First, yes there is a surrender value. It’s right there in any illustration you look at. Second, it takes much longer than 5 years for what you’re talking about to happen, excluding the premium paid in. In fact, it usually isn’t until about year 6-7 where the cash value starts increasing by even as much as the premium paid. Before then, every premium payment is losing you money.

3 The above example is based on a scenario for 20‐year term life insurance (domicile state) that includes the following benefit conditions: $50,000 death benefit, $50,000 accidental death benefit, and $12,500 seatbelt benefit. Benefits may vary by state, benefit option, and level of coverage selected. Review your state‐specific brochure below for a “How It Works” scenario customized for your state.


Mores also gave the name actuary to the chief official—the earliest known reference to the position as a business concern. The first modern actuary was William Morgan, who served from 1775 to 1830. In 1776 the Society carried out the first actuarial valuation of liabilities and subsequently distributed the first reversionary bonus (1781) and interim bonus (1809) among its members.[7] It also used regular valuations to balance competing interests.[7] The Society sought to treat its members equitably and the Directors tried to ensure that policyholders received a fair return on their investments. Premiums were regulated according to age, and anybody could be admitted regardless of their state of health and other circumstances.[9]

Insurance Solutions Company


Recently, viatical settlements have created problems for life insurance providers. A viatical settlement involves the purchase of a life insurance policy from an elderly or terminally ill policy holder. The policy holder sells the policy (including the right to name the beneficiary) to a purchaser for a price discounted from the policy value. The seller has cash in hand, and the purchaser will realize a profit when the seller dies and the proceeds are delivered to the purchaser. In the meantime, the purchaser continues to pay the premiums. Although both parties have reached an agreeable settlement, insurers are troubled by this trend. Insurers calculate their rates with the assumption that a certain portion of policy holders will seek to redeem the cash value of their insurance policies before death. They also expect that a certain portion will stop paying premiums and forfeit their policies. However, viatical settlements ensure that such policies will with absolute certainty be paid out. Some purchasers, in order to take advantage of the potentially large profits, have even actively sought to collude with uninsured elderly and terminally ill patients, and created policies that would have not otherwise been purchased. These policies are guaranteed losses from the insurers' perspective.
It is not a valid argument to me to say that the “administrative pain in the ass” is a reason to ignore the tactic. It’s a pretty simple procedure and certainly not worth paying all the extra costs of a whole life approach just to avoid. Yes, you have to be careful if you have Traditional IRAs, but there are ways around that too. No, it’s not for everyone, but I would much rather try to make the backdoor Roth work first than immediately jump to whole life.
Large number of similar exposure units: Since insurance operates through pooling resources, the majority of insurance policies are provided for individual members of large classes, allowing insurers to benefit from the law of large numbers in which predicted losses are similar to the actual losses. Exceptions include Lloyd's of London, which is famous for insuring the life or health of actors, sports figures, and other famous individuals. However, all exposures will have particular differences, which may lead to different premium rates.

Hi, Matt. My parents are actually talking to an agent to get the whole life insurance and their premium monthly is about $1000 so which makes them to pay $120000 (since it’s the 10 yr plan) and the agent presented that the guaranteed value will be $250000. I have very little knowledge about the whole life insurance plan but wouldn’t it be easier for them to just get it and be insured with that guaranteed value if they are not the type to find where to invest and all that? or is it something that they shouldn’t relay on.. they are doing it for more their retirement and asked me for help but i am very confused about this whole life plan. Thanks!
*Payoff Protector is not an insurance product. Subject to the terms, conditions, and restrictions of the Payoff Protector provision in your State Farm Bank Promissory Note and Security Agreement. If your vehicle is determined to be a total loss before the loan is paid off, State Farm Bank will cancel the difference between the insurance payout and the unpaid principal balance due on the loan. Certain restrictions apply. For example, your loan must be in good standing.
Like most small business owners, you probably purchase your insurance policies through an insurance agent or broker. The functions performed by insurance agents are similar, but not identical, to those performed by brokers. This article will explain how they differ. It will also explain how agents and brokers make money from the premiums you pay your insurers. Except where noted, the following discussion applies to agents and brokers selling property/casualty insurance. 

