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.
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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.
There is a lot of good information here, however when I think of what my father-n-law did to himself I have to disagree about whole life insurance. My father-n-law use to sell life insurance in the 1960s and only believed in term and that is all that he has ever had. However, now in his 70s, the only thing he is eligible for is a 3 year term policy and I’m sure that once this expires he will age out and no longer be eligible for coverage. He will not admit the exact amount of his monthly premium, but its over then $150 a month. He has contacted many companies for alternatives, but he is either not eligible, or the cost is too high. I’m not looking for “investment”, I’m looking to protect my family, and I refuse to back myself into the corner that he did. We may loose the house in case we can figure something out.
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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Agents only need to know the products of one company, which can simplify the learning curve. This can also make it easier to keep policyholders abreast of policy changes and provide better service in general after the policy is sold, helping to foster a closer ongoing relationship. Because brokers must know the products and services offered by numerous companies, staying current and providing clients with reliable product knowledge can prove challenging.
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.
Retrospectively rated insurance is a method of establishing a premium on large commercial accounts. The final premium is based on the insured's actual loss experience during the policy term, sometimes subject to a minimum and maximum premium, with the final premium determined by a formula. Under this plan, the current year's premium is based partially (or wholly) on the current year's losses, although the premium adjustments may take months or years beyond the current year's expiration date. The rating formula is guaranteed in the insurance contract. Formula: retrospective premium = converted loss + basic premium × tax multiplier. Numerous variations of this formula have been developed and are in use.
Protected self-insurance is an alternative risk financing mechanism in which an organization retains the mathematically calculated cost of risk within the organization and transfers the catastrophic risk with specific and aggregate limits to an insurer so the maximum total cost of the program is known. A properly designed and underwritten Protected Self-Insurance Program reduces and stabilizes the cost of insurance and provides valuable risk management information.

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But I love how you talk about it here, being excited by the sales pitch before grounding yourself in some of the things you had read prior to the meeting. Whether it’s insurance, investing, buying a car or anything else, all of us get excited in the moment when we’re being presented with a new opportunity. The real challenge is in doing exactly what you were able to do so successfully: stepping back from the moment and reflecting on your real goals here, what you really set out to do, and then analyzing the facts objectively. You did a terrific job there and in the end were able to make the best decision for you and your family.

Now, it turns out that we have higher, broader family obligations than I anticipated 20-27 years ago. My wife and I plan to possibly keep working past 65 (which I hadn’t anticipated) and would like to be able to fund these obligations even if we were to die before our now planned time to stop working (that goes past the periods anticipated by the terms of our term policies). Our term policies and term coverage are beginning to expire and due to certain issues, at best, we would have to pay very high premiums for anything I would try to purchase now, if we would qualify at all.
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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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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.
I bought a whole life insurance policy for my daughter when she was 4! What a mistake to make! Now that the policy is 21 years old, I am undecided whether to continue paying the annual premium or surrender the policy.I have paid $25,126 over the years, and will walk away with $36,250 if I surrender it now. The policy covers has a $100,000 coverage and the annual premium is now $1179. I would appreciate your advice!
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Insurance agents, often referred to as “captive” agents, typically represent one insurance company. Insurance brokers, on the other hand, represent multiple insurance companies to ensure that you are connected with the right insurance for you. An agent acts as a conduit to provide information to insurance buyers. The insurance buyer then has the option to choose from available policies and contracts from the insurer offered through the agent. These policies and contracts are decided through contractual agreements that the insurance agents have with the insurers to meet certain guidelines.
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.
The best part of the cash value? You have access to it at any time, for any reason, without taxes or penalties. This is probably the best benefit of whole life and is what is most attractive to my high net clients who are already maximizing contributions to IRA’s, 401k’s etc. Also, whole life does not carry the same penalties for withdrawals as these other accounts do
For example, most insurance policies in the English language today have been carefully drafted in plain English; the industry learned the hard way that many courts will not enforce policies against insureds when the judges themselves cannot understand what the policies are saying. Typically, courts construe ambiguities in insurance policies against the insurance company and in favor of coverage under the policy.
These reviews are all from Medicare beneficiaries just like you. Our clients consistently rate us 5 stars for both our up-front help, but also the phenomenal back-end support you get from our Client Service Team. We have some of the very best Medicare supplement agents in the country. These independent Medicare advisors truly care. You can read our reviews here. Notice how many of them are from clients who called us when Medicare denied their claim or rejected their bills or their doctor mis-codes a service or when they are standing at the pharmacy and can’t get their medication. Normally you would call the insurance company yourself to try to figure out how to fix these things.
Keep in mind, not all insurance companies use agents. You can do business directly with many companies by purchasing coverage online. These policies may be less expensive since the company doesn't have to pay the agent's commission. Regardless of how you buy the policy, make sure the company is licensed in your state, is financially stable and check to see if they have complaints.
Life insurance policies often have hidden costs, such as fees and large commissions, that you may not find out about until after you purchase the policy. There are so many different kinds of life insurance, and so many companies that offer these policies, that you should use a fee-only insurance adviser who, for a fixed fee, will research the various policies available to you and recommend the one that best suits your needs. To ensure objectivity, your adviser should not be affiliated with any particular insurance company and should not receive a commission from any policy.
When you work with an insurance broker, you can rest easy knowing that you are receiving honest, reliable service. Brokers provide full disclosure on commission rates and the effects that these rates may have on your insurance premium. In fact, brokers are required to disclose this information. If you choose to go through with the sale, know that the broker’s compensation is included in your premium payments. At the point of sale, your broker should provide you with a statement that tells you how much of your premium will go towards commission. This allows you to make a more informed choice when shopping for insurance.

