Beyond that, I do agree that whole life insurance can be useful in certain situations when structured properly. But those situations are few and far between and they require the help of someone who both knows the ins and outs of these policies AND is willing to put the client’s interests over their own financial interests (i.e. minimizing commissions and other costs on the policy). That kind of person is also difficult to find.
If someone really does want and need permanent insurance, and that may be especially relevant for those in Canada who own corporations, there are a variety of strategies to which the Minister of Finance is taking the axe for policies issued after January 1, 2017. As it stands now, the absurd inflation of surrender charges in the early years of a policy allow for a maximum funded LCOI (level cost of insurance) Universal Life policy to sock away a small fortune, tax-sheltered. That’s on the way out. But until it’s gone, there are some great applications that take advantage of a policy’s ability to pay out the investment portion of a policy tax free to a beneficiary upon the first death on a joint-last-to-die contract. That’s just one application…this is but one way insurance companies have adapted permanent insurance products to benefit the wealthy and there are many others, but these strategies tend to be offensive to the Canada Revenue Agency and as such their existence is always under threat. Life insurance companies tend to engage in games of cat and mouse in terms of finding and exploiting holes in the Income Tax Act in Canada, such as 10/8 policies or triple back to back arrangements, then the authorities shutter them. Rinse and repeat. This is probably not a bad thing…it exposes and then closes holes in the income taxa act. Frankly, the best use of an insurance policy is as INSURANCE. The death benefit is where the juice was always supposed to be. Not in engaging in elaborate tactics to skirt the rules. This is especially true as what is legal today may not necessarily be legal tomorrow. A lot of highly beneficial strategies amount to playing with fire.
Hi Matt, I have a question for you. I was sold a whole life policy by a friend 4.5 years ago (before I was married) with the promise that it is a good investment tool. I’ve learned a lot about investing since then. The accumulation value is $6700 the surrender value is about $2700. I’m wondering if I should get out now and take the $2700 and run, or wait until I can pull out what I’ve paid into it which I hear is 10 years.
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.
Pre-need life insurance policies are limited premium payment, whole life policies that are usually purchased by older applicants, though they are available to everyone. This type of insurance is designed to cover specific funeral expenses that the applicant has designated in a contract with a funeral home. The policy's death benefit is initially based on the funeral cost at the time of prearrangement, and it then typically grows as interest is credited. In exchange for the policy owner's designation, the funeral home typically guarantees that the proceeds will cover the cost of the funeral, no matter when death occurs. Excess proceeds may go either to the insured's estate, a designated beneficiary, or the funeral home as set forth in the contract. Purchasers of these policies usually make a single premium payment at the time of prearrangement, but some companies also allow premiums to be paid over as much as ten years.
James, be very careful about blanket advice to roll your pension into an IRA. A lot of financial professionals can make money through a transaction like that and you’d likely be giving up guaranteed income for the rest of your life. To be clear, it’s certainly possible that this would be a good move, but you would only know that after a careful and detailed analysis of your specific pension, your specific goals, and the rest of your financial situation.
Therein lies the problem. The asset you are securing is not the cash and too many people sell it that way and then the client views it that way. The asset is the death benefit. I know of no other asset where you can essentially secure a million dollar tax free asset at a 60% discount with about 2% down. The cash value build up is a an added bonus as I see it which provides great liquidity later on and also provides for quite a bit of optionality. With respect to term insurance, most people outlive their term so I would argue term is more expensive. I own both, but when I look at my term, if I pay premiums and outlive my term, I will have sunken about 250,000 into the contract and will have gotten zero for it. My permanent insurance will be paid to a beneficiary no matter what. Also people die including children. We need to take a cold look at what would happen if ine of our children died. How do you pay for the funeral? Do you need counseling? Will you go back to work immediately? Would you want to give it to charity or start one in your child’s name? I bought them for each of my kids. They are my favorite asset because I guaranteed their insurability. I have a few friends who have children with diabetes. Most carriers will not insure diabetics. My friends thankfully bought their children policies before they were diagnosed. I would agree permanent insurance is not for everyone, but more people should use at least a small piece of it S part of their plan. I also think they are extremely valuable when a person has the capacity to shrink down the insurance and load it with cash, as you mentioned above. Anytime the IRS puts limits on a vehicle as they do on permanent vehicles or any vehicle for that matter, I tend to think that is a good asset or vehicle for your money.
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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Contingent or incentive commissions reward agents and brokers for achieving volume, profitability, growth or retention goals established by the insurer. For example, Elite Insurance promises to pay the Jones Agency an extra 3 percent commission if Jones writes $10 million in new property policies within a certain time frame. If Jones renews 90 percent of those policies when they expire, Elite will pay Jones an addition 2 percent commission.
In the United States, the tax on interest income on life insurance policies and annuities is generally deferred. However, in some cases the benefit derived from tax deferral may be offset by a low return. This depends upon the insuring company, the type of policy and other variables (mortality, market return, etc.). Moreover, other income tax saving vehicles (e.g., IRAs, 401(k) plans, Roth IRAs) may be better alternatives for value accumulation.

