as meeting the lower rate (20% in 2005–06) of liability for policyholders. Therefore, a policyholder who is a higher-rate taxpayer (40% in 2005-06), or becomes one through the transaction, must pay tax on the gain at the difference between the higher and the lower rate. This gain is reduced by applying a calculation called top-slicing based on the number of years the policy has been held. Although this is complicated, the taxation of life assurance-based investment contracts may be beneficial compared to alternative equity-based collective investment schemes (unit trusts, investment trusts and OEICs). One feature which especially favors investment bonds is the '5% cumulative allowance'—the ability to draw 5% of the original investment amount each policy year without being subject to any taxation on the amount withdrawn. If not used in one year, the 5% allowance can roll over into future years, subject to a maximum tax-deferred withdrawal of 100% of the premiums payable. The withdrawal is deemed by the HMRC (Her Majesty's Revenue and Customs) to be a payment of capital and therefore, the tax liability is deferred until maturity or surrender of the policy. This is an especially useful tax planning tool for higher rate taxpayers who expect to become basic rate taxpayers at some predictable point in the future, as at this point the deferred tax liability will not result in tax being due.
Marine insurance and marine cargo insurance cover the loss or damage of vessels at sea or on inland waterways, and of cargo in transit, regardless of the method of transit. When the owner of the cargo and the carrier are separate corporations, marine cargo insurance typically compensates the owner of cargo for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier or the carrier's insurance. Many marine insurance underwriters will include "time element" coverage in such policies, which extends the indemnity to cover loss of profit and other business expenses attributable to the delay caused by a covered loss.
There is a lot of good information here, however when I think of what my father-n-law did to himself I have to disagree about whole life insurance. My father-n-law use to sell life insurance in the 1960s and only believed in term and that is all that he has ever had. However, now in his 70s, the only thing he is eligible for is a 3 year term policy and I’m sure that once this expires he will age out and no longer be eligible for coverage. He will not admit the exact amount of his monthly premium, but its over then $150 a month. He has contacted many companies for alternatives, but he is either not eligible, or the cost is too high. I’m not looking for “investment”, I’m looking to protect my family, and I refuse to back myself into the corner that he did. We may loose the house in case we can figure something out.
Insurance companies have in recent years developed products for niche markets, most notably targeting seniors in an aging population. These are often low to moderate face value whole life insurance policies, allowing senior citizens to purchase affordable insurance later in life. This may also be marketed as final expense insurance and usually have death benefits between $2,000 and $40,000. One reason for their popularity is that they only require answers to simple "yes" or "no" questions, while most policies require a medical exam to qualify. As with other policy types, the range of premiums can vary widely and should be scrutinized prior to purchase, as should the reliability of the companies.
If you need life insurance (which in order to find out , you must ask yourself one question : am I going to die ?) a Whole Life Insurance policy is a non-risky , non-volitile way of earning a high rate of return with a very conservative risk portfolio. A whole life policy is part of a healthy financial portfolio. It grows with preferential tax treatment and pays tax free to your beneficiary or estate. In nearly every case of par Whole life if you are under 50 you will have a cash surrender value equal to 100% and up to 800% of the premiums paid.
Hi Matt, Enjoyed the article. I agree with a lot of what I have seen up here, both by you and other commenters. I believe that a lot of the typical Dave Ramsey advice applies to the vast majority of the population, who can’t afford to pay $500 month premiums w/$500 month overfunds. Yeah, if you’re in a position where that amount is no more than 20% of your savings, wow & congrats, and it could possibly be a good idea. But that’s like 50% of mine. As someone who is new to investing and just a year out of school, I recently sat down with a guy from one of the more respectable companies in the WLI market. I truly believe it would have been a good deal for a very select group of individuals, but for me, there were two main turn-offs. First, I simply couldn’t commit to send such a large portion of my savings for the next 10, 20, or 30 years. But secondly, I just didn’t fully understand the policy. From other comments, I think others are in the same boat. These things are confusing, I asked lots of questions but still it just didn’t make sense what was going on with every level. I’ve done my research on saving/investing, and gotten a pretty good grasp so far of my strategy, but my mind still just hasn’t fully grasped WLI. So I backed off. And I’d encourage everyone to do the same – if you don’t know exactly what it is that you’re doing and can’t understand or explain it, then don’t get in to it.
Another reason occurred to me as I was reviewing the sales pitch from our agent. Maybe others have mentioned this in the comments, I haven’t read them all. Basically, it’s lack of flexibility, and the fact that you have to “marry” your life insurance policy for it to work the way it’s intended. This is similar to Point #1 but from a different angle. Obviously Whole Life / Universal policies get “better” over time (supposedly)…usually after decades. Even the agents would mostly agree you need to keep it for life for it to work.
When insured parties experience a loss for a specified peril, the coverage entitles the policyholder to make a claim against the insurer for the covered amount of loss as specified by the policy. The fee paid by the insured to the insurer for assuming the risk is called the premium. Insurance premiums from many insureds are used to fund accounts reserved for later payment of claims – in theory for a relatively few claimants – and for overhead costs. So long as an insurer maintains adequate funds set aside for anticipated losses (called reserves), the remaining margin is an insurer's profit.
Question Matt, what are your credentials? On the subject of finance and securities, do you hold any of the licenses I mentioned in my response earlier? Are you in the industry, or were you just sold by an agent and didn’t know what you were buying and now you are having buyers remorse looking at an illustration that was shown to you and figuring how you may have gotten a little less than you bargained for by using a calculator? Because dealing with some of our top clients who are in a tax bracket that you nor I will ever see, they are happy with the level of service we provide and the products we offer, maybe you just had a bad agent that needed to close a deal before the month’ s end and made you a customer and it was very transactional as opposed to assessing your need and making you a client. If you couldn’t afford the policy he should have given you a term policy that you could later convert. People with the money prefer not to “rent” as in a term policy, and people that can afford it get permanent insurance. Some people want their wealth to be managed properly and leave a legacy behind for future generations, that is done through life insurance and the other products we offer.
Home insurance, also commonly called hazard insurance or homeowners insurance (often abbreviated in the real estate industry as HOI), provides coverage for damage or destruction of the policyholder's home. In some geographical areas, the policy may exclude certain types of risks, such as flood or earthquake, that require additional coverage. Maintenance-related issues are typically the homeowner's responsibility. The policy may include inventory, or this can be bought as a separate policy, especially for people who rent housing. In some countries, insurers offer a package which may include liability and legal responsibility for injuries and property damage caused by members of the household, including pets.[31]
The “fixed returns” you talk about from whole life are not the 4-6% you mention in multiple places. Again, as I said in the post, the guaranteed returns are much closer to 1% or less. Yes you might get better returns depending on the dividends the insurance company decides to pay, but that’s not “fixed” or guaranteed. It changes every year. And yes, you can improve those refunds if you vastly overfund the policy in the early years, which again is something I already mentioned in the post. But for 98-99% of the population that really isn’t a viable strategy.