2 If you had a total loss with your brand new auto within the first year or 15,000 miles (whichever occurred first), we would repair or replace it with a brand new auto and take no deduction for depreciation. This does not apply to a substitute auto, an auto you do not own, nor a vehicle leased under a long-term contract of six months or more (subject to deductible). Does not apply to theft of tires or batteries, unless the entire vehicle were stolen. Deductible applies for special parts. Not available in NC.

Insurance Rider Company


Whole life insurance is by definition undiversified. You are investing a large amount of money with a single company and relying entirely on their goodwill to give you good returns. The insurance company will make their own investments and then decide what portion of their returns they would like to pass on to their policyholders. You are completely at their whim. If that one company goes bankrupt, has some bad years, or simply changes their outlook on paying out to customers, your return will suffer.
In the European Union, the Third Non-Life Directive and the Third Life Directive, both passed in 1992 and effective 1994, created a single insurance market in Europe and allowed insurance companies to offer insurance anywhere in the EU (subject to permission from authority in the head office) and allowed insurance consumers to purchase insurance from any insurer in the EU.[44] As far as insurance in the United Kingdom, the Financial Services Authority took over insurance regulation from the General Insurance Standards Council in 2005;[45] laws passed include the Insurance Companies Act 1973 and another in 1982,[46] and reforms to warranty and other aspects under discussion as of 2012.[47]
Cash value increases within the policy are not subject to income taxes unless certain events occur. For this reason, insurance policies can be a legal and legitimate tax shelter wherein savings can increase without taxation until the owner withdraws the money from the policy. In flexible-premium policies, large deposits of premium could cause the contract to be considered a modified endowment contract by the Internal Revenue Service (IRS), which negates many of the tax advantages associated with life insurance. The insurance company, in most cases, will inform the policy owner of this danger before deciding their premium.
Did you mention anywhere that the cash value of “permanent” insurance is owned by the insurance company? Did you mention that you don’t own it; the insurance oompany does. Did you mention that the only way the client ever gets the cash value is to cancel his policy? If the client dies, then the cash value is taken to pay off part of the face value of the insurance.

My argument is based on the fact that whole life insurance is often sold as an investment, and therefore many people buy it as an investment. I am well aware that there are other reasons people buy it, and those are explicitly acknowledged in the article. The rest of your questions have already been addressed in both the article and other comments.
Methods for transferring or distributing risk were practiced by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively.[1] Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practiced by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen, or lost at sea.
4The monthly rate shown is for Preferred Elite based on a Male, age 37, and a 20-year level term period. Terms and limitations will apply. Rates shown are monthly as of January 1, 2018. Allstate TrueFit® is a term life insurance to age 95 policy issued by Allstate Assurance Company, 3075 Sanders Rd., Northbrook IL 60062 and is available in most states with contract/series ICC14AC1/ AC14-1. In New York, issued by Allstate Life Insurance Company of New York, Hauppauge, NY with contract/series NYLU818. The premiums will be the same for the level term period selected. Beginning with the anniversary following the level term period, the company reserves the right to change premium rates each policy year, but rates cannot be more than the maximum guaranteed amounts stated in the policy.
3 Assumes the average cost of a gallon of gasoline is $2.37**. Comparison is based on the average weekly premium for Nebraska Payroll Premium rates industry Class A; Aflac Life Solutions WHOLE LIFE POLICY - Series A68100; Female non-smoker age 18-21. Premiums may vary by coverage type, account, state of issue, and the election of additional/optional benefits.
Did you mention anywhere that the cash value of “permanent” insurance is owned by the insurance company? Did you mention that you don’t own it; the insurance oompany does. Did you mention that the only way the client ever gets the cash value is to cancel his policy? If the client dies, then the cash value is taken to pay off part of the face value of the insurance.
Mortgage life insurance insures a loan secured by real property and usually features a level premium amount for a declining policy face value because what is insured is the principal and interest outstanding on a mortgage that is constantly being reduced by mortgage payments. The face amount of the policy is always the amount of the principal and interest outstanding that are paid should the applicant die before the final installment is paid.
For example, most insurance policies in the English language today have been carefully drafted in plain English; the industry learned the hard way that many courts will not enforce policies against insureds when the judges themselves cannot understand what the policies are saying. Typically, courts construe ambiguities in insurance policies against the insurance company and in favor of coverage under the policy.

