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.
Backdoor Roths – 1) These vehicles are still capped at $5,500 on an annual basis (LI has no restrictions on contribution amounts.) 2) Roth IRAs are still exposed to market risk and can experience losses in account value (whole life policies are not and cannot). 3) Doing a backdoor conversion year after year is an administrative pain in the ass and will have tax implications if you hold a traditional IRA.

Your comment on term insurance allowing you to convert at anytime is inaccurate. You must read the conversion language as it is designed to protect the insurance company. Met life for example states ” During the conversion period shown in the policy schedule you can convert this policy, while it is in force with all premiums paid, to a new policy–On a plan of permanent insurance, with a level face amount, available on the policy date of the new policy.”. Some term plans won’t let you convert after 10 years or if your over age 65. Imagine having a 20year $1,000,000 term plan and getting cancer in the 19th year. You want to convert but find out the conversion period ended in the 10th year. Also, the company typically determines which plan you can convert to. Maybe its just 2 plans out of the 8 they offer. What is the likelyhood of those being the best 2 plans available? Alas, no one reads the contract or the prospectus for that matter. My dad always said “the big print givith and the small print taketh away.”
Moreover, with hindsight, because I suspect that the conversion options in the term policies, as I look into them, won’t prove all that attractive, I am thinking that it would have been optimum to have had universal or whole life coverage for closer to 20% of our aggregate, total original insurance coverage, rather than 10%. Still, while I am pretty satisfied that my prior decision-making was close to right, I do wonder if you see this all very differently. 
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Coverage that suits you. Comprehensive and collision coverage is just the beginning. Our policies also give you the flexibility to dial up (or down) your peace of mind. Choose from new car replacement2, special parts replacement3, enhanced rental car damage coverage4, and more. And because there’s only one you, receive identity theft protection5 at no extra cost.
Insurers will often use insurance agents to initially market or underwrite their customers. Agents can be captive, meaning they write only for one company, or independent, meaning that they can issue policies from several companies. The existence and success of companies using insurance agents is likely due to improved and personalized service. Companies also use Broking firms, Banks and other corporate entities (like Self Help Groups, Microfinance Institutions, NGOs, etc.) to market their products.[26]
Also, the case study you reference is interesting for several reasons. First of all, it’s a single example out of what I assume are millions, and there’s therefore no real way to determine whether it’s actually representative for anyone else. Second, they actually ask whether it would have been better to buy term and invest the difference, and the proceed to say it’s not worth evaluating. Funny!

Therein lies the problem. The asset you are securing is not the cash and too many people sell it that way and then the client views it that way. The asset is the death benefit. I know of no other asset where you can essentially secure a million dollar tax free asset at a 60% discount with about 2% down. The cash value build up is a an added bonus as I see it which provides great liquidity later on and also provides for quite a bit of optionality. With respect to term insurance, most people outlive their term so I would argue term is more expensive. I own both, but when I look at my term, if I pay premiums and outlive my term, I will have sunken about 250,000 into the contract and will have gotten zero for it. My permanent insurance will be paid to a beneficiary no matter what. Also people die including children. We need to take a cold look at what would happen if ine of our children died. How do you pay for the funeral? Do you need counseling? Will you go back to work immediately? Would you want to give it to charity or start one in your child’s name? I bought them for each of my kids. They are my favorite asset because I guaranteed their insurability. I have a few friends who have children with diabetes. Most carriers will not insure diabetics. My friends thankfully bought their children policies before they were diagnosed. I would agree permanent insurance is not for everyone, but more people should use at least a small piece of it S part of their plan. I also think they are extremely valuable when a person has the capacity to shrink down the insurance and load it with cash, as you mentioned above. Anytime the IRS puts limits on a vehicle as they do on permanent vehicles or any vehicle for that matter, I tend to think that is a good asset or vehicle for your money.
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.
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To say a life insurance company is not a diversified portfolio is a hard statement to agree with. Life insurance companies own 18% of the corporate bonds issued in the United States. These a multi-billion dollar diversified portfolio’s of fixed income securities WITH NO INTEREST RATE Risk. It is true that it takes time to accumulate cash value, however, there isn’t a passive investment strategy that doesn’t take time to create wealth.

Second, I would say that it’s debatable whether whole life insurance is actually better than a savings account or CD, in terms of a savings vehicle. You mention the guaranteed return. Well, as I mention in the post, my policy had a “4% guaranteed return”, but when I ran the numbers it only actually amounted to 0.74% event after 40 years. It was less before that. And this was from one of the top mutual life insurers in the country. Not only is that incredibly misleading (and that’s being kind), I can get a better guaranteed rate than that right now from an online savings account, even though interest rates are at an all-time low. And my online savings account doesn’t have any of the other huge drawbacks that are also mentioned in the article.