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Once licensed, an insurance broker generally must take continuing education courses when their licenses reach a renewal date. For example, the state of California requires license renewals every 2 years, which is accomplished by completing continuing education courses. Most states have reciprocity agreements whereby brokers from one state can become easily licensed in another state. As a result of the federal Gramm-Leach-Bliley Act, most states have adopted uniform licensing laws, with 47 states being deemed reciprocal by the National Association of Insurance Commissioners. A state may revoke, suspend, or refuse to renew an insurance broker's license if at any time the state determines (typically after notice and a hearing) that the broker has engaged in any activity that makes him untrustworthy or incompetent.
Agents and brokers act as intermediaries between you (the insurance buyer) and your insurers. Each has a legal duty to help you obtain appropriate coverage at a reasonable price. Each must have a license to distribute the type of insurance he or she is selling. An agent or broker must also adhere to the regulations enforced by your state insurance department.
To "indemnify" means to make whole again, or to be reinstated to the position that one was in, to the extent possible, prior to the happening of a specified event or peril. Accordingly, life insurance is generally not considered to be indemnity insurance, but rather "contingent" insurance (i.e., a claim arises on the occurrence of a specified event). There are generally three types of insurance contracts that seek to indemnify an insured:

NerdWallet compared quotes from these insurers in ZIP codes across the country. Rates are for policies that include liability, collision, comprehensive, and uninsured/underinsured motorist coverages, as well as any other coverage required in each state. Our “good driver” profile is a 40-year-old with no moving violations and credit in the “good” tier.
So I’ll start by saying that evaluating a policy that’s been in place for a while, like yours has, is different from evaluating a new policy. It’s possible that at this point keeping the policy may actually be a good idea, but you will need more information from your insurance company before making the decision. Here are some questions you’d want to have the answers to:
1. What I mean by that is why not buy a whole life policy carry the policy for 20/30 years, just as you would a term life. Then once you have paid down all debt, built wealth, and self funded funeral expenses you surrender your policy. (Making sure my policy has no surrrender fees past year 30) Walking away with more Money than you paid in premiums. To me this also gives me options once I hit that 30 year mark to possibly keep the money in the whole life policy to continue to increase at a conservative and somewhat safe rate.

