An entity seeking to transfer risk (an individual, corporation, or association of any type, etc.) becomes the 'insured' party once risk is assumed by an 'insurer', the insuring party, by means of a contract, called an insurance policy. Generally, an insurance contract includes, at a minimum, the following elements: identification of participating parties (the insurer, the insured, the beneficiaries), the premium, the period of coverage, the particular loss event covered, the amount of coverage (i.e., the amount to be paid to the insured or beneficiary in the event of a loss), and exclusions (events not covered). An insured is thus said to be "indemnified" against the loss covered in the policy.

Finally, the loan that I mentioned in my above post as interest free and tax free after the 11th year are a little more complicated than a “free loan”. First, the rate may increase in the future (at the discretion of the management) to a max 0.25% so that over time would add up if you took out a loan for retirement and had no intention of paying it back. Also, the loan balance is actually transferred to a loan reserve account where interest is charged at 2%, but at the same time the money in the loan reserve account earns interest of 2% which is credited to the Policy Value. So this is how they achieve an “interest and tax free” loan. I actually did not understand the specifics of this transaction or any IRS consequences that you could potentially have.
So I should have guessed that this was some form of equity-indexed universal life, both because of the “IUL” in the acronym and because they are all the rage right now with insurance salesmen. They claim to provide stock-market returns without the risk, which is of course impossible. You did an excellent job here of laying out exactly why that minimum 0.75% return is nowhere near as attractive as it sounds, and one of the other big issues with many of these policies is that they don’t count dividends as part of the formula that determines your return, which is a pretty significant thing to leave out!
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.
Medicare Brokers like Boomer Benefits also often provide simple and easy education to you about how Medicare works. Every year, thousands of Medicare beneficiaries feel frustrated after trying to read the Medicare handbook. At Boomer Benefits, we will educate you by breaking Medicare down into pieces that are easier to understand. This is why we are so well known as the baby boomer’s favorite insurance agency.
If one were to buy a long dated bond with a yield of 4%, and interest rates go up, one could actually end up with a loss if bond not held to maturity. On the other hand, if one were to OVERFUND a participating Whole Life policy, the CASH VALUE IRR over 20 years would be around 4% (probably slightly above) based on current dividend scales. Yet if long term rates rise, so will the returns in the policy. As long as premiums are paid, the cash value in any given time will NEVER be less than the cash value a year earlier.
The problem a lot of people run into is that they sink all of their money into an over the top whole life policy and use that as their sole investment property which is insane. HOWEVER, I thoroughly believe that whole life insurance is a powerful tool when it comes to funding a comfortable retirement, because whole life’s cash value helps serve as a way to hedge the down markets as a non-correlated asset.
For all of the above advantages, I believe the actual returns seen were far less then the 8% a year on the simulation. The reason was probably fees similar to Reason#2 in the above article. I wish I had the tables that were presented so I could verify this (I have asked my friend for the tables). At any rate, after my reading, I am leaning toward not purchasing this product because it seems to give weaker results (after fees) compared to other tax advantaged and non tax advantaged investment accounts which I have barely begun to invest in. It may be useful in some cases if all the better investments have been maximized and one is looking for a tax free long term low yield conservative investment account that allows one to withdraw tax and interest free and provides a life insurance payout in the event of death.

In most countries, life and non-life insurers are subject to different regulatory regimes and different tax and accounting rules. The main reason for the distinction between the two types of company is that life, annuity, and pension business is very long-term in nature – coverage for life assurance or a pension can cover risks over many decades. By contrast, non-life insurance cover usually covers a shorter period, such as one year.
1 The Banking Benefits – Deposit Introductory program offers a high yield fixed Introductory Rate during the first 12 statement cycles after opening a new Consumer Money Market Savings account with State Farm Bank. A new Consumer Money Market Savings account means you cannot have an existing Money Market Savings with the same ownership currently open or which closed within the last 12 months. Your Benefit account balance must remain below $5,000,000 to earn the Introductory Rate. If the account balance is $5,000,000 or above, you will earn the Standard Rate on your entire balance. The new Money Market Savings must be a Personal or Trust account. IRA Money Market, Estate, Uniform Transfer to Minors, and Business accounts are NOT eligible.