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3. I would recommend that they talk to a fee-only financial planner before they make any decisions. This is someone who would be paid only to give them advice, not to sell them a product, and should therefore be able to be more objective. They should be able to find one who would be willing to work with them for a one-time flat fee (others will try to take over managing their assets for a regular fee. They can evaluate whether that’s something they want on their own, but know that the option for a one-time flat fee is available, and is likely all they need at this point).
In the United States, the most prevalent form of self-insurance is governmental risk management pools. They are self-funded cooperatives, operating as carriers of coverage for the majority of governmental entities today, such as county governments, municipalities, and school districts. Rather than these entities independently self-insure and risk bankruptcy from a large judgment or catastrophic loss, such governmental entities form a risk pool. Such pools begin their operations by capitalization through member deposits or bond issuance. Coverage (such as general liability, auto liability, professional liability, workers compensation, and property) is offered by the pool to its members, similar to coverage offered by insurance companies. However, self-insured pools offer members lower rates (due to not needing insurance brokers), increased benefits (such as loss prevention services) and subject matter expertise. Of approximately 91,000 distinct governmental entities operating in the United States, 75,000 are members of self-insured pools in various lines of coverage, forming approximately 500 pools. Although a relatively small corner of the insurance market, the annual contributions (self-insured premiums) to such pools have been estimated up to 17 billion dollars annually.[36]
As for your question, I don’t believe I’ve ever reviewed a USAA whole life policy so I can’t comment on then specifically. I would simply encourage you to start by clarifying your personal goals and to then evaluate each option based on how well it will help you meet them. With that said, of your main goal is investing for retirement then I would typically encourage you to max out traditional retirement accounts before considering any kind of life insurance.
After reading the entire thread, couldn’t help but add my thoughts. I am a civilian here so no affiliation as an insurance salesman or financial planner in any capacity. I am however, an owner of a WL policy (one year in) which I got through a friend in the business. I admittedly jumped into this without doing the proper due diligence as more of a favor to him. I have had anxiety about this decision since, and am days away from my second annual premium payment and have thus spent a great deal of time researching and thinking about the implications of this asset. I am at a “cut my losses and run crossroads”. Is this a quality asset, or do I cut and run and chalk-up the loss as the cost of a lesson learned in letting others do my independent thinking for me (two implications here are that 1) I do believe that the person who sold me this actually believes in the products and 2) that doesn’t mean that he is right and any person, no matter how financially savvy, who is willing to dedicate the time, can do the research and come up with their own view). I say all of this to admit that I am biased, even if only sub-consciously, as I have tried to think in a balanced manner with regards to this decision. All of that being said, I am currently leaning towards keeping the asset in place and welcome thoughts. My current logic below.

Underfunded whole life insurance may have only performed 4%. However, designed with additional premiums they have actually earned closer to 7% in the 30 years from 1984-2013. Even during the period between 1977 and 1982 where interest rates shot through the roof and bond holders didn’t recapture their losses for several years, over funder whole life returned 35% after the cost of insurance is considered.
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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.


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A good agent will figure out how much insurance is needed, and if a whole life policy would make sense without causing the policy to MEC within the constraint of one’s human life value. As for surrenders and loans against the policy, good agents discuss how to structure these options for supplemental retirement income to maintain a reasonable death benefit given a retirement age. There are institution(s) that have always paid a dividend and have been top rated every year.
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Accidental death insurance is a type of limited life insurance that is designed to cover the insured should they die as the result of an accident. "Accidents" run the gamut from abrasions to catastrophes but normally do not include deaths resulting from non-accident-related health problems or suicide. Because they only cover accidents, these policies are much less expensive than other life insurance policies.
A very good article. Congruent to the philosophy in which our company was built: Buy Term, Invest the Difference. I am a crusader at heart and I am peeved every time I see these products in the hands of people who can barely afford it and whose life will be completely damaged for merely owning it because they are grossly under-insured when they could have well purchase a proper term amount for the time they need it.

