Any person acting as an insurance agent or broker must be licensed to do so by the state or jurisdiction that the person is operating in. Whereas states previously would issue separate licenses for agents and brokers, most states now issue a single producer license regardless if the person is acting on behalf of the insured or insurer. The term insurance producers is used to reference both insurance agents and brokers.
Whole life is insurance not an investment. You buy it so the day you pass on your family will have money to ease their grieving by giving them time off, financial security, and most importantly for whole life insurance to pay the cost of your funeral, etc. It can mean a lot to people to have a nice funeral for their loved one as a proper send off. I view whole life as a product, like my house, which I also don’t view as an investment.
I did an in-depth analysis awhile back showing the exact opposite of what you presented here. If you adjust for risk tolerance, and look at the best policies on the market, they’re not only competitive, they’re good. And, what I found corresponds with the research currently available about whole life vs BTID. Namely, sometimes, they’re better than a traditional 60/40 split portfolio (though I’d be hesitant to make that comparison as a blanket rule).
2. My analogy to a house wasn’t intended to compare the merits of an investment. It was simply a way to explain the Cash Value of a policy, in terms that people could understand better. We many times hear the argument about Whole Life Cash value: “It’s my money. Why do I have to borrow against it?” Giving the analogy of a home (or for that matter any asset of value, be it real estate, or stocks, bonds or mutual funds held in an account that allows for margin loans) helps people understand the difference between an asset that has value, to actual cash. It also helps people understand why sometimes it is preferable to borrow against an asset, rather than liquidate the asset.
7Variable universal life products are long-term investments designed to provide life insurance protection and flexibility in connection with premium payments and death benefits. You should carefully consider the investment objectives, risks, charges, and expenses of the investment alternatives before purchasing a policy. These policies have limitations and are sold by prospectus only. The prospectus contains details on the investment alternatives, policy features, the underlying portfolios, fees, charges, expenses, and other pertinent information. To obtain a prospectus or a copy of the underlying portfolio prospectuses, please contact Allstate Assurance Company. Please read the prospectuses carefully before purchasing a contract.
“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.”
Hi There I was reading the comments and thought Id chime in. For the purpose of full disclosure Im an agent. That being said I have always been for doing the right thing for people and so I try to do as much due diligence in the products I offer, if I dont feel comfortable I do not sell it. Alot of times there are pressures for us agents to sell a particular product but I always approach everything with skepticism. Ive ran the numbers on whole life and there are a some companies that offer superior whole life policies. After running the numbers I beleive that having a small whole life policy is not a bad deal.
Captive Agents - Captive insurance agents represent just one insurance carrier. In essence, they are employees of the carrier. The upside of working with a captive agent is that he or she has exceptionally thorough product knowledge. The downside is that he/she cannot provide access to products or pricing from outside their respective company. For this reason, you must have a high tolerance for carrier-specific terms, since each carrier and its in-house representatives may use language that is tough to compare across several companies that you encounter. Nevertheless, tap into that exceptional product knowledge and get smarter along the way as you search. The surge in online insurance websites offers consumers yet another option to use as part of their selection strategy. It is easy to find an insurance agent online, particularly one from a national insurance provider. Moreover, with 24-7 online access and quick comparison of policies, these web services are convenient, quick and a great way to ballpark quotes and to give you exposure to a wide variety of insurance providers. When you find one that is appealing to you, give them a call or fill out an agent request online.
1. Almost ANYONE can benefit from a well designed overfunded Participating Whole Life policy. Are you saying that the vast majority of the population has no place in their investment portfolio for a guaranteed fixed asset that provides long-bond like returns (coupled with a few other bells and whistles)? I would even argue that single people with no children might benefit from this product in the right amount and the proper structure (not to mention that some policies now have the option to pay for long-term-care). EVERY PERSON that cares for someone or something (be it a spouse, a child, a charity, or anything else) can benefit even more, by virtue of having a guaranteed death benefit. Such a benefit allows the comfort (and better cash flow with lower taxation) of spending down assets, rather than relying solely on returns on assets.
1. What I mean by that is why not buy a whole life policy carry the policy for 20/30 years, just as you would a term life. Then once you have paid down all debt, built wealth, and self funded funeral expenses you surrender your policy. (Making sure my policy has no surrrender fees past year 30) Walking away with more Money than you paid in premiums. To me this also gives me options once I hit that 30 year mark to possibly keep the money in the whole life policy to continue to increase at a conservative and somewhat safe rate.
1. It can help with estate taxes. As of 2014, married couples can pass on up to $10.68 million to their heirs without any estate taxes due (there are some nuances, but they’re besides the point here). An individual can pass on $5.34 million estate tax-free. For people who will be passing on more that those amounts, they could be facing significant estate taxes that would leave their heirs with less money. Permanent life insurance can be a good way to provide the funds to pay those taxes and allow their heirs to receive the full amount of the inheritance.
First of all, it’s important to understand that while the death benefit is certainly valuable, it is not technically an “asset”. The asset that you can include on your balance sheet with a whole life policy is the cash value. The only way you get the death benefit is by dying, so it is not an asset you can actually use today. Again, that doesn’t mean it’s worthless, it’s just not correct to compare it to money in a savings or investment account.
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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Life insurance can be very confusing. What is term life insurance? What is whole life insurance? How can you get the information you need and make the right decision about life insurance for you and your family or other beneficiaries? We’ll provide an overview of these two popular types of life insurance so you can get an idea of what might be a good fit for you. Find out more by contacting an insurance agent in your area.
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.
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?
At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +25.28% per year. These returns cover a period from January 1, 1988 through February 4, 2019. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.