Universal life insurance addresses the perceived disadvantages of whole life—namely that premiums and death benefits are fixed. With universal life, both the premiums and death benefit are flexible. With the exception of guaranteed-death-benefit universal life policies, universal life policies trade their greater flexibility off for fewer guarantees.


Brokers are not appointed by insurers. They solicit insurance quotes and/or policies from insurers by submitting completed applications on behalf of buyers. Brokers don't have the authority to bind coverage. To initiate a policy, a broker must obtain a binder from the insurer. A binder is a legal document that serves as a temporary insurance policy. It usually applies for a short period, such as 30 or 60 days. A binder is not valid unless it has been signed by a representative of the insurer. A binder is replaced by a policy. 

Second, what that means is that your decision should be based solely on how you expect each option to perform going forward. You can evaluate what you expect to get from the whole life policy going forward vs. what you might expect from other options, and then decide which options give you the best chance of achieving your personal goals. I can’t honestly answer that question for you, but I hope some of the information in this article and others throughout the site do give you a sense of your options.
MetLife Auto & Home is a brand of Metropolitan Property and Casualty Insurance Company and its affiliates: Economy Fire & Casualty Company, Economy Premier Assurance Company, Economy Preferred Insurance Company, Metropolitan Casualty Insurance Company, Metropolitan Direct Property and Casualty Insurance Company (CA Certificate of Authority: 6730; Warwick, RI), Metropolitan General Insurance Company, Metropolitan Group Property and Casualty Insurance Company (CA COA: 6393; Warwick, RI), and Metropolitan Lloyds Insurance Company of Texas, all with administrative home offices in Warwick, RI. Coverage, rates, discounts, and policy features vary by state and product, and are available in most states to those who qualify. Policies have exclusions, limitations, and terms under which the policy may be continued in force or discontinued. For costs and complete details of coverage, contact your local MetLife Auto & Home representative or the company.  
Additionally, this can be a great way to compliment a financial plan that is linked to the markets performance. When I am in my 60’s nearing retirement and have a good amount of cash value in my policy–I will not be terribly worried about the market performance (401(k)s/mutual funds/ IRA/ stocks). I know that flucuations in the market will occur and if a recession happens when I am 62, I will use my cash and policy cash value to hold me over until the markets recover. Again, my aim is not to buy high and sell low, it is to buy low and sell high.

Second, I used the policy illustration I received as an example of the kinds of policies I see all the time. Of course every policy is different and needs to be evaluated on its own merits, but the truth is that most of these policies behave similarly. The policy I evaluated personally was actually one of the good ones and was backed by one of the companies that many people look to as the “gold standard”. So it was not a “bad policy”. It was typical of one of the “better” policies.

Insurance terms, definitions and explanations are intended for informational purposes only and do not in any way replace or modify the definitions and information contained in individual insurance contracts, policies or declaration pages, which are controlling. Such terms and availability may vary by state and exclusions may apply. Discounts may not be applied to all policy coverages.
The bottom line is that I feel that the insurance industry has adapted to the negative stigma attached to whole life insurance polices and are introducing some variants that do not look at all like the whole life insurance that is described in the above article. They have found ways to counter some of the Reasons not to invest in whole life insurance mentioned in the article above (such as the interest rate). I read about another variant called EIULs and I think there are many other similar products out there. But they can not counter all of the Reasons mentioned in the article above. So buyer beware and do your due diligence!
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.
The benefit to you is enormous. Boomer Benefits provides back-end policy support that you cannot get directly from an insurance company and that none of our competitors offer: a dedicated Client Service Team for our existing policyholders only with 10 full-time employees on call to immediately fix very common Medicare hiccups which are otherwise stressful for you.

