An agent or broker is a person or business who can help you apply for help paying for coverage and enroll in a Qualified Health Plan (QHP) through the Marketplace. They can make specific recommendations about which plan you should enroll in. They’re also licensed and regulated by states and typically get payments, or commissions, from health insurers for enrolling a consumer into an issuer's plans. Some brokers may only be able to sell plans from specific health insurers.
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? 

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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.
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State Farm® Life Insurance Company (Not licensed in MA, NY or WI) or State Farm Life and Accident Assurance Company (Licensed in NY and WI) can help you find coverage that's right for you and your loved ones. Our life planning videos and calculator can help you understand your options, and figure out how much and what kind is right for you, before getting your life insurance quote.
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So let’s do a quick comparison. Let’s take that $527 annual premium and invest it instead. From 1963 to 2013, the US stock market earned a 10.22% annual return (source), but let’s assume that this person also put some money into bonds (smart) and earned a more conservative 8% annual return. Over those 50 years, at that 8% return, that money would have grown to $327,231. I don’t know about you, but I would rather have my money that way than locked inside a whole life insurance policy.
The commissions a life insurance agent earns selling a whole life policy is tiny compared to the ongoing commission a fee based asset manager charges to manage a portfolio. These asset managers use bonds to manage stock market volatility. A consumer who hires one of these managers is paying 1-2% annual fee’s for someone to add an asset that reduces long term stock returns and has the potential to drop 20% or more when interest rates rise. It takes 10 minutes to set an allocation and if an investor can stomach the volatility, they need to let it do its thing. More on this in a minute.
Most people are familiar with or have worked with an insurance agent at some point in their lives. However, a broker has an entirely different role from an insurance agent. Unlike insurance agents, insurance brokers do not work for an insurance company. They work for their clients, providing advice on the best insurance options for their clients’ needs. Their goal is to support their clients’ interests — not to sell a particular policy on behalf of an insurance company.

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Hi Matt, I’m a Life Insurance agent and Advisor and I work for New York Life. Some of your points make sense but saying that whole life is bad is a little off. It is good for savings toward your retirement and will do a lot more than a savings account, money market or cd will ever do. So to agree with you to a certain extent I’ll explain what I do for younger individuals, I’ll sell a whole life policy and later it with term insurance. Basically the whole life will build a cash value with guaranteed returns and the term insurance is in the event of an untimely death. $1,000,000 of term can be as low as $50 a month. Also NY Life has never guaranteed dividends but has paid them out for 159 years, even during the Great Depression. Our company is backed by a $180 billion general account and a $19 billion surplus. So yeah, we guarantee your returns. And we don’t just sell life insurance, that’s why our agents like myself have life, series 6,7,63,66,65 licenses, if our clients, not customers want more than life, we diversify for them into brokerage or anything else they want. Just puttin my 2 cents in.

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Base commission is the “normal” commission earned on insurance policies. Base commission is expressed in terms of a percentage of premium and varies by type of coverage. For instance, an agent might earn say, a 10 percent commission on workers compensation policies and 15 percent on general liability policies. Suppose that you purchase a liability policy from the Elite Insurance Company through the Jones Agency, an independent agent. Jones earns a 15 percent commission on general liability policies.

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By clicking the "FINISH" button above and submitting your online term life insurance quote request to SelectQuote, you are agreeing by your electronic signature to give SelectQuote and Inside Response, Allied Insurance Partners and LiveOps, Inc., your prior express written consent and continuing established business relationship permission to call you at each cell and residential phone number you provided in your online quote request, and any other subscriber or user of these phone numbers, using an automatic dialing system and pre-recorded and artificial voice messages any time from and after your inquiry to SelectQuote for purposes of all federal and state telemarketing and Do-Not-Call laws and your prior affirmative written consent to email you at the email address(s) you provided in your online quote request, in each case to market our products and services to you and for all other purposes. Your consent is not required to get a quote or purchase anything from SelectQuote, and you may instead reach us by phone at 1-800-670-3213.
A very good article. Congruent to the philosophy in which our company was built: Buy Term, Invest the Difference. I am a crusader at heart and I am peeved every time I see these products in the hands of people who can barely afford it and whose life will be completely damaged for merely owning it because they are grossly under-insured when they could have well purchase a proper term amount for the time they need it.