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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]
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.
The mortality tables provide a baseline for the cost of insurance, but the health and family history of the individual applicant is also taken into account (except in the case of Group policies). This investigation and resulting evaluation is termed underwriting. Health and lifestyle questions are asked, with certain responses possibly meriting further investigation. Specific factors that may be considered by underwriters include:
Wow, what a great article, Matt. A couple of nights ago, I was listening to Clark Howard on the radio, and to my dismay, heard him start talking about one of the worst investments for college. He continued, and when he actually said whole life insurance, my heart dropped, because about ten years ago, my wife and I were talked into this “investment” for paying for our kids college.
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.
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While you won’t be able to pinpoint the amount you’ll need to the penny, you can make a sound estimate.  Your goal should be to develop a life insurance plan that, following your death, will allow your family to live comfortably without your economic contribution. Also consider the effect of inflation over time. The amount needed for retirement or college 20 years from now is likely to be significantly higher than today.
People in the tobacco category typically have to pay higher premiums due to the higher mortality. Recent US mortality tables predict that roughly 0.35 in 1,000 non-smoking males aged 25 will die during the first year of a policy.[22] Mortality approximately doubles for every extra ten years of age, so the mortality rate in the first year for non-smoking men is about 2.5 in 1,000 people at age 65.[22] Compare this with the US population male mortality rates of 1.3 per 1,000 at age 25 and 19.3 at age 65 (without regard to health or smoking status).[23]

Whole life is permanent insurance — you’re insured throughout your lifetime, or until the policy matures, as long as you continue to pay your premiums per terms of the contract. And those premiums will stay level as long as the policy remains in force. Over time, permanent insurance typically accumulates a cash value that can be accessed2 for a variety of purposes while you’re still alive.


Often a commercial insured's liability insurance program consists of several layers. The first layer of insurance generally consists of primary insurance, which provides first dollar indemnity for judgments and settlements up to the limits of liability of the primary policy. Generally, primary insurance is subject to a deductible and obligates the insured to defend the insured against lawsuits, which is normally accomplished by assigning counsel to defend the insured. In many instances, a commercial insured may elect to self-insure. Above the primary insurance or self-insured retention, the insured may have one or more layers of excess insurance to provide coverage additional limits of indemnity protection. There are a variety of types of excess insurance, including "stand-alone" excess policies (policies that contain their own terms, conditions, and exclusions), "follow form" excess insurance (policies that follow the terms of the underlying policy except as specifically provided), and "umbrella" insurance policies (excess insurance that in some circumstances could provide coverage that is broader than the underlying insurance).[32]
We are both in our 40’s with 2-young children and already have term life policies. We are a single income family who relies on my husband’s commissions (he is in sales)which are not guaranteed year to year. While he has had a few good years where we have managed to max out his yearly 401k contribution, have money in stocks/mutual funds, Roth IRA and at least a years worth of savings set aside in the event of no income we were recommended to invest in whole life as another investment vehicle. Basically, transferring the money in our less than %1 savings account into the whole life policy over the course of 24-years. It seemed very attractive at the time. We simply wanted a better vehicle for investment than our poorly performing savings account. Our advisor (who does work for a big insurance company) came up with whole life ins. We kept asking what other low risk investments that kept our cash flow flexible we could do and he kept coming back to this one. We are currently trying to get more information from our advisor on how to cancel our policy or do you think it is worth it to leave the $20,000 in the policy and just not make any more contributions? Also, any recommendations on what to do with the rest of our savings rather than keeping it in a low earning savings account, but maintaining cash flow flexibility?
Beyond that, I do agree that whole life insurance can be useful in certain situations when structured properly. But those situations are few and far between and they require the help of someone who both knows the ins and outs of these policies AND is willing to put the client’s interests over their own financial interests (i.e. minimizing commissions and other costs on the policy). That kind of person is also difficult to find.
Hi Matt. Read your posts and comments on Whole Life and the overfunding options available. I have a different situation involving a policy with Prudential called Variable Appreciable Life. I am looking for a safe haven for some available cash with a minimum return of 4%. Agent/Financial Planner has suggested I overfund the balance of that VAL policy. Yes, I am quite conservative but have enough invested in 401k, Stocks, Funds etc. Policy is 50K and issued in 1990. Wife and I are in mid seventies and looking to have 30-40K of available liquid cash. Can add/withdraw the overfunding $ at any time. Interest guarantee is 4.0%.
Analysis: You’ll likely get better services from outside specialists, but that’s not the overriding factor here. The real problem is that tying services to insurance products makes it disruptive for you to leave your broker. The products and services should be unbundled so that there’s real competition for the big-ticket item: the insurance itself.
In any case, once when I was younger, I used to think like the author, that you can overcome your risk tolerance and become a better investor if only you can control yourself and learn to love the equities roller coaster ride…now that I am in my mid-40s, I realize that I’m old school and conservative. I am happy with 5-6% return that is tax free risk free and doesn’t involve me making any decisions except how much I want to save this year.