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Disability- what happens to your retirement plan contributions if you want to work but can’t? Your employer can’t even contribute for you… It’s illegal. Oh, a life insurance company will pay the premium for you along with any additional money that you scheduled to dump in… And continue to contribute forever if your remain disabled (if done right). That is called a “self-completing retirement plan.”
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.
I have no idea how the Hiltons manage their money, so I can’t comment/fact check what you’re saying here. But in a broader sense, the right financial moves for the wealthiest 1% of Americans are often much different than the right moves for the other 99%. If you’re already incredibly wealthy, then sure, a well-designed permanent life insurance policy can make a lot of sense. If you’re trying to build wealth, then no it usually doesn’t.
As far as buying term and investing the difference the company I bought from has produced far better risk adjusted returns when compared to my analysis over the last twenty years of buying term and investing the difference in the S&P. I don’t mean to say we should not invest but I view my permanent policy as a great place to take some risk off the table and also to have some long term safe dollars. I agree that unless you die early, this is not a good short term idea. Also the fact that is not considered an asset as you mention, gives it very favorable treatment. I asked myself, if I were a beneficiary would I want to inherit a portfolio worth 2.5 million a house worth a million or a 3.5 million tax free check. For me, it was the latter. For high net worth people I would argue it is better than a muni allocation. I don’t view the discussion as one or the other invest and buy term or just buy whole life but rather as a synergy of assets that can produce a great value. As you say, it’s all quite subjective. Is whole life your best “investment”? No, but I do think it is a fantastic tool.
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.
As for your question, I don’t believe I’ve ever reviewed a USAA whole life policy so I can’t comment on then specifically. I would simply encourage you to start by clarifying your personal goals and to then evaluate each option based on how well it will help you meet them. With that said, of your main goal is investing for retirement then I would typically encourage you to max out traditional retirement accounts before considering any kind of life insurance.
I am looking at it all from the perspective of an inheritance. In my line of work, I see pensions and IRA’s taken by healthcare and Medicaid all the time. Heirs are left with nothing and it is sad. Im researching and researching but cannot find something that is safe enough, can grow to at least $100,000 for thirty so years, and cannot be taken touched aside from….life insurance. I have elderly grandfathers who left their families w/ something because of life insurance. My veteran grandfathers
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In the United States, brokers are regulated by the state (or states) in which they work. Most brokers are required to have an insurance broker license, which involves taking courses and passing an examination. Each state has different requirements for insurance brokers, which a broker must meet to be licensed in that state. Most states require insurance brokers to take continuing education courses in order to maintain their license.

1 The Banking Benefits – Deposit Introductory program offers a high yield fixed Introductory Rate during the first 12 statement cycles after opening a new Consumer Money Market Savings account with State Farm Bank. A new Consumer Money Market Savings account means you cannot have an existing Money Market Savings with the same ownership currently open or which closed within the last 12 months. Your Benefit account balance must remain below $5,000,000 to earn the Introductory Rate. If the account balance is $5,000,000 or above, you will earn the Standard Rate on your entire balance. The new Money Market Savings must be a Personal or Trust account. IRA Money Market, Estate, Uniform Transfer to Minors, and Business accounts are NOT eligible.
Brokers may be either retail or wholesale. A retail broker interacts directly with insurance buyers. If you visited a broker, who then obtained insurance coverages on your behalf, he or she is a retail broker. In some cases, your agent or broker may be unable to obtain insurance coverage on your behalf from a standard insurer. In that event, he or she may contact a wholesale broker. Wholesale brokers specialize in certain types of coverage. Many are surplus lines brokers, who arrange coverages for risks that are unusual or hazardous.
I wish I could give you direct feedback but it’s really impossible to say Steve. It depends on your specific situation, your goals, and also the state of the policies as they exist now. Evaluating an in-force policy is different than evaluating a yet-to-be-purchased policy, and even a bad policy can perform reasonably well going forward once it’s been in place for a number of years. If you’d like an objective analysis, I would suggest reaching out to a fee-only financial planner. Given that you’re closer to retirement than my typical client, I would try to find one through NAPFA or Garrett Planning Network.
2. How come you don’t mention that the GUARANTEED Cash Value on most WL polices increase GREATER that the premium in about year 5-8 depending on product? And typically that begins with a 5% cash to cash return increasing to double digits quite quickly. Why? Because all the insurance costs are up front. And yes you lose if you get out in 1-5 years – It’s insurance and that needs to be accounted for.