In his memoir “Am I Being Too Subtle?” Sam Zell, a billionaire investor and chairman of Equity International, writes, “I’m always on the lookout for anomalies or disruptions in an industry, in a market or in a particular company…. Any event or pattern out of the ordinary is like a beacon telling me some new interesting opportunity may be emerging.”
First, a term life insurance policy will cost much less than a whole life insurance policy with the same death benefit, often around 12 times less. So your example of a $30,000 whole life policy with a $20 premium compared to a $30,000 term life policy with that same $20 premium is not a valid comparison. The term life premium would be a fraction of the whole life premium.
Insurance involves pooling funds from many insured entities (known as exposures) to pay for the losses that some may incur. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring. In order to be an insurable risk, the risk insured against must meet certain characteristics. Insurance as a financial intermediary is a commercial enterprise and a major part of the financial services industry, but individual entities can also self-insure through saving money for possible future losses.[15]

As for actually wanting coverage in case of the death of a child, I would say that the choice is here slightly more personal preference. You are of course correct that children can die and that there would be costs involved. Whole life insurance can help with that. I would personally prefer to insure against these unlikely scenarios with regular savings and investments because I think it’s less costly and also gives you more options for what to do with the money.
In 2017, within the framework of the joint project of the Bank of Russia and Yandex, a special check mark (a green circle with a tick and ‘Реестр ЦБ РФ’ (Unified state register of insurance entities) text box) appeared in the search for Yandex system, informing the consumer that the company's financial services are offered on the marked website, which has the status of an insurance company, a broker or a mutual insurance association.[50]
In cases where the policy owner is not the insured (also referred to as the celui qui vit or CQV), insurance companies have sought to limit policy purchases to those with an insurable interest in the CQV. For life insurance policies, close family members and business partners will usually be found to have an insurable interest. The insurable interest requirement usually demonstrates that the purchaser will actually suffer some kind of loss if the CQV dies. Such a requirement prevents people from benefiting from the purchase of purely speculative policies on people they expect to die. With no insurable interest requirement, the risk that a purchaser would murder the CQV for insurance proceeds would be great. In at least one case, an insurance company which sold a policy to a purchaser with no insurable interest (who later murdered the CQV for the proceeds), was found liable in court for contributing to the wrongful death of the victim (Liberty National Life v. Weldon, 267 Ala.171 (1957)). 

First, there are your regular whole life policies that are non-{articipating and then there are those that are Participating. Participating policices earn dividends which is called a “return of premium” however with that dividend it purchases more insurance and the coverage keeps going on as long as a dividend is paid, the more coverage the more dividend, the more dividend the more coverage etc. After 25-30 years a person can stop paying for the policy and take reduced paid up insurance and keep the insurance enforced for the rest of their lives without paying a single cent. This is one of the features I absolutely love about participating whole life.
If you are just starting to consider life insurance at the age of 60, your children are most likely grown up and on their own, and your needs are very different. You might want a small term life insurance policy that could cover your final expenses, or you might be looking for a term life or whole life policy that could provide for your spouse’s needs if he or she lives on after your passing.
All points have merit but, like any service, unprofessional service can be punished by walking. However, point #4, “market blocking” is a particularly confounding practice in P&C (I don’t think this occurs in LIfe & Health). Market blocking is a matter which Insurance Commissioners could easily correct nationwide to the immediate benefit of the customer.
This isn’t entirely accurate. Whole life insurance isn’t a product designed to replace term insurance. It wouldn’t make sense to have a retirement account disappear in the event of someone passing early. This would be irresponsible on the part of an agent to suggest this. Whole life has to be used with the intent of using it as collateral for loans, enhanced retirement and for leaving a legacy. In the early years it should be set up with a term rider to ensure a family’s needs will be met. Yes this is more expensive but it is a tool with an objective and if that’s not the objective then whole life makes no sense at all. It is not right for everyone.

As for your question, USAA is a fantastic company and I would happily recommend them for many things, like auto, home, and umbrella insurance. With that said, I have never reviewed one of their whole life insurance policies and therefore can’t really comment on that specifically. I will say that I would be careful about taking that 4.5% return at face value, as I describe in the post. I would encourage you to run the numbers for yourself to see what it really comes out to.
The IRS regulation on how much can be put in over 7 year period to not cause a whole life policy to be considered a Modified Endowment Contract. Additionally, many long standing highly rated institutions will limit the amount of OPP that can be dumped into the policy over a given period. Why is that? Because people will use whole life in low interest environments with the intention of withdrawing in the event of a market change.

Insurance On The Spot Co


Term assurance provides life insurance coverage for a specified term. The policy does not accumulate cash value. Term insurance is significantly less expensive than an equivalent permanent policy but will become higher with age. Policy holders can save to provide for increased term premiums or decrease insurance needs (by paying off debts or saving to provide for survivor needs).[25]
Thanks for the insightful article. I agree with the general statement that, in a vacuum, it is better to “buy term and invest the difference.” However, I’m interested to hear your thoughts on using whole life insurance as an investment vehicle in the context of the infinite banking model (assuming you are familiar with the concept). From what I understand, it sounds like a good way to achieve predictable and guarenteed growth on a compounded basis while allowing you to borrow money from your own policy and pay yourself the interest, all while always having access to the funds. I think it might be wise for people, like myself, are looking for guaranteed growth with little risk.

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