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]
In managing the claims handling function, insurers seek to balance the elements of customer satisfaction, administrative handling expenses, and claims overpayment leakages. As part of this balancing act, fraudulent insurance practices are a major business risk that must be managed and overcome. Disputes between insurers and insureds over the validity of claims or claims handling practices occasionally escalate into litigation (see insurance bad faith).

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2) With a portfolio of risky assets, the LONG-TERM RETURN is expected to be higher, but the variability around that is MUCH higher. In pretty much all of the “expected return” analyses that people on the internet show to compare whole life to term life + investing the difference, they are just comparing annualized returns or an IRR on a zero-volatility return stream. What they don’t account for are situations where the market crashes and you panic, wanting to move money into cash, or having to draw down on assets because they’re liquid and you can. This is normal behavioral stuff that occurs all the time, and reduces the power of your compounding. If you and your adviser are sure you can avoid these common pitfalls, then that is great and you might want to go for it. But don’t dismiss the reality. Also when running your simulations, make SURE to tax all of your realized capital gains and interest income along the way, and unrealized cap gains at the end. It can make a big difference.
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I read the comments about the topic of my article and I see that some responses touch on the "middleman" in ways that suggest some things about those who reside "in the middle." One plus for us "middle" people is that we get to hear things from carriers that those on the retail buying end may not ever hear. Sometimes, when dealing with us "middle" people, you get a behind the scenes look at things that may have a bearing on your coverage. With life insurance through a broker vs an agent, you get to know that impaired risk underwriting (for unhealthy applicants) has a particular kind of nuance. For instance, carriers may decline your application because they take on a set number of impaired risk clients, and then they decline those coming after that. You might think, after being declined, that what they are telling you is "you are done, no life insurance for you." But, what I know from experience is that another carrier or two have not hit the limit yet on declines - and that might be the avenue of approach to get you approved. As a broker, I know things that apply across a broad spectrum of carriers, not just the playbook of one carrier. As a result, the market intelligence of this "middleman" can improve the experience of buyers by finding a way forward for them that is outside the boundary of what a retail buyer might ever know. One thing that I did not mention in the article is that I have been both a captive and a broker, and the experience allows me to see the pluses and minuses in both. Thank you for your responses, and if you have a question about insurance of any type (my specialties are life, Health, Disability, and Annuities) you may post it at MoneyTips.com and let the professional community respond to it. It's free, harmless, informative, relatively instant, and a bunch of other good things, too.
I have to agree with Bilal. While this article is very insightful for a very specific audience (young workers), it does not fully take into consideration the needs of older retirees. I had term life for 35+ years; as I approached 70, it got ridiculously expensive. It wound up being just under $1000 per quarter, which I could obviously not afford. I had to cancel the policy, with nothing to show for all of the years of payments. Now I have no life insurance, although I am in exceptional health. Whole life offers me a good way to have a $10,000 policy, which will cover funeral expenses so my kids won’t have to worry with that. I think it is a good deal for my circumstance, and suspect it is for many other older people, as these policies are generally available with no medical questions OR exam.
Hi Matt. Read your posts and comments on Whole Life and the overfunding options available. I have a different situation involving a policy with Prudential called Variable Appreciable Life. I am looking for a safe haven for some available cash with a minimum return of 4%. Agent/Financial Planner has suggested I overfund the balance of that VAL policy. Yes, I am quite conservative but have enough invested in 401k, Stocks, Funds etc. Policy is 50K and issued in 1990. Wife and I are in mid seventies and looking to have 30-40K of available liquid cash. Can add/withdraw the overfunding $ at any time. Interest guarantee is 4.0%.
Because brokers work with a variety of insurance companies, they tend to have a broader understanding of companies’ offerings and key benefits. They are commission-based, which is a double-edged sword: they may be more motivated to earn your business year after year by getting you the best deal possible; or they may try to sell you a policy with unnecessary bells and whistles since that would pay them a higher commission. Regarding the double-edged sword: the best way to nail down the best deal possible is the annual review and re-shopping of coverage. The best way to avoid unnecessary “bells and whistles” is to remember that your needs guide what you purchase. If you don’t need “bells and whistles”, don’t purchase them. Approaching insurance this way is always the best way forward. Consider this: having options placed in front of you and explained in detail allows you the opportunity to hear about the newest “bells and whistles,” some of which may be just what you need or were looking for, but simply never asked about. Policies change, and new options are added by carriers all the time.
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.
One other point. You emphasize the “tax free” nature of whole life here. I feel like I was pretty clear about that in the post and would be interested to hear your thoughts. Just blindly calling it “tax free” ignores the presence of interest (on your own money, by the way) which over extended periods of time can actually be more detrimental than taxes.