Collision and comprehensive only cover the market value of your car, not what you paid for it—and new cars depreciate quickly. If your car is totaled or stolen, there may be a “gap” between what you owe on the vehicle and your insurance coverage. To cover this, you may want to look into purchasing gap insurance to pay the difference. Note that for leased vehicles, gap coverage is usually rolled into your lease payments.

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Qualifying status is determined at the outset of the policy if the contract meets certain criteria. Essentially, long term contracts (10 years plus) tend to be qualifying policies and the proceeds are free from income tax and capital gains tax. Single premium contracts and those running for a short term are subject to income tax depending upon the marginal rate in the year a gain is made. All UK insurers pay a special rate of corporation tax on the profits from their life book; this is deemed as meeting the lower rate (20% in 2005–06) of liability for policyholders. Therefore, a policyholder who is a higher-rate taxpayer (40% in 2005-06), or becomes one through the transaction, must pay tax on the gain at the difference between the higher and the lower rate. This gain is reduced by applying a calculation called top-slicing based on the number of years the policy has been held. Although this is complicated, the taxation of life assurance-based investment contracts may be beneficial compared to alternative equity-based collective investment schemes (unit trusts, investment trusts and OEICs). One feature which especially favors investment bonds is the '5% cumulative allowance'—the ability to draw 5% of the original investment amount each policy year without being subject to any taxation on the amount withdrawn. If not used in one year, the 5% allowance can roll over into future years, subject to a maximum tax-deferred withdrawal of 100% of the premiums payable. The withdrawal is deemed by the HMRC (Her Majesty's Revenue and Customs) to be a payment of capital and therefore, the tax liability is deferred until maturity or surrender of the policy. This is an especially useful tax planning tool for higher rate taxpayers who expect to become basic rate taxpayers at some predictable point in the future, as at this point the deferred tax liability will not result in tax being due.
We were sold a whole life policy from Mass Mutual for my husband, but we also have term insurance on both of us. We are on a 10 year track to pay off the policy and have three years left. Is it still a “bad investment” once the policy is paid off? Should we be expecting those 0.74% yearly returns for a fully paid-off policy? Or does that apply only if one is paying premiums on it for the next 30+ years? Whole life insurance appealed to me because I am extremely squeamish about the stock market and don’t want to pay a financial planner on a regular basis. I’d rather have low (but not 0.74%), steady returns than high risk/high reward investments. Did we still make a mistake by buying whole life?
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.
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The primary purpose of life insurance is to protect the people who are financially dependent upon you. Once those people are no longer dependent upon you (e.g. your kids grow up), you no longer have the need for that protection. Term life insurance is like having car insurance for as long as you own a car. Whole life insurance is like having car insurance forever, even when you no longer own a car.
Analysis: In what other circumstance do customers sign contracts without seeing them? The full policy language is not presented as part of the proposal. And don’t count on the broker to know, or be able to negotiate, the terms. A broker proposal typically contains language like “Your review of these documents and any review you may seek from legal counsel or insurance consultants is expected and essential.”
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]
And I agree with you Matt. People that just try to make a buck on someone else’s loss or something they truly can’t afford is despicable to me. And I apologize for my “are you licensed?” Comment. Your actually doing a noble thing as a father and informing people that need to hold on to what they can or invest it correctly in this economy. I have a lot of business owners and high end clients and I sell them whole life for a ton of reasons. But for my blue collar average joe or even white collar for that matter, I just wanna take care of them and their families. They’re not my customers their my clients. And that’s drilled into us by New York Life, I hope you have continued success in your Financial Planning career. God bless you.