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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!

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Limited risk of catastrophically large losses: Insurable losses are ideally independent and non-catastrophic, meaning that the losses do not happen all at once and individual losses are not severe enough to bankrupt the insurer; insurers may prefer to limit their exposure to a loss from a single event to some small portion of their capital base. Capital constrains insurers' ability to sell earthquake insurance as well as wind insurance in hurricane zones. In the United States, flood risk is insured by the federal government. In commercial fire insurance, it is possible to find single properties whose total exposed value is well in excess of any individual insurer's capital constraint. Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market.

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Insurance brokers perform a plethora of duties for individuals and businesses in search of the right insurance for them. When you contact an insurance broker for a quote, he will acquire some information and assess your individual needs. An insurance broker will compare the coverage of various insurers to get you the best conditions and rates. A broker will also search for opportunities to combine different types of insurances to obtain discounts or reduce premiums. As brokers do not work for the insurance companies, their recommendations are unbiased and in favor of the insurance buyer.

Any reputable source will report mutual fund and stock returns as “annualized” figures, which takes the sequence of returns into account. Another term for this is “geometric average”, which again accounts for the order in which returns are received. So while there are some financial “experts” out there touting average returns (cough, Dave Ramsey), for the most part what you’re talking about here is not a factor.

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A Roth IRA certainly gives you a lot more investment options, with the added benefit of not starting with an account balance of essentially $0. It’s important to understand though that there are always risks involved with investing, and you could lose money within a Roth IRA too. Still, while I don’t know the specifics of your situation it will generally be a good idea to go with something like a Roth IRA before considering any kind of life insurance.

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Stranger-originated life insurance or STOLI is a life insurance policy that is held or financed by a person who has no relationship to the insured person. Generally, the purpose of life insurance is to provide peace of mind by assuring that financial loss or hardship will be alleviated in the event of the insured person's death. STOLI has often been used as an investment technique whereby investors will encourage someone (usually an elderly person) to purchase life insurance and name the investors as the beneficiary of the policy. This undermines the primary purpose of life insurance, as the investors would incur no financial loss should the insured person die. In some jurisdictions, there are laws to discourage or prevent STOLI. 

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In any case, I thought I might chime in given that I disagree with your statement about all of these policies being legal robbery. As a disclaimer, I should point out that I agree that unscrupulous life insurance agents definitely do have a tendency to oversell these policies where term life would do, and I do not disagree that commissions are often the likely motivation in many of these cases.
I did an in-depth analysis awhile back showing the exact opposite of what you presented here. If you adjust for risk tolerance, and look at the best policies on the market, they’re not only competitive, they’re good. And, what I found corresponds with the research currently available about whole life vs BTID. Namely, sometimes, they’re better than a traditional 60/40 split portfolio (though I’d be hesitant to make that comparison as a blanket rule).

In India IRDA is insurance regulatory authority. As per the section 4 of IRDA Act 1999, Insurance Regulatory and Development Authority (IRDA), which was constituted by an act of parliament. National Insurance Academy, Pune is apex insurance capacity builder institute promoted with support from Ministry of Finance and by LIC, Life & General Insurance companies.
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Captive insurance companies may be defined as limited-purpose insurance companies established with the specific objective of financing risks emanating from their parent group or groups. This definition can sometimes be extended to include some of the risks of the parent company's customers. In short, it is an in-house self-insurance vehicle. Captives may take the form of a "pure" entity (which is a 100% subsidiary of the self-insured parent company); of a "mutual" captive (which insures the collective risks of members of an industry); and of an "association" captive (which self-insures individual risks of the members of a professional, commercial or industrial association). Captives represent commercial, economic and tax advantages to their sponsors because of the reductions in costs they help create and for the ease of insurance risk management and the flexibility for cash flows they generate. Additionally, they may provide coverage of risks which is neither available nor offered in the traditional insurance market at reasonable prices.
Great article Matt. You provide 8 great reasons as to why whole life insurance isn’t the best option for the majority of people. As you noted, there are times when it is advisable such as if you have a disabled child (also a no-lapse universal life policy is another alternative in this instance), but for most term life insurance and investing the rest is the way to go.
Nick this was a terrific overview. You didn’t mention the whole life rip-off, i.e., that the Client is paying for 2 things but in the end only gets 1. If the insured dies the death benefit goes to the beneficiary, the cash goes back to the company. Conversely, if the Client takes the cask the contract is terminated and the death benefit is gone. Bad, bad, bad!

