I’ll be up front that I am not an expert on life insurance and long term care for people in your situation and therefore don’t have a great answer for you. I have heard good things about certain hybrid policies like you’re describing, but I would be very careful about who you’re buying it from and how exactly the policy works. If you would like a referral to a fee-only financial planner who specializes in this kind of decision, just let me know and I would be happy to help.

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Point Three: One of the catches of the whole life agent is “Whole life insurance never expires!” Okay let us imagine a house insurance agent selling you an addon savings plan to your house fire insurance. Say you eventually sell the house and move to an apartment. Now would you want to keep paying house insurance when you DO NOT HAVE A HOUSE ANYMOFE ??? 🙂 Or paying for car insurance when you no longer have a car??? So why would you want to keep paying for a poor savings plan that only saves the life insurance company any money??? 🙂

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.


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.
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Insurance agents have a responsibility to the insurance company.  Agents act as the insurance company representative in the buying process as they are typically salaried employees.   Most insurance agents are “Captive” to represent only one company, such as: Allstate, State Farm, Farmer, etc.  Because they are contracted as captive insurance agents, they are not able to discuss or recommend other insurance companies.  

Defense Base Act (DBA) insurance provides coverage for civilian workers hired by the government to perform contracts outside the United States and Canada. DBA is required for all U.S. citizens, U.S. residents, U.S. Green Card holders, and all employees or subcontractors hired on overseas government contracts. Depending on the country, foreign nationals must also be covered under DBA. This coverage typically includes expenses related to medical treatment and loss of wages, as well as disability and death benefits.


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.
Special exclusions may apply, such as suicide clauses, whereby the policy becomes null and void if the insured commits suicide within a specified time (usually two years after the purchase date; some states provide a statutory one-year suicide clause). Any misrepresentations by the insured on the application may also be grounds for nullification. Most US states specify a maximum contestability period, often no more than two years. Only if the insured dies within this period will the insurer have a legal right to contest the claim on the basis of misrepresentation and request additional information before deciding whether to pay or deny the claim.
According to the section 80C of the Income Tax Act, 1961 (of Indian penal code) premiums paid towards a valid life insurance policy can be exempted from the taxable income. Along with life insurance premium, section 80C allows exemption for other financial instruments such as Employee Provident Fund (EPF), Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), National Savings Certificate (NSC), health insurance premium are some of them. The total amount that can be exempted from the taxable income for section 80C is capped at a maximum of INR 150,000.[26] The exemptions are eligible for individuals (Indian citizens) or Hindu Undivided Family (HUF).
*This material is for informational purposes only. In general, partial or full surrenders from a permanent life insurance policy in excess of the policy’s basis are taxable, and limited circumstances exist where death proceeds will be taxable. Neither Farmers New World Life Insurance Company, nor its employees nor its agents provide legal or tax advice. Always consult your own attorney, accountant or tax adviser as to the legal, financial or tax consequences and advice on any particular transaction.

When I was at the meeting yesterday with my parents also present, I was really impressed at the product, which was basically a variation of whole life insurance called FFIUL. I was also impressed with the upper level salesman and the presentation. I saw the simulation that was shown and the resulting table of yearly returns looked impressive at first. I left the meeting with a smile on my face and was really thinking about making the investment especially considering that my friend (an accountant whose house I was at) said that he had invested in the same product.


An entity which provides insurance is known as an insurer, insurance company, insurance carrier or underwriter. A person or entity who buys insurance is known as an insured or as a policyholder. The insurance transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms, and usually involves something in which the insured has an insurable interest established by ownership, possession, or pre-existing relationship.
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]
Also, you said whole life is not an investment. But by definition, it is an investment. An investment is simply where you put money into something expecting a return in the future. And whole life insurance does provide that. Plus if it is a mutual company as mine is then you become a partial owner which means you get to vote and help the business make good business decisions.

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Hi, Matt. My parents are actually talking to an agent to get the whole life insurance and their premium monthly is about $1000 so which makes them to pay $120000 (since it’s the 10 yr plan) and the agent presented that the guaranteed value will be $250000. I have very little knowledge about the whole life insurance plan but wouldn’t it be easier for them to just get it and be insured with that guaranteed value if they are not the type to find where to invest and all that? or is it something that they shouldn’t relay on.. they are doing it for more their retirement and asked me for help but i am very confused about this whole life plan. Thanks! 

Term life insurance pays a specific lump sum to your loved ones for a specified period of time – usually from one to 20 years. If you stop paying premiums, the insurance stops. Term policies pay benefits if you die during the period covered by the policy, but they do not build cash value. They may also give you the option to port. That is, you can take the coverage with you if you leave your company.