*Quotes based on a composite of participating carriers which have at least an "A-" rating by A.M. Best. Rates current as of 12/19/2017 for a Guaranteed 10-year term life policy, $250,000 in coverage issued at each company's best-published rates. Sample rate is for a preferred plus, non-tobacco user, male and female age 18-34. Rates and the products available may vary by state. All policies are subject to underwriting approval.


Holly, I just turned seventy years old and retired and constantly looking and applying for jobs because my monthly income is only 1,206.00. I am divorce for only twenty eight years and have a learning disabled adult son who has never work. I need a life insurance policy to be around $30,000 to cover funeral expenses and some money for my son to cope. What life insurance company should I chose and should I chose term or whole life? I would greatly appreciate your response. I have no savings. Thank you. Diahann Cambridge

The proceeds of a life policy will be included in the estate for death duty (in the UK, inheritance tax) purposes. Policies written in trust may fall outside the estate. Trust law and taxation of trusts can be complicated, so any individual intending to use trusts for tax planning would usually seek professional advice from an Independent Financial Adviser and/or a solicitor.
5The monthly rate shown is for Preferred Elite based on a Male, age 37. Whole Life Advantage® is a whole life insurance policy issued by Allstate Life Insurance Company, 3075 Sanders Rd, Northbrook IL 60062. Whole Life Advantage is available in most states with series LU11040 or form ICC12A1. In New York, issued by Allstate Life Insurance Company of New York, Hauppauge, NY, and is available with contract NYLU796.
*Payoff Protector is not an insurance product. Subject to the terms, conditions, and restrictions of the Payoff Protector provision in your State Farm Bank Promissory Note and Security Agreement. If your vehicle is determined to be a total loss before the loan is paid off, State Farm Bank will cancel the difference between the insurance payout and the unpaid principal balance due on the loan. Certain restrictions apply. For example, your loan must be in good standing.
Property insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured more than 13,000 houses. The devastating effects of the fire converted the development of insurance "from a matter of convenience into one of urgency, a change of opinion reflected in Sir Christopher Wren's inclusion of a site for 'the Insurance Office' in his new plan for London in 1667."[4] A number of attempted fire insurance schemes came to nothing, but in 1681, economist Nicholas Barbon and eleven associates established the first fire insurance company, the "Insurance Office for Houses," at the back of the Royal Exchange to insure brick and frame homes. Initially, 5,000 homes were insured by his Insurance Office.[5]
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?

Awesome article Matt! Couldn’t agree more – unfortunately not enough people know that whole life insurance should only be purchased in very limited circumstances and should not be considered for investment purposes. Thanks for joining the #wholeliferebellion. I created a Term v. Whole Life Insurance comparison calculator so people can crunch the numbers: http://www.insuranceblogbychris.com/term-vs-whole-life-insurance-comparison-calculator/


It’s a great point about the cost causing people to be underinsured. I have no idea if there are any statistics on that, but intuitively it would seem to make sense. It’s a shame if someone with a real need for life insurance is under-protected because a salesman could make a bigger commission off the more expensive product. But I’m sure it happens.
Many people have a 401(k) or other retirement plan with their employer. Just about everyone has the option of contributing to an IRA. Then there are regular taxable accounts. All of these options allow you to choose your investments, control your costs (though employer plans will be more limited here), diversify, and avoid the downsides of whole life insurance we’ve just gone over.