In determining premiums and premium rate structures, insurers consider quantifiable factors, including location, credit scores, gender, occupation, marital status, and education level. However, the use of such factors is often considered to be unfair or unlawfully discriminatory, and the reaction against this practice has in some instances led to political disputes about the ways in which insurers determine premiums and regulatory intervention to limit the factors used.


Death benefits are generally received income tax-free by your beneficiaries. In the case of permanent life insurance policies, cash values accumulate on an income tax-deferred basis. That means you would not have to pay income tax on any of the policy’s earnings as long as the policy remains in effect. In addition, most policy loans and withdrawals are not taxable (although withdrawals and loans will reduce the cash value and death benefit).2

A corollary to the liquidity issue is the concept of flexibility of your contributions. Even with a 401(k) or IRA, where you can’t access your money without penalty, you can always choose to stop contributing for a period of time if you need that money for other purposes. In the meantime, your account stays intact, steadily earning tax-deferred returns on the money you’ve already put in.
In my experience it is rare to find a policy for which the cash value growth by year 6 doesn’t exceed the annual premium (except for policies purchased at older ages, or policies of low face amounts, which have inherently higher costs), that is more than likely to hold true by year 9 or 10! Catching onto some words in my statement, while ignoring the facts presented, doesn’t make you more credible. I challenge you to post images of inforce illustrations where cash value growth is less that the annual premium by year 6.
Brokers are not appointed by insurers. They solicit insurance quotes and/or policies from insurers by submitting completed applications on behalf of buyers. Brokers don't have the authority to bind coverage. To initiate a policy, a broker must obtain a binder from the insurer. A binder is a legal document that serves as a temporary insurance policy. It usually applies for a short period, such as 30 or 60 days. A binder is not valid unless it has been signed by a representative of the insurer. A binder is replaced by a policy.
Finally, everyone who accumulates assets will have a life insurance policy of one type or another. Social Security currently is “a life insurance policy”. Will it be around in 30 years? Who knows…who knows what will be there. All I know is that a good plan will have a guaranteed income source that they can not outlive. Many people with assets take Social Security before age 70 because they want to be sure to get something out of it…this is a life insurance decision. They reduce their life time income by taking payment early. If they owned a permanent life policy, they could reduce their investment risk by spending assets and leverage the insurance policy to replace the assets they use while they delay taking income from SS and the increased payment the benefit provides can increase their life style, pay the premium and create a legacy for their children, grand children or favorite charity. Life insurance “loans” are not income. They are loans. So if a person planned ahead, they could receive 10’s of thousands of dollars from the cash value of their policy (and ROTH IRA money) and not pay a dime of income tax on the social security benefit. If inflation happens and interest rates and taxes increase, the SS benefits will increase and this person will have increasing income that won’t be consumed by an increase in taxes as all their income would be tax free.
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.

Converting term life to whole life insurance can be an excellent way to continue your life insurance policy and also build cash value that you can borrow from. There are many different ways to structure this type of policy, depending on your needs and goals, so be sure to work with a life insurance professional who can answer all of your questions and help you make the best choices.
Muslim scholars have varying opinions about life insurance. Life insurance policies that earn interest (or guaranteed bonus/NAV) are generally considered to be a form of riba[60] (usury) and some consider even policies that do not earn interest to be a form of gharar (speculation). Some argue that gharar is not present due to the actuarial science behind the underwriting.[61] Jewish rabbinical scholars also have expressed reservations regarding insurance as an avoidance of God's will but most find it acceptable in moderation.[62]
Good questions. The honest answer is that the only way to know what’s best is to do a review of your personal goals, the policy you have now, the whole life policy you would be changing it to, and the other options available to you. I would highly recommend seeking out a fee-only financial planner who can help you with this, and I would start by looking at the Garrett Planning Network. Their advisors all offer hourly services that would be perfect for this kind of project. NAPFA is another great network of fee-only planners.
You don’t have to be an expert to get a good deal on your insurance premiums -- that’s what we’re here for. Whether it’s auto, home, life or health insurance, and no matter what stage of life you’re in, we can educate you on how insurance works to protect you, your family and your assets. We also break down how pricing works, explain how much insurance you need for your particular situation and guide you through the buying process so you can be sure you’re getting the best deal on the right policy.