So let me ask, does she have a need for life insurance? That is, what would the insurance proceeds actually be used for? It may be that she no longer has a need and could simply unload the policy. If that’s the case, I have heard of people having some luck selling these policies to a third party. It’s not something I have experience with, but I could ask around for you if you’d like.


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.
Example (Comprehensive): You park your car outside during a major hailstorm, and it's totaled. If you have comprehensive, we'll pay out for the full value of your car (minus your deductible amount). Example (Collision): You back out of your garage, hit your basketball hoop, and cause $2,000 worth of damage to your vehicle. If you have collision, we'll then pay for your repairs (minus your deductible amount).
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.  
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.
After reading the entire thread, couldn’t help but add my thoughts. I am a civilian here so no affiliation as an insurance salesman or financial planner in any capacity. I am however, an owner of a WL policy (one year in) which I got through a friend in the business. I admittedly jumped into this without doing the proper due diligence as more of a favor to him. I have had anxiety about this decision since, and am days away from my second annual premium payment and have thus spent a great deal of time researching and thinking about the implications of this asset. I am at a “cut my losses and run crossroads”. Is this a quality asset, or do I cut and run and chalk-up the loss as the cost of a lesson learned in letting others do my independent thinking for me (two implications here are that 1) I do believe that the person who sold me this actually believes in the products and 2) that doesn’t mean that he is right and any person, no matter how financially savvy, who is willing to dedicate the time, can do the research and come up with their own view). I say all of this to admit that I am biased, even if only sub-consciously, as I have tried to think in a balanced manner with regards to this decision. All of that being said, I am currently leaning towards keeping the asset in place and welcome thoughts. My current logic below.

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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.
This is a very helpful example of why WL insurance IS a good investment: http://www.mypersonalfinancejourney.com/2013/04/infinite-banking-concept-whole-life-insurance.html. Also, Paradigm Life has several very good models to show how WL policies can out pace “buy term and invest the difference” products long term. One size does not fit all. I have Term Life insurance supplementing my WL policies right now, but they are all convertible. So I will be able to lump in money later and convert them into permanent policies with all of the borrowing and tax sheltered benefits.
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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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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]
Today we still answer to our members, but we protect more than just cars and Ohio farmers. We’re a Fortune 100 company that offers a full range of insurance and financial services across the country. Including car, motorcycle, homeowners, pet, farm, life and commercial insurance. As well as annuities, mutual funds, retirement plans and specialty health services.
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
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]
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.

Your statements are somewhat misleading. The policies that Kim are describing are likely Universal Life policies, not true whole life policies. True whole life policies have set premiums, not increasing. And the cash value is built off of a dividend being paid by the insurance companies. Many insurance companies (Ohio National Northwestern ?Mutual, ect.) have been around for over 100 years and have literally paid a dividend every single year. Which means that the policy holder is paying the same premium every single year and is also experience growth in their cash value account very single year. When Kim says that her “cash value was not making good returns” she is referring to a policy that is tied to the market, not based off of dividend payments. Whole life is an amazing product that you are confusing with Universal Life


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.
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.
The questions we ask on our site are used only to determine which insurance companies and products best match your unique needs. Each insurance company bases its final prices on its own criteria. To more accurately match you with the best company, product and policy for your needs, we gather some general health, lifestyle, family history, and contact information on our site. A licensed representative will then review your submission and, if necessary, either call or email you to clarify any outstanding issues and provide you with the information you request.
From a pure insurance standpoint, whole life is generally not a useful product. It is MUCH more expensive than term (often 10-12 times as expensive), and most people don’t need coverage for their entire life. The primary purpose of life insurance is to ensure that your children have the financial resources they need to get themselves to the point where they can provide for themselves, so coverage that lasts your entire life doesn’t make a lot of sense except for a minority of cases that are the subject of another discussion.