Premiums paid by a policyholder are not deductible from taxable income, although premiums paid via an approved pension fund registered in terms of the Income Tax Act are permitted to be deducted from personal income tax (whether these premiums are nominally being paid by the employer or employee). The benefits arising from life assurance policies are generally not taxable as income to beneficiaries (again in the case of approved benefits, these fall under retirement or withdrawal taxation rules from SARS). Investment return within the policy will be taxed within the life policy and paid by the life assurer depending on the nature of the policyholder (whether natural person, company-owned, untaxed or a retirement fund).
To echo what everyone else has said, great article! My wife and I were pitched this idea earlier today and I thought it sounded great until she made me read this article. I then returned to the paperwork they had given me to find it riddled with “these values are not guaranteed”. The footnotes even went as far as to say these projections were based on their dividend schedule for 2014 and that future years could be “higher or lower” and the went on to recommend looking at a hypothetical lower schedule illustration available upon request. My question for you is in regards to your conclusion. I’m self employed and put 30k into a sep-Ira and also utilize a tIRA->Roth conversion for my wife. You said this might be worth it if it was ossicle to front load the plan, the one I was presented with called for 15k/yr. are you saying it would be worth hit if I could put say 30-45k into each of the first few years? I’d still be a little skeptical after reading the brochure where it says the dividends are essentially at the discretion of he carrier
I am looking into different investment options to start a retirement plan. What i have learned thus far, is that the majority of people seem to be looking at the total amount of the investment at the time of retirement. One of my primary concerns is the amount of taxation incurred once the funds start to be distributed. Deferred taxed 401K does not seem to be a viable option when you consider the taxation in say 30 years (even with the employer match) VS post-tax investments at the current tax rate. A Roth IRA seems to be a better option. I recently spoke to an advisor who recommended Whole Life as an investment option due to the non-taxable nature of the investment – i am currently researching how this may work. To your knowledge, has anyone performed a apples to apples comparison of the differing investment strategies to include estimated taxation at the time of disbursement?

1 The Banking Benefits – Deposit Introductory program offers a high yield fixed Introductory Rate during the first 12 statement cycles after opening a new Consumer Money Market Savings account with State Farm Bank. A new Consumer Money Market Savings account means you cannot have an existing Money Market Savings with the same ownership currently open or which closed within the last 12 months. Your Benefit account balance must remain below $5,000,000 to earn the Introductory Rate. If the account balance is $5,000,000 or above, you will earn the Standard Rate on your entire balance. The new Money Market Savings must be a Personal or Trust account. IRA Money Market, Estate, Uniform Transfer to Minors, and Business accounts are NOT eligible.


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.


I have worked in the Banking Business for over 7 years. After years of working for a company/corporation, I decided to start my own business in the same business field. I am now a Financial specialist with New York Life Insurance Company for almost 2 years. I get to do the same thing as before but now I’m running my own business. Trust is everything and I make it my mission to earn my clients trust.

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With whole life, both the MINIMUM size (your guaranteed cash value or your death benefit, depending on how you’re modeling it) and probability (100% if you keep paying) are known. So it is easy to model out your minimum expected return. And yes, that return stinks. It is usually far less than what you’d expect from investing in stocks. But there is a good reason for that.

Calculable loss: There are two elements that must be at least estimable, if not formally calculable: the probability of loss, and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim.

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