Large number of similar exposure units: Since insurance operates through pooling resources, the majority of insurance policies are provided for individual members of large classes, allowing insurers to benefit from the law of large numbers in which predicted losses are similar to the actual losses. Exceptions include Lloyd's of London, which is famous for insuring the life or health of actors, sports figures, and other famous individuals. However, all exposures will have particular differences, which may lead to different premium rates.
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.
Hey Mark. Thanks for the kind words and you make a great point! That’s a big reason for #5 in the article. With the speed at which life can change, locking yourself into paying those premiums for decades is just so limiting. And you go even further than that here with simply wanting to invest the money you’ve already put in differently, and I couldn’t agree with you more. It adds a lot of inflexibility to your planning which can make figuring out the other pieces a lot more difficult.

Lets also not forget a very important aspect of whole life INSURANCE. It provides guaranteed insurance, for life. Term policies are nice, and serve a purpose, but they eventually end and the cost to continue term as you get older can be way too expensive for most people. Whole Life allows you to lock in a guaranteed premium, that will never increase.

Insurance Nation Co


What will you need the life insurance for at that point? Would you be able to save $10,000 in a savings account between now and age 70 instead of paying for whole life insurance? If you take the $26.50 difference in premiums that you mention here and put it into a savings account each month, you’ll have about $7,782 by age 70, assuming 1.5% interest. If you can increase that monthly contribution to $34.25, you’ll reach just over $10,000 by age 70. And that money will be available for whatever you or your family need, any time you want.
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.

Auto Insurance Company


Hi Christine. First of all, thank your for stopping by. Second of all, please don’t beat yourself up over this. Life insurance salesmen are trained to make these policies sound REALLY attractive and their arguments can be quite persuasive. I actually found myself feeling close to convinced about one of these policies a few years ago before coming to my senses.

Like most small business owners, you probably purchase your insurance policies through an insurance agent or broker. The functions performed by insurance agents are similar, but not identical, to those performed by brokers. This article will explain how they differ. It will also explain how agents and brokers make money from the premiums you pay your insurers. Except where noted, the following discussion applies to agents and brokers selling property/casualty insurance.
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.
Insurance Services Co Aurora CO 80015

Of course, it’s always more efficient to just save the money themselves. However, many people don’t and people often want to make sure that the money will be there when they are old and can no longer make decisions for themselves. Whole life is one way to do that. We chose term because it made more sense for us and it was so cheap since we were young when we bought. However, I’m just presenting the alternate viewpoint coming from someone who has filed many, many whole life policies on behalf of grateful families.
The problem is that it takes a long time for the returns to reach that level. There will be many years at the start of the policy where your return will be negative, and many more years where the return will be only slightly positive. If you stick with it for a long time, you eventually get into a reasonable range of returns. But if at any point before that you decide you want to do something different, you will have spent many years and a lot of money getting very poor returns.
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.  
The first years premiums goes to the insurance agent who sold you the policy…and I’m sure there are plenty of other hidden fees in there. I almost went with whole life insurance as a friend was working as an insurance agent and I had just graduated college. I decided against it though. Read a book that said that I should instead buy term and invest the difference. Another problem with whole life insurance is that the premiums are much more expensive than term life insurance…if someone chooses whole life, they will likely choose a lesser coverage and might be underinsured if something unfortunate were to occurr.
Terrorism insurance provides protection against any loss or damage caused by terrorist activities. In the United States in the wake of 9/11, the Terrorism Risk Insurance Act 2002 (TRIA) set up a federal program providing a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism. The program was extended until the end of 2014 by the Terrorism Risk Insurance Program Reauthorization Act 2007 (TRIPRA).
“In the policy that was attempted to be sold to me, the “guaranteed return” was stated as 4%. But when I actually ran the numbers, using their own growth chart for the guaranteed portion of my cash value, after 40 years the annual return only amounted to 0.74%. There are a number of explanations for this difference, including fees and the way in which the interest rate is applied.”
You’re typically asked about your current and past health conditions, and your family health history. The insurer may ask for your consent to get your medical records and may ask you to take a life insurance medical exam. Insurers will also check other data sources to determine term life insurance quotes. More: What you need to apply for term life insurance
The “fixed returns” you talk about from whole life are not the 4-6% you mention in multiple places. Again, as I said in the post, the guaranteed returns are much closer to 1% or less. Yes you might get better returns depending on the dividends the insurance company decides to pay, but that’s not “fixed” or guaranteed. It changes every year. And yes, you can improve those refunds if you vastly overfund the policy in the early years, which again is something I already mentioned in the post. But for 98-99% of the population that really isn’t a viable strategy.