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Life insurance companies in the United States support the Medical Information Bureau (MIB),[17] which is a clearing house of information on persons who have applied for life insurance with participating companies in the last seven years. As part of the application, the insurer often requires the applicant's permission to obtain information from their physicians.[18]


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.
Insurance brokers play a significant role in helping companies and individuals procure property and casualty (liability) insurance, life insurance and annuities, and accident and health insurance. For example, research shows that brokers play a significant role in helping small employers find health insurance, particularly in more competitive markets. Average small group commissions range from two percent to eight percent of premiums. Brokers provide services beyond procuring insurance, such as providing risk assessments, insurance consulting services, insurance-related regulatory and legislative updates, claims assistance services, assisting with employee enrollment, and helping to resolve benefit issues.[3] However, some states consider the provision of services that are unrelated to the insurance procured through the broker to be an impermissible rebate or inducement.
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.
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.
Though not an absolute separation; an insurance agent is an insurance company's representative by way of agent-principal legal custom. The agent's primary alliance is with the insurance carrier, not the insurance buyer. In contrast, an insurance broker represents the insured, generally has no contractual agreements with insurance carriers, and relies on common or direct methods of perfecting business transactions with insurance carriers. This can have a significant beneficial impact on insurance negotiations obtained through a broker (vs. those obtained from an agent).

I agree that it isn’t a good investment. However, that doesn’t make whole life a bad insurance policy. As I mentioned before, I realized a lot of things in my years working for a mortuary. First, the vast majority of life insurance policies that we filed were whole life (I would guess 80-90%). Why? Because people who are in their 70’s, 80’s, and 90’s don’t have term policies anymore. And I’ve seen all kinds of things happen to people who have planned well financially. Getting old and having to go into a nursing home generally means depleting one’s assets. With nursing homes in my area costing $5000 per month (and more in some areas), it may not take long to go through someone’s savings. Once they go through all of their assets, Medicaid will pick up the tab for the nursing home bill. Having whole life leaves money at the end regardless of what unforeseen circumstances happen. I’ve seen it happen hundreds of times….I’m guessing that those families didn’t think it was such a bad deal.
With that said, yes the interest rates are good, but it’s not really appropriate to compare the interest rate on a whole life loan to interest rates from other sources. With whole life, you’re borrowing YOUR OWN money that you already contributed after-tax. That’s very different from borrowing from a bank, where the money was never yours. It’s much more appropriate to compare the long-term, cumulative interest rate to the long-term after-tax returns you could get from other investments. That comparison looks very different and often much less beneficial for whole life.

A few comments… You shouldn’t ever be buying whole life insurance for purely for the reason of investing, you buy any life insurance because you need life insurance, the investment component is secondary. So not sure why we are analyzing it purely as an investment (I actually do know why, because some agents try to sell it this way, and Matt is trying to help them avoid a pitfall).
Life insurance (or life assurance, especially in the Commonwealth of Nations) is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money (the benefit) in exchange for a premium, upon the death of an insured person (often the policy holder). Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. The policy holder typically pays a premium, either regularly or as one lump sum. Other expenses, such as funeral expenses, can also be included in the benefits.
If she still needs the insurance, then you’re right that she may just be stuck between a rock and a hard place. I have some independent insurance experts that I work with and could potentially run it by them just to see what the options might be. If you’d like to talk things over in more detail, please feel free to email me directly at matt@momanddadmoney.com, or you can call me at 850-426-4034.
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.

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Builder's risk insurance insures against the risk of physical loss or damage to property during construction. Builder's risk insurance is typically written on an "all risk" basis covering damage arising from any cause (including the negligence of the insured) not otherwise expressly excluded. Builder's risk insurance is coverage that protects a person's or organization's insurable interest in materials, fixtures or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from an insured peril.[28]
If you are in the market for insurance for your business, home, vehicle, or your family, a broker can help you determine what your insurance needs are and what insurance is right for you. Because a broker works for you — not for an insurance company — you can be assured that your insurance broker has your best interests in mind when shopping for insurance policies. Contact an insurance broker today to learn more about how he or she can help you buy the best possible insurance for your needs.

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.


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.

Within Australia there are also a number of industry bodies that issue professional accreditations to members that comply with best standards of professional practice and integrity and maintain up to date skills and knowledge. The two main accreditations are the ANZIIF[12] CIP (certified insurance professional) and NIBA[13] QPIB (qualified practicing insurance broker) qualifications.

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I certainly don’t think that an insurance policy has to pay out to be valuable and that isn’t necessarily what I meant. We have term insurance now and I certainly find value in it even though it (hopefully) will never pay. What I meant was that the value to other family members is immeasurable. I can’t tell you how many times that I’ve seen a whole life policy swoop in and save the day when family members were struggling to cover the cost of a $10,000 or more funeral. I’ve just seen it happen too many times. Nobody thinks their 90 year old mom whose been in a nursing home for ten years would have life insurance and trust me when I say that people are pleasantly surprised when they find out that that’s the case.

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.
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.
Hi, Matt. My parents are actually talking to an agent to get the whole life insurance and their premium monthly is about $1000 so which makes them to pay $120000 (since it’s the 10 yr plan) and the agent presented that the guaranteed value will be $250000. I have very little knowledge about the whole life insurance plan but wouldn’t it be easier for them to just get it and be insured with that guaranteed value if they are not the type to find where to invest and all that? or is it something that they shouldn’t relay on.. they are doing it for more their retirement and asked me for help but i am very confused about this whole life plan. Thanks!
By the time you’re 50-60, either of those may no longer be the case. Either your kids may be old enough to provide for themselves (i.e. out of college), and/or you may already have enough money in your various savings accounts to handle whatever needs they have. That second one seems especially likely given that you’re 22 and already focused on making good financial decisions.
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.