Shoes are great but if the statement is “size six shoes are great” makes the question more difficult to answer. If you were born with size six feet then size six shoes could be excellent for you. If you’re a size 13 – then, maybe not so much. See? The answer is subject to your personal needs/requirements. Same is true with whole life insurance. Next time you’re pondering the subject ask yourself what should a grandfather do if he wants to insure his grandchild has something from him when his children are irresponsible and will most likely either outright steal the grandchild’s inheritance or just blow through it if they could? Or understand that the family has a history of illness and by purchasing the policy at an early stage the baby will be abler to get life permanent insurance. But to do what I ask requires real thought, not someone shooting from the hip.
The author of this article has obviously not been exposed to the details, and perhaps unaware of the Canadian versions of whole life. His comments are just wrong on so many levels, it would take a book to refute them. To make such a blanket statement that all whole life policies are bad, is equivalent of saying because one BMW 750 was a lemon, don’t but one because they are probably all lemons. It is the application of these policies that is critical to understand, and yes they can be sold by inexperienced or crooked advisors looking after their own interests, but whole life has many positive applications both for individuals and especially for corporations.
In his memoir “Am I Being Too Subtle?” Sam Zell, a billionaire investor and chairman of Equity International, writes, “I’m always on the lookout for anomalies or disruptions in an industry, in a market or in a particular company…. Any event or pattern out of the ordinary is like a beacon telling me some new interesting opportunity may be emerging.”
I chose not to discuss the difference between stock and mutual companies here because I don’t think it’s very relevant to the conversation. You aren’t clear why you think it’s important, but my best guess is that you think your returns are more guaranteed with a mutual company. I would agree that you’re better off with a mutual company, but you’re still hinging a large amount of money on the prospects and policies of a single company. It is still undiversified and still exposes you to a lot of unnecessary risk. If you have a different reason for bringing up this distinction I would be interested to hear it.
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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2Partial withdrawals and surrenders from life policies are generally taxed as ordinary income to the extent the withdrawal exceeds your investment in the contract, which is also called the "basis." In some situations, partial withdrawals during the first 15 policy years may result in taxable income prior to recovery of the investment in the contract. Loans are generally not taxable if taken from a life insurance policy that is not a modified endowment contract. However, when cash values are used to repay a loan, the transaction is treated like a withdrawal and taxed accordingly. If a policy is a modified endowment contract, loans are treated as a taxable distribution to the extent of policy gain. On a modified endowment contract, loans, withdrawals and surrenders are treated first as distributions of the policy gain subject to ordinary income taxation, and may be subject to an additional 10% federal tax penalty if made prior to age 59½. Loans, if not repaid, and withdrawals reduce the policy's death benefit and cash value.

Insurance broker became a regulated term under the Insurance Brokers (Registration) Act 1977[2] which was designed to thwart the bogus practices of firms holding themselves as brokers but in fact acting as representative of one or more favoured insurance companies. The term now has no legal definition following the repeal of the 1977 Act. The sale of general insurance was regulated by the Financial Services Authority from 14 January 2005 until 31 March 2013 and by the Financial Conduct Authority since 1 April 2013. Any person or firm authorized by the Authority can now call themselves an insurance broker.


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
We don’t have enough information in these posts to make a recommendation. You should meet with a few advisors and get one you’re on the same page with. If they can’t explain why you “need” whole life (remember, there are other options for permanent insurance, including level-cost T100), dump him…you can do better. You should be requesting a few funding alternatives rather than banking on one strategy with different brokers. You need to really do your homework.

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Many companies separate applicants into four general categories. These categories are preferred best, preferred, standard, and tobacco. Preferred best is reserved only for the healthiest individuals in the general population. This may mean, that the proposed insured has no adverse medical history, is not under medication, and has no family history of early-onset cancer, diabetes, or other conditions.[21] Preferred means that the proposed insured is currently under medication and has a family history of particular illnesses. Most people are in the standard category.
The insurance industry in China was nationalized in 1949 and thereafter offered by only a single state-owned company, the People's Insurance Company of China, which was eventually suspended as demand declined in a communist environment. In 1978, market reforms led to an increase in the market and by 1995 a comprehensive Insurance Law of the People's Republic of China[48] was passed, followed in 1998 by the formation of China Insurance Regulatory Commission (CIRC), which has broad regulatory authority over the insurance market of China.[49]
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.