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Nice write up. I personally have been able to save with an independent agent. A big concern of mine was finding an agent that worked with more reputable insurance carriers. There seems to be alot of agents who will use non-standard insurance carriers to provide cheaper coverage. I've heard some horror stories about customer service, sub-par adjustments, and claims services. I'd definitely do alot of research into the insurance companies the independent agent is appointed with.
The insurance company calculates the policy prices (premiums) at a level sufficient to fund claims, cover administrative costs, and provide a profit. The cost of insurance is determined using mortality tables calculated by actuaries. Mortality tables are statistically based tables showing expected annual mortality rates of people at different ages. Put simply, people are more likely to die as they get older and the mortality tables enable the insurance companies to calculate the risk and increase premiums with age accordingly. Such estimates can be important in taxation regulation.[10][11]
Studies have shown that roughly half of a stock's price movement can be attributed to a stock's industry group. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. By focusing on the top stocks within the top 50% of Zacks Ranked Industries, you can dramatically improve your stock picking success.
The second is that I’ve heard enough horror stories about indexed life insurance in general to be skeptical. It’s not that it can’t work, it’s that there are plenty of examples of it underperforming, having a catch that wasn’t made clear up front, and other instances where it just doesn’t work the way it was sold to work. Any time something is sold as being able to pay for any financial goal no matter the market conditions, it’s usually too good to be true.
Good question Lisa. I’m not an expert on Northwestern Mutual’s policies so I can’t give you a precise answer. But I believe that their adjustable comp life insurance policies allow you to combine term and whole life insurance in various proportions based on your desired outcome. In other words, it’s a more flexible policy than typical whole life insurance.
Underfunded whole life insurance may have only performed 4%. However, designed with additional premiums they have actually earned closer to 7% in the 30 years from 1984-2013. Even during the period between 1977 and 1982 where interest rates shot through the roof and bond holders didn’t recapture their losses for several years, over funder whole life returned 35% after the cost of insurance is considered.
Typically, life insurance is chosen based on the needs and goals of the owner. Term life insurance generally provides protection for a set period of time, while permanent insurance, such as whole and universal life, provides lifetime coverage. It's important to note that death benefits from all types of life insurance are generally income tax-free.1

Permanent life insurance policies do not expire. They are intended to protect your loved ones permanently, as long as you pay your premiums. Some permanent life insurance policies accumulate cash value. That means, the value of the policy will grow each year, tax-deferred, until it matches the face value of the policy. The cash can generally be accessed via loans or withdrawals, and can be used for a variety of purposes. This type of plan is typically portable so coverage can continue if employment terminates. 

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
I really wish you would have stated more clearly the difference between the typical whole life plans with zero overfunding and a participating overfunded whole life policy. But I agree with you: What’s the point of not overfunding? Those policies have such a low cash component that they typically are just a ploy to make money by the agent and it seems as if that was your point all along. Which you should have clarified. Why minimum whole life insurances plans are a scam, especially when sold as a main investment vehicle. But then a little drama drives traffic right?
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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An agent or broker is a person or business who can help you apply for help paying for coverage and enroll in a Qualified Health Plan (QHP) through the Marketplace. They can make specific recommendations about which plan you should enroll in. They’re also licensed and regulated by states and typically get payments, or commissions, from health insurers for enrolling a consumer into an issuer's plans. Some brokers may only be able to sell plans from specific health insurers.
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.
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.

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The second is that I’ve heard enough horror stories about indexed life insurance in general to be skeptical. It’s not that it can’t work, it’s that there are plenty of examples of it underperforming, having a catch that wasn’t made clear up front, and other instances where it just doesn’t work the way it was sold to work. Any time something is sold as being able to pay for any financial goal no matter the market conditions, it’s usually too good to be true.
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]

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