Insurance Card


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
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.
The comparison for defined contribution vs registered accounts is easier because you are dealing with account values which you can project with a fair degree of certainty, at least within ranges to which you can apply confidence intervals, to the degree market activity can be reliably subjected to statistics (point of contention: this is debatable…otherwise we wouldn’t have return years with standard deviations of 3+). You just project the accumulation and the withdrawal and see which one runs out of money first, then consider the non-financial issues already discussed above. Comparing defined benefit plans vs registered accounts is a little bit tougher. This is where you might want to bring in your accountant or actuary to do the math. They can provide you with the information you need to make the decision.
At the most basic level, initial ratemaking involves looking at the frequency and severity of insured perils and the expected average payout resulting from these perils. Thereafter an insurance company will collect historical loss data, bring the loss data to present value, and compare these prior losses to the premium collected in order to assess rate adequacy.[22] Loss ratios and expense loads are also used. Rating for different risk characteristics involves at the most basic level comparing the losses with "loss relativities"—a policy with twice as many losses would therefore be charged twice as much. More complex multivariate analyses are sometimes used when multiple characteristics are involved and a univariate analysis could produce confounded results. Other statistical methods may be used in assessing the probability of future losses.

Auto Insurance Co


Who ever said anything about only having whole life insurance as an investment? Savings, The Market and Insurance (a mix of whole and term) is the best way to plan and protect one’s retirement. Plus once your premiums are paid up, the need to repay the loan is not true. (as long as you don’t go into the death benefit). What the real issues is people are tapping into loans while they are making premiumpayments and they aren’t receiving the proper assessment.
As for your question, USAA is a fantastic company and I would happily recommend them for many things, like auto, home, and umbrella insurance. With that said, I have never reviewed one of their whole life insurance policies and therefore can’t really comment on that specifically. I will say that I would be careful about taking that 4.5% return at face value, as I describe in the post. I would encourage you to run the numbers for yourself to see what it really comes out to.
Any death benefit of the policy will not be payable if the named insured commits suicide or if anyone covered by additional riders commits suicide, while sane or insane, within two years from the policy or rider effective date. All premiums paid will be refunded, less any indebtedness. The following information only applies to the Accelerated Death Payment, Waiver of Premium Benefit Rider, and Accidental-Death Benefit Rider:
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.
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.

Insurance involves pooling funds from many insured entities (known as exposures) to pay for the losses that some may incur. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring. In order to be an insurable risk, the risk insured against must meet certain characteristics. Insurance as a financial intermediary is a commercial enterprise and a major part of the financial services industry, but individual entities can also self-insure through saving money for possible future losses.[15]

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.
I have been paying into a whole life for 8 years, do I get out of it? What do I do after? My love ones outlived their term policies and the burden of burial fell on the family. I had a term life for 5 years before getting a whole life. I lost my job and they dropped me in two months for lack of payments. All that money I paid into the term was lost and getting insurance when older was more expensive. So the next time I went with whole. They don’t drop you as fast if you can’t pay the premiums during a job loss and if they do you get at least some money back. After reading this I feel I still made the wrong decision.
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
Medicare Brokers like Boomer Benefits also often provide simple and easy education to you about how Medicare works. Every year, thousands of Medicare beneficiaries feel frustrated after trying to read the Medicare handbook. At Boomer Benefits, we will educate you by breaking Medicare down into pieces that are easier to understand. This is why we are so well known as the baby boomer’s favorite insurance agency.

Insurance Company Near Me Company


4. If you end up wanting permanent life insurance when you get older, you have plenty of options other than buying whole life insurance as an investment when you’re young. You could convert a term policy. You could buy guaranteed no-lapse universal life. There are plenty of options that don’t require you lock yourself into a poorly-performing policy at a young age when that cash flow would be better used elsewhere.

Auto Insurance Co Aurora 80015


I am looking at it all from the perspective of an inheritance. In my line of work, I see pensions and IRA’s taken by healthcare and Medicaid all the time. Heirs are left with nothing and it is sad. Im researching and researching but cannot find something that is safe enough, can grow to at least $100,000 for thirty so years, and cannot be taken touched aside from….life insurance. I have elderly grandfathers who left their families w/ something because of life insurance. My veteran grandfathers
Good question Eski. I would encourage you to look into long-term disability insurance as a potentially more effective way to provide coverage for the exact risk you’re talking about. In general you’ll get better, more comprehensive coverage from a disability insurance policy that’s specifically designed for this than from a life insurance policy that includes it as a limited add-on.
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?
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. 

Insurance Services Co


Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to claims are known as perils. An insurance policy will set out in detail which perils are covered by the policy and which are not. Below are non-exhaustive lists of the many different types of insurance that exist. A single policy that may cover risks in one or more of the categories set out below. For example, vehicle insurance would typically cover both the property risk (theft or damage to the vehicle) and the liability risk (legal claims arising from an accident). A home insurance policy in the United States typically includes coverage for damage to the home and the owner's belongings, certain legal claims against the owner, and even a small amount of coverage for medical expenses of guests who are injured on the owner's property.
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.