Naturally, the float method is difficult to carry out in an economically depressed period. Bear markets do cause insurers to shift away from investments and to toughen up their underwriting standards, so a poor economy generally means high insurance premiums. This tendency to swing between profitable and unprofitable periods over time is commonly known as the underwriting, or insurance, cycle.[25]

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.
The financial stability and strength of an insurance company should be a major consideration when buying an insurance contract. An insurance premium paid currently provides coverage for losses that might arise many years in the future. For that reason, the viability of the insurance carrier is very important. In recent years, a number of insurance companies have become insolvent, leaving their policyholders with no coverage (or coverage only from a government-backed insurance pool or other arrangement with less attractive payouts for losses). A number of independent rating agencies provide information and rate the financial viability of insurance companies.
In the United States, the tax on interest income on life insurance policies and annuities is generally deferred. However, in some cases the benefit derived from tax deferral may be offset by a low return. This depends upon the insuring company, the type of policy and other variables (mortality, market return, etc.). Moreover, other income tax saving vehicles (e.g., IRAs, 401(k) plans, Roth IRAs) may be better alternatives for value accumulation.

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Any person who uses permanent insurance should be out of debt and have the discipline to maintain a long term approach. There aren’t any get rich quick schemes and any plan can work as long as an investor looks to get the maximum value for the money they pay. Cash Value Life insurance provides values that promises you or I can’t keep unless we partner with one of these companies.

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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.
Premiums paid by the policy owner are normally not deductible for federal and state income tax purposes, and proceeds paid by the insurer upon the death of the insured are not included in gross income for federal and state income tax purposes.[28] However, if the proceeds are included in the "estate" of the deceased, it is likely they will be subject to federal and state estate and inheritance tax.
Unlike insurance agents, brokers typically have access to many different policies offered by various companies — not just a few policies offered by a single company. They may also have access to policies that are not available to most consumers. Having a wide selection of policies to choose from can ensure that clients have the best possible coverage and the best rates. It may also make the process more complicated, as more choices can lead to confusion over which policies will provide the best coverage. A broker can assist clients in choosing the right policies for their home, business, family or automobile to make sure that they are adequately protected. This includes more than simply looking at the premium rates or policy limits; it involves a thorough analysis of what exactly each policy covers and excludes to ensure that it is the right policy for the client.

To echo what everyone else has said, great article! My wife and I were pitched this idea earlier today and I thought it sounded great until she made me read this article. I then returned to the paperwork they had given me to find it riddled with “these values are not guaranteed”. The footnotes even went as far as to say these projections were based on their dividend schedule for 2014 and that future years could be “higher or lower” and the went on to recommend looking at a hypothetical lower schedule illustration available upon request. My question for you is in regards to your conclusion. I’m self employed and put 30k into a sep-Ira and also utilize a tIRA->Roth conversion for my wife. You said this might be worth it if it was ossicle to front load the plan, the one I was presented with called for 15k/yr. are you saying it would be worth hit if I could put say 30-45k into each of the first few years? I’d still be a little skeptical after reading the brochure where it says the dividends are essentially at the discretion of he carrier
Now that you have a better picture of the difference between term and whole life policies, you probably want to compare term life versus whole life insurance costs. To do so, you will need to directly compare the short and long term costs of a whole life policy and a term policy, based on factors like your age, the face value of the policy you want to buy, and whether or not you are a smoker.

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