House Insurance Company


Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to claims are known as perils. An insurance policy will set out in detail which perils are covered by the policy and which are not. Below are non-exhaustive lists of the many different types of insurance that exist. A single policy that may cover risks in one or more of the categories set out below. For example, vehicle insurance would typically cover both the property risk (theft or damage to the vehicle) and the liability risk (legal claims arising from an accident). A home insurance policy in the United States typically includes coverage for damage to the home and the owner's belongings, certain legal claims against the owner, and even a small amount of coverage for medical expenses of guests who are injured on the owner's property.

Actually, you can easily “surrender” the money from a whole life contract and not pay tax. Life insurance is treated “First in; First Out” for accounting and tax purposes. You can easily surrender the cash value that is considered growth too. However, if this is done, then the policy owner would be taxed. The “loan” is a way for the insurance company to give your money to you and the income tax free death benefit can pay the “loan” back. Yes, there is interest charged however, most of the time it is the same amount that the policy continues to earn because remember, the money is still in the policy. This is known as a “wash loan”.
You may find that your out-of-pocket costs for whole life insurance seem daunting compared to term life insurance. This is because the dollars you pay into term life insurance premiums are only there to provide a death benefit to your beneficiaries if you die during a specified term, while money you invest in whole life insurance premiums builds cash value that you can use later in life or that will add to the death benefit payout. The percentage of your costs that go into your cash accrual account increases with passing years, as many of the administrative costs associated with setting up the policy and associated investments occurs early in the life of the policy.
Insurance Brokers work the consumer vs. insurance agents who work for the insurance company.  Brokers are very knowledgeable with both personal and commercial insurance. Utilizing state-of-the-art rating software to find the most affordable insurance policies to fit your needs and budget. Insurance Brokers save time, money and energy when shopping for lower cost insurance.
Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies, are regulated as insurance, and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance.
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.

I, 22 year old male, can pay ~$13,000 into a universal life policy throughout the next 20 years (~$650/yr, ~55/mo), never touch it again, and that will provide a death benefit of $100,000 until I’m at least 75 years old (I will put more money in of course since I plan on living past 75). That’s also a flexible premium policy with one of the most financially stable companies, so I would say that’s a good investment for my future children/grandchildren. Maybe not for myself, but at least my premiums won’t be more than $100/month when I’m old, assuming I still have excellent health and am insurable. With term I can get it insanely cheap now, but what about when I’m 50-60 and closing in on retirement? My premiums would hopefully be under $200/mo. at that point assuming I have excellent health or guaranteed insurability.
*This material is for informational purposes only. In general, partial or full surrenders from a permanent life insurance policy in excess of the policy’s basis are taxable, and limited circumstances exist where death proceeds will be taxable. Neither Farmers New World Life Insurance Company, nor its employees nor its agents provide legal or tax advice. Always consult your own attorney, accountant or tax adviser as to the legal, financial or tax consequences and advice on any particular transaction.
The sale of life insurance in the U.S. began in the 1760s. The Presbyterian Synods in Philadelphia and New York City created the Corporation for Relief of Poor and Distressed Widows and Children of Presbyterian Ministers in 1759; Episcopalian priests organized a similar fund in 1769. Between 1787 and 1837 more than two dozen life insurance companies were started, but fewer than half a dozen survived. In the 1870s, military officers banded together to found both the Army (AAFMAA) and the Navy Mutual Aid Association (Navy Mutual), inspired by the plight of widows and orphans left stranded in the West after the Battle of the Little Big Horn, and of the families of U.S. sailors who died at sea.
Home insurance Co Aurora CO 80015

Thanks Jason! Your question is a good one, and the truth is that it really depends on the specifics of your situation. What are your college savings goals? What does the policy look like now? What is it expected to look like when you need the money? What other funds do you already have in place? I’m not asking you to answer those questions here, just want to give you a sense of the kinds of things I would consider.