Insurance Services Company


However, there may be areas where your pension doesn’t stack up to individual plans. For example you can leave your individual account to a beneficiary but that may not be possible with your pension. Also, survivor benefits may be insufficient or altogether absent. The nice thing about transferring your pension to an individual account today is that with interest rates at all-time lows, the amount the pension has to provide you on exit (the commuted value) is inflated to reflect the larger pool of capital required to fund your retirement years. This means you can leave with a bigger pool of dough than you could in an era where interest rates were much higher and so if things turn around and we find ourselves in a rising rate environment with improved fixed income opportunities, you can make out like a bandit. Of course, things could slide into negative interest rate territory and you could be left years left to live and no cash to live it on.
Crop insurance may be purchased by farmers to reduce or manage various risks associated with growing crops. Such risks include crop loss or damage caused by weather, hail, drought, frost damage, insects, or disease.[29] Index based crop insurance uses models of how climate extremes affect crop production to define certain climate triggers that if surpassed have high probabilities of causing substantial crop loss. When harvest losses occur associated with exceeding the climate trigger threshold, the index-insured farmer is entitled to a compensation payment[30].

Insurance Journal Company


Of course, it’s always more efficient to just save the money themselves. However, many people don’t and people often want to make sure that the money will be there when they are old and can no longer make decisions for themselves. Whole life is one way to do that. We chose term because it made more sense for us and it was so cheap since we were young when we bought. However, I’m just presenting the alternate viewpoint coming from someone who has filed many, many whole life policies on behalf of grateful families.

Home insurance Co Aurora 80015


Global insurance premiums grew by 2.7% in inflation-adjusted terms in 2010 to $4.3 trillion, climbing above pre-crisis levels. The return to growth and record premiums generated during the year followed two years of decline in real terms. Life insurance premiums increased by 3.2% in 2010 and non-life premiums by 2.1%. While industrialised countries saw an increase in premiums of around 1.4%, insurance markets in emerging economies saw rapid expansion with 11% growth in premium income. The global insurance industry was sufficiently capitalised to withstand the financial crisis of 2008 and 2009 and most insurance companies restored their capital to pre-crisis levels by the end of 2010. With the continuation of the gradual recovery of the global economy, it is likely the insurance industry will continue to see growth in premium income both in industrialised countries and emerging markets in 2011.
Insurance Services Office Co Aurora CO 80015

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.

House Insurance Company


In 2017, within the framework of the joint project of the Bank of Russia and Yandex, a special check mark (a green circle with a tick and ‘Реестр ЦБ РФ’ (Unified state register of insurance entities) text box) appeared in the search for Yandex system, informing the consumer that the company's financial services are offered on the marked website, which has the status of an insurance company, a broker or a mutual insurance association.[50]
Property insurance provides protection against risks to property, such as fire, theft or weather damage. This may include specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, inland marine insurance or boiler insurance. The term property insurance may, like casualty insurance, be used as a broad category of various subtypes of insurance, some of which are listed below:
Disability- what happens to your retirement plan contributions if you want to work but can’t? Your employer can’t even contribute for you… It’s illegal. Oh, a life insurance company will pay the premium for you along with any additional money that you scheduled to dump in… And continue to contribute forever if your remain disabled (if done right). That is called a “self-completing retirement plan.”
As for it being undiversified, NO investment by itself is completely diversified. Cash value life insurance can ADD diversity and security to a portfolio (the top companies have incredible financial strength, good policies can have a solid conservative return while meeting a life insurance need). Diversification is an issue with cash value life insurance if it makes up a good portion of your assets, and if it would, you shouldn’t be buying it.
The mortality of underwritten persons rises much more quickly than the general population. At the end of 10 years, the mortality of that 25-year-old, non-smoking male is 0.66/1000/year. Consequently, in a group of one thousand 25-year-old males with a $100,000 policy, all of average health, a life insurance company would have to collect approximately $50 a year from each participant to cover the relatively few expected claims. (0.35 to 0.66 expected deaths in each year × $100,000 payout per death = $35 per policy.) Other costs, such as administrative and sales expenses, also need to be considered when setting the premiums. A 10-year policy for a 25-year-old non-smoking male with preferred medical history may get offers as low as $90 per year for a $100,000 policy in the competitive US life insurance market.

This article was 100% devoted to the investment component, but I do agree that there are circumstances where the insurance component can be very valuable. I was actually recently thinking about your previous comment, which was along the same lines as this one. I haven’t run the numbers, as it’s very difficult, if not impossible to find online quotes for whole life insurance where you don’t have to give out your contact information. But if you’re truly worried about having money available for funeral expenses, I wonder if it would be more cost efficient to set up an irrevocable trust with terms that the money in the trust could only be used for funeral expenses. Anything left over could go to the estate. I have a hunch that the one-time cost involved there would in most cases be less than the ongoing cost of a whole life policy. Like I said, I haven’t run the numbers to be sure, but it would certainly be worth considering. This is actually something I could find out pretty easily with a couple of emails. Sounds like a future post!
Now that you have a better picture of the difference between term and whole life policies, you probably want to compare term life versus whole life insurance costs. To do so, you will need to directly compare the short and long term costs of a whole life policy and a term policy, based on factors like your age, the face value of the policy you want to buy, and whether or not you are a smoker.

Insurance Journal

×