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.

To be completely honest, I didn’t go into more detail about the things you talk about here because I don’t personally believe it’s relevant for the vast majority of the population, and certainly not for my audience. I am aware that if you have a certain level of income and net worth, an overfunded policy may be a good decision for you, which is why I even mention it at all. But for most people, even an overfunded policy would represent far too big a percentage of their overall asset allocation to make sense. You’d get into the lack of diversification issue, so it’s just not worth it.
Of course the fees are applied to your principle and interest, which drags the value of your account down to painful levels. The simulation that the salesman ran for me was based on the assumption that the value of the account would grow 8% compounded every year. The results of this simulations looked really cool at first because the salesman focused on the long term results and the steady increase in death benefit. But when I looked at the numbers more closely, it was sobering. The investment produced negative interest in the first 7 years (as high as -37.51% in the first year) after which it turned the corner and then began to return 6-8% after year 11.
James, be very careful about blanket advice to roll your pension into an IRA. A lot of financial professionals can make money through a transaction like that and you’d likely be giving up guaranteed income for the rest of your life. To be clear, it’s certainly possible that this would be a good move, but you would only know that after a careful and detailed analysis of your specific pension, your specific goals, and the rest of your financial situation.
The beneficiary receives policy proceeds upon the insured person's death. The owner designates the beneficiary, but the beneficiary is not a party to the policy. The owner can change the beneficiary unless the policy has an irrevocable beneficiary designation. If a policy has an irrevocable beneficiary, any beneficiary changes, policy assignments, or cash value borrowing would require the agreement of the original beneficiary.

Today we still answer to our members, but we protect more than just cars and Ohio farmers. We’re a Fortune 100 company that offers a full range of insurance and financial services across the country. Including car, motorcycle, homeowners, pet, farm, life and commercial insurance. As well as annuities, mutual funds, retirement plans and specialty health services.

I find whole life as a way to guarantee some form of money will be there when its needed or maybe even as a gift. For such a low amount paid it would give me peace of mind and joy to know im buying future dollars at a discounted price. With that being said, life insurance should not be used as an investment because it was not meant to be used as an investment, You CAN use it as a Savings account for the LOOOONG term 30+ years if overfunded then rolled over to an annuity however by no means should it be your retirement account. I wish I could explain this concept more but I feel like ive typed quite a bit.
Second, I would say that it’s debatable whether whole life insurance is actually better than a savings account or CD, in terms of a savings vehicle. You mention the guaranteed return. Well, as I mention in the post, my policy had a “4% guaranteed return”, but when I ran the numbers it only actually amounted to 0.74% event after 40 years. It was less before that. And this was from one of the top mutual life insurers in the country. Not only is that incredibly misleading (and that’s being kind), I can get a better guaranteed rate than that right now from an online savings account, even though interest rates are at an all-time low. And my online savings account doesn’t have any of the other huge drawbacks that are also mentioned in the article.

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Insurance brokers represent the insurance buyer – you the consumer or business owner.  They are appointed or contracted with multiple insurance companies.  They have the flexibility to discuss many options and companies that meet your needs and budget. Insurance brokers have been around as long as insurance agents.  In many cases people will refer to insurance brokers as independent insurance agents.
Still, although I believe that persons without adequate income either to fund adequately retirement vehicles or to pay monthly bills without using a home equity line of credit or leaving any credit card balances unpaid, should probably only purchase term insurance, if you earn more than that, I am thinking that purchasing 15% to 25% of needed life insurance coverage though whole life policies may be a way to mitigate against the needed guessing that goes into picking the length and amount of term policies. Do you agree?
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]

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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!

I mentioned investment allocations earlier. There are other ways to get stock market returns with Whole life insurance as well. I am not talking about “Variable Life Insurance” either. Those who purchase these policies loose the benefit of having an insurance company retain some of their investment risk. To obtain market returns, a person simply invests in long call options on the broad market. In doing this, an investor earns stock market returns but transfers their downside risk to the owner of the index (SPY or SPX). The options will be worthless or appreciate (sometimes 500%). Coupled with the guarantees of the over funded cash value life policy, their portfolios will not decrease below a certain point in any given time but they can destroy the market in up years. This all takes 10 minutes to manage and about $20 in cost (compared to an asset manager charging a percentage,) Because life insurance is guaranteed to maintain its value, it protects the remaining money that is not tied up when directly invested in stocks and is available to that an investor can be “greedy when others are fearful” (Warren Buffet) or “buy low while others are selling”.

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