Shoes are great but if the statement is “size six shoes are great” makes the question more difficult to answer. If you were born with size six feet then size six shoes could be excellent for you. If you’re a size 13 – then, maybe not so much. See? The answer is subject to your personal needs/requirements. Same is true with whole life insurance. Next time you’re pondering the subject ask yourself what should a grandfather do if he wants to insure his grandchild has something from him when his children are irresponsible and will most likely either outright steal the grandchild’s inheritance or just blow through it if they could? Or understand that the family has a history of illness and by purchasing the policy at an early stage the baby will be abler to get life permanent insurance. But to do what I ask requires real thought, not someone shooting from the hip.

Property insurance provides protection against risks to property, such as fire, theft or weather damage. This may include specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, inland marine insurance or boiler insurance. The term property insurance may, like casualty insurance, be used as a broad category of various subtypes of insurance, some of which are listed below: 

In the United Kingdom, The Crown (which, for practical purposes, meant the civil service) did not insure property such as government buildings. If a government building was damaged, the cost of repair would be met from public funds because, in the long run, this was cheaper than paying insurance premiums. Since many UK government buildings have been sold to property companies, and rented back, this arrangement is now less common and may have disappeared altogether.


Formal self-insurance is the deliberate decision to pay for otherwise insurable losses out of one's own money.[citation needed] This can be done on a formal basis by establishing a separate fund into which funds are deposited on a periodic basis, or by simply forgoing the purchase of available insurance and paying out-of-pocket. Self-insurance is usually used to pay for high-frequency, low-severity losses. Such losses, if covered by conventional insurance, mean having to pay a premium that includes loadings for the company's general expenses, cost of putting the policy on the books, acquisition expenses, premium taxes, and contingencies. While this is true for all insurance, for small, frequent losses the transaction costs may exceed the benefit of volatility reduction that insurance otherwise affords.[citation needed]

Contingent or incentive commissions reward agents and brokers for achieving volume, profitability, growth or retention goals established by the insurer. For example, Elite Insurance promises to pay the Jones Agency an extra 3 percent commission if Jones writes $10 million in new property policies within a certain time frame. If Jones renews 90 percent of those policies when they expire, Elite will pay Jones an addition 2 percent commission.
Also, you said whole life is not an investment. But by definition, it is an investment. An investment is simply where you put money into something expecting a return in the future. And whole life insurance does provide that. Plus if it is a mutual company as mine is then you become a partial owner which means you get to vote and help the business make good business decisions.
Good question Steve. The full answer is that I don’t know exactly what options you have and it likely makes sense to talk to a good independent agent. But you are right that it is much harder to find affordable term life insurance as you get older, and in your case some kind of permanent insurance may make sense if you have an insurance need. Just make sure that you are only getting the features you need, and none that you don’t, so that your premium is being used as efficiently as possible. For example, if you are only buying it for the death benefit, do you need the cash value?
Know when to cut coverage. Don’t strip away coverage just for the sake of a lower price. You’ll need full coverage car insurance to satisfy the terms of an auto loan, and you’ll want it as long as your car would be a financial burden to replace. But for older cars, you can drop comprehensive and collision coverage, which only pay out up to your car’s current value, minus the deductible.
Insurance Insider Co Aurora CO 80015

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]
Negligence on the part of insurance brokers can have severe effects upon clients when they discover their insurance coverage is worthless, which in turn illustrates why retaining a competent insurance broker is so important. In one case, Near North Entertainment Insurance Services provided alternative rock band Third Eye Blind with a commercial general liability (CGL) insurance policy that excluded coverage for the "entertainment business." After insurance coverage for a lawsuit was denied because Third Eye Blind was and is, after all, in the entertainment business, the California Court of Appeal ruled in a published opinion that the broker had a duty to advise the band it needed something more than a basic CGL policy.[4]