Let’s consider th facts. Over the last 25 Years , SunLife participating WL Insurance has been consistent around 9.7% interest. That’s compounding annually. 25 year old male , Guaranteed minimum death benefit $150,000 . At age 65 the death benefit will likely be $650,000 , potentially $700,000 and if the market went way downhill and crashed $350,000. Guess how much he paid over the 20 year premium payment period (20pay WL) =$79,980 . That’s a contractually guaranteed – total cost for that $150,000 guarantees death benefit . It’s already much over 100% of his money back. With cash value , with loan ability (tax – free policy loan interest rates are on average in Canada right now 3.5%) . Ok? Making sense at all? Seeing any benefits to this concept anybody? So tell me , an investment of let’s just round up and say $80,000 that a 25 year old male will pay over 20 years. Guarantees him a minimum cash value of $68,900 contractually guarantees minimum. But , with the additional dividends he will actually have something like $129,000 . If he died two months into it the death benefit is $150K . When he turns 65 his investment grew on a tax sheltered basis from $80K to $390K , then if he does die they pay the $150K plus the cash value of $390K all tax free entirely to his family or his estate.
Internationally known financial adviser Suze Orman strongly believes that if you want insurance, buy term; if you want an investment, buy an investment, not insurance. Don't mix the two. Unless you're a very savvy investor and understand all the implications of the various types of life insurance policies, you most likely should purchase term life insurance.

I agree with you, generally. Many of those commenting seem to have forgotten that you focused around whole life as an “investment”. Even though insurance is an investment in it’s own way, it’s shouldn’t be sold as an investment. In my experience, it really only makes sense for more wealthy clients who are doing more elaborate estate planning etc. However, the vast majority of people in their 20’s and 30’s should steer clear of whole life. Selling permanent insurance for “retirement planning” gives the financial services industry a slimy look. The income isn’t “tax-free”. It’s a loan. As you say in the article: if one’s taking it for income are they really going to pay it back…? Plus, if a client is in their 20’s and 30’s their time horizon is perfect for IRAs and the equity markets. May dividend aristocrat stocks have paid high percentages for 50+ years. Lastly, as many agents put their clients first…. others do not. If the premiums on whole life are 10x as high… so are the commissions.
Each type of life insurance product has its advantages and disadvantages. You can’t say term life is the best, whole life is the best or universal life is the best. It depends on what an individual client need and his or her situation. As a client, they should know all the advantages and disadvantages but of course, they are under the supervision of a certain type of insurance agent that can be biased and try to sell what they have to offer to form their companies. Avoid an agent that focuses on selling one type of product. Talk to an agent who can provide the knowledge of each type and you can choose what best for you.
None of the below should be taken as actionable advice. You should consult someone who you know and trust before making any important financial decisions. This is just a window into how I made my decision, so you can see some things I considered. I might be wrong about some of these things, but everything I’ve written below is what I believe today based on my current understanding and the guidance of my own advisers. Please note that I do also max out my 401k and IRAs and keep a modest taxable account as well, so whole life is just one piece (albeit a fairly sizable one) of my portfolio.
I have a Dividend Option Term Rider that will expire soon. I am 57 years old. New York life wrote to me stating I can change over to whole life insurance without having to answer health questions or take a physical exam. What are the advantages or disadvantages of this for someone of my age? I currently have a 401K. Would my money be better invested in that or elsewhere? Thanks.
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.
Actually I’m satisfied with your response. Because it makes sense, people without the money shouldn’t purchase whole life. We only tell our clients if they can afford it to purchase it. That’s common sense. And if you need something that will take care of your expenses when you are gone and don’t have a lot of money, then term is the way to go. If you have the money whole life is a good tool for tax diversification. But there is too much to talk about that those of us that are in the industry and are actually licensed to help people in these areas and it would take up too much space. We’d be having this discussion for months. But you make valid points, but to say whole life is a bad investment just seems wrong, because of the percentage of people that can use it, it works perfect. I have a friend who makes $80,000 a month who recently came into oil and was discouraged by blogs like this. After I explained to her how ridiculous blogs like this are for her situation she was actually calm and more receptive. I appreciate you informing the public. And in our jobs we do that well enough, I think instead of trying to be Dave Ramsey, you should just title it, “Why Whole Life is a Bad investment for the average Joe or 98% of the population.
Hi Matt, I’m a Life Insurance agent and Advisor and I work for New York Life. Some of your points make sense but saying that whole life is bad is a little off. It is good for savings toward your retirement and will do a lot more than a savings account, money market or cd will ever do. So to agree with you to a certain extent I’ll explain what I do for younger individuals, I’ll sell a whole life policy and later it with term insurance. Basically the whole life will build a cash value with guaranteed returns and the term insurance is in the event of an untimely death. $1,000,000 of term can be as low as $50 a month. Also NY Life has never guaranteed dividends but has paid them out for 159 years, even during the Great Depression. Our company is backed by a $180 billion general account and a $19 billion surplus. So yeah, we guarantee your returns. And we don’t just sell life insurance, that’s why our agents like myself have life, series 6,7,63,66,65 licenses, if our clients, not customers want more than life, we diversify for them into brokerage or anything else they want. Just puttin my 2 cents in.
True, but what’s not accounted for is the rolling geometric average. Trailing returns only assume you invest at the beginning of a period and hold to the end. The rolling average (if done correctly) assumes you invest over time…say monthly…like almost everyone does. I remember reading several pieces by Dan Wiener (who is an advocate for index fund investing, and specifically Vanguard) mention this.
None of the below should be taken as actionable advice. You should consult someone who you know and trust before making any important financial decisions. This is just a window into how I made my decision, so you can see some things I considered. I might be wrong about some of these things, but everything I’ve written below is what I believe today based on my current understanding and the guidance of my own advisers. Please note that I do also max out my 401k and IRAs and keep a modest taxable account as well, so whole life is just one piece (albeit a fairly sizable one) of my portfolio.
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Well, first of all, I know nothing about how things work in Canada so I’m definitely not qualified to advise you on this. Given the same situation in the US though, I would say that it’s something you could consider. I would just make sure that you work with a fee-only financial planner who specializes in this kind of thing, can evaluate all of your options in the context of your specific goals, and, if this ends up being a good option, can help you find a policy specifically structured to minimize costs and maximize growth. That’s really the only way I would consider it.