Your point is valid in that everyone has different risk tolerances objectives etc. so what is good for me is not good for someone else. As for, is the insurance enough for my children; I added an additional purchase benefit where they can add ten times as much coverage no matter what health issues they have. They don’t have to go through a medical. So of they develop juvenile diabetes and they want to add more coverage when they are 18, the company still looks at them in perfect health. They don’t need a medical exam when they add more coverage.

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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”.
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]
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]

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.

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!
Term life is a type of life insurance policy where premiums remain level for a specified period of time —generally for 10, 20 or 30 years. After the end of the level premium period, premiums will generally increase. Coverage continues as long as the premiums are paid. Perhaps this is an option you may want to consider when you’re on a more limited budget and will have significant expenses over a shorter period of time.
Yes, backdoor Roths are capped at $5,500 per year. Still, I think they’re a better first option than whole life for all of the reasons mentioned in the post. Exposure to market risk is not an inherent problem, and is also not a characteristic of Roth IRAs. A Roth IRA is just a type of account within which the individual can invest however they want. If they want to be exposed to market risk (something that many people deem desirable), they can be. If not, they don’t have to be. It’s up to them.
I am an agent with one of the top companies and have been for 5 years. The “buy term and invest the rest” sounds like a great idea but here’s what I have found. People don’t actually do it. You cannot change human behavior. I try to hold my clients accountable and want them to do the same for me. If a client is a spender, they will never stop being a spender. For those people we design a savings plan that let’s them spend their money guilt free, as long as they hit their monthly savings goal, they can spend what they wish.

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Keep in mind though that the interest rate on these insurance loans are among the best rates you can get anywhere for access to money like prime plus 1 or 2 percent, and your principal is untouched and continues to grow. Who would you rather borrow from? Yourself/insurance co at prime plus 1% or 2% or from the bank at prime plus 6%+ So I think it is more misleading to harp on the minimal interest rate your paying on a fraction of the value of the cash value…which again is growing at the rate of the dividends.
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.
"Flexible death benefit" means the policy owner can choose to decrease the death benefit. The death benefit can also be increased by the policy owner, usually requiring new underwriting. Another feature of flexible death benefit is the ability to choose option A or option B death benefits and to change those options over the course of the life of the insured. Option A is often referred to as a "level death benefit"; death benefits remain level for the life of the insured, and premiums are lower than policies with Option B death benefits, which pay the policy's cash value—i.e., a face amount plus earnings/interest. If the cash value grows over time, the death benefits do too. If the cash value declines, the death benefit also declines. Option B policies normally feature higher premiums than option A policies.
Industries with a higher percentage of companies that have Beat (Positively Surprised) usually means that something good is happening to that group as a whole for so many companies to be positively surprising. And studies have shown that companies that positively surprise have a greater likelihood of positively surprising in the future (or missing if they've recently missed).
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.
It is not a valid argument to me to say that the “administrative pain in the ass” is a reason to ignore the tactic. It’s a pretty simple procedure and certainly not worth paying all the extra costs of a whole life approach just to avoid. Yes, you have to be careful if you have Traditional IRAs, but there are ways around that too. No, it’s not for everyone, but I would much rather try to make the backdoor Roth work first than immediately jump to whole life.

You do write that “some of our top clients who are in a tax bracket that you nor I will ever see” enjoy the benefits of whole life. As I say in the post, there is a small percent of the population with a very large amount of money that can benefit from whole life. That is not who I’m writing for here. For 98% of the population, it is not a useful tool.
Agents and brokers act as intermediaries between you (the insurance buyer) and your insurers. Each has a legal duty to help you obtain appropriate coverage at a reasonable price. Each must have a license to distribute the type of insurance he or she is selling. An agent or broker must also adhere to the regulations enforced by your state insurance department.
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Hi James. Sorry for the late reply! So I’ll be honest that I’m not an expert on this exact strategy, but my understanding is that it’s generally something you might look to implement later in life, closer to when you’re actually making the decision about what type of pension payout you want. That’s simply because there are a lot of variables involved that could make it either more or less advantageous, and if you’re in your early 30s it’s just hard to know what all of those variables will look like 30 years down the line.
The ~4% ROR initially feels like an acceptable return given limited principal risk, tax advantages and the current returns on alternative safe investments. I personally feel that the market will be more susceptible to bouts of volatility and higher levels of inter-asset correlation in the future. The idea of a fixed investment with stable returns in the distribution phase of retirement is important to me.
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]

There are also companies known as "insurance consultants". Like a mortgage broker, these companies are paid a fee by the customer to shop around for the best insurance policy amongst many companies. Similar to an insurance consultant, an 'insurance broker' also shops around for the best insurance policy amongst many companies. However, with insurance brokers, the fee is usually paid in the form of commission from the insurer that is selected rather than directly from the client.


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.

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