All points have merit but, like any service, unprofessional service can be punished by walking. However, point #4, “market blocking” is a particularly confounding practice in P&C (I don’t think this occurs in LIfe & Health). Market blocking is a matter which Insurance Commissioners could easily correct nationwide to the immediate benefit of the customer.


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.

I only read the first couple of paragraphs here but so far what you are talking about is universal insurance, not whole life. Whole life builds cash value but the policy holder doesn’t get that money….they can take it out on a loan but they have to pay it back with a small interest rate…the cash value a whole life policy collects is what keeps the policy going and it is why they are able to pay out everything they promised you. No one anywhere ever would say hey how about you pay me ten dollars and I will give you twenty in a week….the whole life policy builds up cash value and between that and your premiums they are able to make the money to cover the whole cost. Term life is exactly what its name says…it only last for a term and will be terminated within a set period of time (usually like 20 years) so when you buy it at 20 and live till 50 you don’t get the money you just paid almost 2,000 a year for nothing….but whole life has to pay out it covers you for your whole life. The reason that the term is so much cheaper is that statistically the person will not die in that set time so they are able to make money off the people who don’t die to cover the select few that do and when you are 50 trying to buy term it is crazy expensive. Everyone has their own opinions and I understand that I am just 99% sure that you are talking about universal insurance which is a mix of term and whole and will soon be illegal because of how shady it is.
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.
First, THE PROBABILITY OF GETTING THE PAYOUT IS SUPPOSED TO BE 100%! It is a GUARANTEED return, so long as your insurer lives up to its obligations (more on that below). So it is a much less risky investment than almost anything other than cash. But CD rates will often look better than the whole life return, so why not invest your money there? Well..
Point Two: There is NO SAVINGS in literally 99% of all whole life or cash value policies! In the event of the death of the insured, the LIFE INSURANCE COMPANY TAKES THE SAVINGS TO PAY OFF THE FACE VALUE OF THE INSURANCE!!! The only person who saves money is the agent and the insurance company. The insured or beneficiaries saves nothing! There may be a few divergent exceptions with cumbersome addons, but NO SAVINGS TO YOU is the result.

Annuity Co Aurora 80015


Matt; Thank you for the thought provoking information you have taken the time to post here. My question: I am 66 and my wife 54. We got a whole life policy several years ago. We wanted insurance that would extend into our 70’s and 80’s (if we are so blessed), because we experienced how end of life costs for elderly parents can add up and be a possible burden to the children. we also want the surviving spouse to be assured of not being cleaned out financially. When I looked at the numbers; Cash value plus death benefit plus a long-term care rider, it seems to be a pretty good return, after all, we know for sure that we will die. I am not aware of term insurance policies for people much past the age of 70 for $200,000 or more. Am I looking in the wrong places or is my think askew?
When comparing car insurance quotes, it helps to compare apples to apples; in other words, you want to be sure that the quotes you get are for identical - or at least very similar - auto insurance policies. Once you have a better idea of the type of coverage you’re looking for in a policy, this will be easy. To better understand coverage types start here
4The monthly rate shown is for Preferred Elite based on a Male, age 37, and a 20-year level term period. Terms and limitations will apply. Rates shown are monthly as of January 1, 2018. Allstate TrueFit® is a term life insurance to age 95 policy issued by Allstate Assurance Company, 3075 Sanders Rd., Northbrook IL 60062 and is available in most states with contract/series ICC14AC1/ AC14-1. In New York, issued by Allstate Life Insurance Company of New York, Hauppauge, NY with contract/series NYLU818. The premiums will be the same for the level term period selected. Beginning with the anniversary following the level term period, the company reserves the right to change premium rates each policy year, but rates cannot be more than the maximum guaranteed amounts stated in the policy.
It’s very true that you don’t own the cash value in anywhere near the same way that you own your other investments. You can only access it in certain circumstances, and even then there are big conditions like surrender charges and interest. And you’re also correct that you can’t get the cash value AND the insurance proceeds. It’s either/or. All good points.
Our Employee Benefits team is acutely aware of the need to provide your employees with the appropriate benefits, while simultaneously ensuring the costs remain affordable to both you and your employees. Our experts take a proactive and consultative approach to doing business, and our goal is to not only help you retain your competitive edge, but to make benefit plan administration seamless for you. We go above and beyond for each client, acting as an advocate in price negotiation and dispute resolution in claims and billing scenarios.
Health questions can vary substantially between exam and no-exam policies. It may be possible for individuals with certain conditions to qualify for one type of coverage and not another.[citation needed] Because seniors sometimes are not fully aware of the policy provisions it is important to make sure that policies last for a lifetime and that premiums do not increase every 5 years as is common in some circumstances.[citation needed]

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