State Farm® Life Insurance Company (Not licensed in MA, NY or WI) or State Farm Life and Accident Assurance Company (Licensed in NY and WI) can help you find coverage that's right for you and your loved ones. Our life planning videos and calculator can help you understand your options, and figure out how much and what kind is right for you, before getting your life insurance quote.

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.
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Assuming you’re already maxing out your regular retirement accounts, have a full emergency fund, are comfortably saving for other short and medium-term goals, are able to spend money comfortably on things you enjoy, AND still have money left over to save, AND expect that to continue indefinitely without any big risk of disruption, then you don’t have to worry too much about the slow growth in the beginning, the complications of accessing the money, or the rigidity of having to pay the premium.
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?

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.


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.
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The best thing to compare permanent life insurance policy to is to another similar type permanent life insurance policy. And you don’t want to focus on the interest rate specifically but on the actual values in each policy that are “guaranteed” – not projected. All things being equal, this tells you which permanent policy is less expensive and provides a higher net interest rate instead.
The best thing to compare permanent life insurance policy to is to another similar type permanent life insurance policy. And you don’t want to focus on the interest rate specifically but on the actual values in each policy that are “guaranteed” – not projected. All things being equal, this tells you which permanent policy is less expensive and provides a higher net interest rate instead.
I chose not to discuss the difference between stock and mutual companies here because I don’t think it’s very relevant to the conversation. You aren’t clear why you think it’s important, but my best guess is that you think your returns are more guaranteed with a mutual company. I would agree that you’re better off with a mutual company, but you’re still hinging a large amount of money on the prospects and policies of a single company. It is still undiversified and still exposes you to a lot of unnecessary risk. If you have a different reason for bringing up this distinction I would be interested to hear it.
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.
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.