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.
In fact, he sort of torpedoes his argument by saying policy loans are legit, with the implication being policyholders are going to get into trouble if they don’t understand how to use policy loans. …but people already get into trouble by not being financially responsible so…again…nothing new. The problem isn’t borrowing or insurance. It’s financial education.
Your “rent” analogy is a classic one used by life insurance salesmen when selling whole life, but it is a poor analogy. After all, insurance has nothing to do with renting vs. owning. Would you say that most people are simply “renting” auto insurance? Do you think people should buy auto insurance policies that will pay them the full price of a new car whenever their car dies, even if they drive it into the ground? Because that’s essentially what whole life insurance is. The main purpose of life insurance is to provide financially for dependents in the case that you die early, just as the main purpose of car insurance (beyond the liability portion) is to provide the financial value of your car in case it dies early. Once that financial protection is no longer needed, the insurance need is gone. Term insurance protects you while you need it and goes away once you don’t. It is insurance in the purest sense of the word and is by far the more effective way to go about it for the vast majority of the population.
I am 34 and someone just sold me 4 policies (50 Whole Life, 50 Whole Life, 100 Whole Life, and 50 Term). The annual total premium is $2600. Everything he said sounded good. I just received the policies this week. Is it a good idea to cancel them? I realize that I may not get a refund for them; I paid for them this week. I am a musician and I have not learned very much about finances. I have a ROTH that is up 11% YTD with Scottrade.
NerdWallet averaged rates for 40-year-old men and women for 20 ZIP codes in each state and Washington, D.C., from the largest insurers, up to 12 in each state. “Good drivers” had no moving violations on record and credit in the “good” tier as reported to each insurer. For the other two driver profiles, we changed the credit tier to “poor” or added one at-fault accident, keeping everything else the same. Sample drivers had the following coverage limits:
2) With whole life, if you keep paying your premiums, your heirs will ALMOST DEFINITELY GET PAID. For instance, if you have a $1mn policy at $10k/year of premium, you know with near certainty that your spouse and kids will one day get $1mn. Even if you are paying in $10k per year which is a lot of money, then if you start at age 30, you will pay in $500k cumulatively by age 80. If you die at 80, your heirs get $1mn. Also keep in mind that this benefit is generally NON-TAXABLE!
That being said there are merits to the latter, which should really be sold as “cash building” tools for people that want to diversify their tax exposure, that’s it. But like you said most agents have no clue about real financial planning. Which would obviously include some degree of IRA’s, 401K’s, ROTH’s, Taxable accounts, hard assets, etc. Like you stated earlier. But have you considered an overfunded cash value policy as a way to diversify within your cash bucket assuming you believe in asset allocation, max 10-20% of total investment? More as an alternative cash bucket? But then that comes to income and the type of individual. I probably recommend them more than most, working with business owners and corporate managers. But for them they need more future tax diversification if taxes are headed north in the future. And the company I use which sadly I’m not going to talk about since I don’t even want anyone to know I wrote this “compliance would massacre me”. But those can be used by a business owner to leverage their cash and actually write off interest paid while said cash is still earning 100% dividend treatment, but of course only a few of those types of companies out there.
The first years premiums goes to the insurance agent who sold you the policy…and I’m sure there are plenty of other hidden fees in there. I almost went with whole life insurance as a friend was working as an insurance agent and I had just graduated college. I decided against it though. Read a book that said that I should instead buy term and invest the difference. Another problem with whole life insurance is that the premiums are much more expensive than term life insurance…if someone chooses whole life, they will likely choose a lesser coverage and might be underinsured if something unfortunate were to occurr.

Yes, backdoor Roths are capped at $5,500 per year. Still, I think they’re a better first option than whole life for all of the reasons mentioned in the post. Exposure to market risk is not an inherent problem, and is also not a characteristic of Roth IRAs. A Roth IRA is just a type of account within which the individual can invest however they want. If they want to be exposed to market risk (something that many people deem desirable), they can be. If not, they don’t have to be. It’s up to them.


As to me, I am a commercial, non-insurance attorney who tries to be an “informed” consumer of financial products. 27 years ago, when I already was carrying no credit card balances and was funding my IRAs and 401ks in appropriate amounts, I, along with other of the partners in our then small law firm, purchased a Universal Life policy on my wife with Manufacturer’s Life (a mutual company) purchased now by John Hancock. Over the next 7 years, I purchased laddered term life insurance policies for my wife and I with terms designed to expire between our ages 55 and 72 (so our coverage would drop as our savings increased). The universal life coverage was for about 8-10% of our total aggregate insurance coverage.

Car Insurance Co

×