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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.
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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.
Yes.  MetLife’s one year term products (including products underwritten by Metropolitan Tower Life Insurance Company and Metropolitan Life Insurance Company ) offer affordable protection when you require insurance for the short term. These products are designed to provide the right amount of protection when it’s needed most, or to supplement a policy you already have. Premium rates can be found here. For more information contact MetLife's Specialized Benefit Resources at 877-638-3932, and press 2 for New Business.
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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
2. Term life insurance WILL cover funeral expenses, but only for as long as it is in place. Whereas whole life insurance does not expire and could therefore cover those costs indefinitely. But in most cases it’s more prudent to simply build up your general savings, which could then be used for anything, including funeral expenses, and only keep the insurance around as long as you really need it. It’s not an incredibly cost efficient way to pay for final expenses.
Accidental loss: The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be pure, in the sense that it results from an event for which there is only the opportunity for cost. Events that contain speculative elements such as ordinary business risks or even purchasing a lottery ticket are generally not considered insurable.
To all of those saying "I'd rather do it on my own," you're definitely taking a huge chance, and more than likely are throwing a ton of money away. There are certain fields where you can do things on your own. However, insurance isn't one of those fields that would be advisable to take that course of action. The laws/rules are sky high, and many of these laws and rules change every single year. Trust me, even if you don't think you're throwing money away, you more than likely are. Whether you choose a broker or captive agent captive agent, I would recommend using a professional who has in depth knowledge. I mean, it's free, anyway. Insurance is similar to the legal/lawyer field. If I had a case, I certainly wouldn't want to represent myself.
By the late 19th century governments began to initiate national insurance programs against sickness and old age. Germany built on a tradition of welfare programs in Prussia and Saxony that began as early as in the 1840s. In the 1880s Chancellor Otto von Bismarck introduced old age pensions, accident insurance and medical care that formed the basis for Germany's welfare state.[11][12] In Britain more extensive legislation was introduced by the Liberal government in the 1911 National Insurance Act. This gave the British working classes the first contributory system of insurance against illness and unemployment.[13] This system was greatly expanded after the Second World War under the influence of the Beveridge Report, to form the first modern welfare state.[11][14]
Whole life insurance is a type of permanent life insurance designed to provide lifetime coverage. Because of the lifetime coverage period, whole life usually has higher premium payments than term life. Policy premium payments are typically fixed, and, unlike term, whole life has a cash value, which functions as a savings component and may accumulate tax-deferred over time.
Auto insurance isn’t only great protection for your vehicle, it’s also the law. All states require some degree of insurance for your vehicle to protect you and other motorists. Coverage requirements will vary based on your financial responsibility for your car and your state’s requirements. Some states even require you to have liability insurance before you even get a license.
As a financial planner I find this article very misleading. Whole life insurance can be an excellent way for someone to save for the long term. If you earn too much for a Roth IRA especially (180K plus for a household roughly) then whole life insurance is literally the only place to get tax free savings on growth  (tax free municipal bonds also but these have a lot of risk especially with interest rates going up). A properly designed whole life insurance policy with a good company like a New York Life,  Mass Mutual,  Northwestern etc which have always paid dividends since the mid 1800s can easily earn NET of fees and taxes 4-5% over a 25-30 year period. Which means in a taxable brokerage account for example or a bank account you would have to GROSS 6% or so to match this over that same period every year on average? On a virtually guaranteed basis this is tough to do. This doesn’t even speak to the point that you have a tax free permanent death benefit. When a client’s 20 year term runs up they almost always still want and need some life insurance,  and what if they aren’t insurable anymore? Getting some whole life when young and healthy,  savings/cash value aside,  assures them they’ll always have coverage which can someday go to kids,  grandkids etc which is a nice option. Whatever cash you pull out reduces the death benefit dollar for dollar, but if set up properly there will always be more than enough death benefit even after most of cash is taken out tax free in retirement, when the stock market is down (this is especially when you appreciate having a non correlated asset like whole life for when the market crashes and you can tap into your whole life cash so you don’t have to touch your investments in that downturn OR take advantage of the opportunity and but stocks when things are down with cars value). Interest does accrue on policy loan which is why the tax is cash free and the loop hole exists. But often the dividend more than offsets the policy loan interest which doesn’t have to be repaid and just comes off of the death benefit which is often just a bonus anyways. A client should make sure they have enough coverage of course which is why people often get a large term life insurance which is “cheap”  in addition to a smaller whole life which is a dual savings,  dual coverage to be in place when the term expires.
Using a broker can also simplify the process of picking insurance. There are so many different choices for insurance, with different limits and exclusions for each policy. It can be difficult to know which insurance and what level of coverage is right for you or your business. This is where an insurance broker can help. Using their experience in the field, a broker can analyze your risks and liabilities to determine exactly what coverage you need. With access to a variety of technology-based tools, brokers can make it simple to compare various options to determine which policies would best fit your needs. Using a broker eliminates the stress of learning about different types of insurance, and makes it easy to figure out what insurance will work for you.
"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.
One other point. You emphasize the “tax free” nature of whole life here. I feel like I was pretty clear about that in the post and would be interested to hear your thoughts. Just blindly calling it “tax free” ignores the presence of interest (on your own money, by the way) which over extended periods of time can actually be more detrimental than taxes. 

The information on this site is general in nature. Any description of coverage is necessarily simplified. Whether a particular loss is covered depends on the specific facts and the provisions, exclusions and limits of the actual policy. Nothing on this site alters the terms or conditions of any of our policies. You should read the policy for a complete description of coverage. Coverage options, limits, discounts, deductibles and other features are subject to individuals meeting our underwriting criteria and state availability. Not all features available in all states. Discounts may not apply to all coverages and/or vehicles. 
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.
When insured parties experience a loss for a specified peril, the coverage entitles the policyholder to make a claim against the insurer for the covered amount of loss as specified by the policy. The fee paid by the insured to the insurer for assuming the risk is called the premium. Insurance premiums from many insureds are used to fund accounts reserved for later payment of claims – in theory for a relatively few claimants – and for overhead costs. So long as an insurer maintains adequate funds set aside for anticipated losses (called reserves), the remaining margin is an insurer's profit.
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.

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I am a fairly wealthy Canadian professional with a corporation. I have indeed maxed out all my tax-deferred savings options. I am nearing 50 years old. I only have one child. By the time I retire I will probably have more money than I could use , but my daughter will probably already inherit more money than she will ever need when I pass away. Do I bother with all of this complicated permanent insurance stuff, or just forget it and try to spend as much as I can ?!! Your article makes me want to forget the whole thing is I am not usually comfortable investing in things I don’t understand very well especially when everyone seems to be pushing it due to high commissions. However I seem to be in that 1% group you say would actually benefit from this. What do you think?

If you are in the market for insurance, you may have heard the terms ‘broker’ and ‘agent’ tossed around. While both are professionals in the insurance industry, these two job titles have some distinct differences. Both insurance brokers and insurance agents act as intermediaries between insurance buyers and insurers. They both must also have the appropriate licenses to distribute the insurance they are selling, while also adhering to any laws or regulations enforced by local insurance departments. The primary difference between an insurance broker and an insurance agent is who each represents. While a broker represents the insurance buyer, an agent represents one or more insurance companies.

One other point. You emphasize the “tax free” nature of whole life here. I feel like I was pretty clear about that in the post and would be interested to hear your thoughts. Just blindly calling it “tax free” ignores the presence of interest (on your own money, by the way) which over extended periods of time can actually be more detrimental than taxes.
Although some aspects of the application process (such as underwriting and insurable interest provisions) make it difficult, life insurance policies have been used to facilitate exploitation and fraud. In the case of life insurance, there is a possible motive to purchase a life insurance policy, particularly if the face value is substantial, and then murder the insured. Usually, the larger the claim, and the more serious the incident, the larger and more intense the ensuing investigation, consisting of police and insurer investigators.[30]
Automated Life Underwriting is a technology solution which is designed to perform all or some of the screening functions traditionally completed by underwriters, and thus seeks to reduce the work effort, time and/or data necessary to underwrite a life insurance application.[19] These systems allow point of sale distribution and can shorten the time frame for issuance from weeks or even months to hours or minutes, depending on the amount of insurance being purchased.[20]

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:


After insurance has been selected and purchased, most insurance brokers will continue to provide service to their clients. This includes advising clients on technical issues that may be helpful in the event that a client has to file a claim, helping clients decide if they should change their insurance policies or coverage, and even making sure that clients comply with their policy’s requirements.

Anyway, there are many complexities to the whole life insurance variant plan that I was presented with, which make it unattractive to me as an investment option. I would suggest that anyone who is looking at whole life insurance as an option take a close look at the investment results and compare them to other options available on the market. Also take a close look at the fees and the structure of the loans that you will take out in the future. My conclusion is that, I would like to get a term life policy for now and maximize my other tax advantaged investments first prior to delving into the world of whole life insurance. And, by the time I actually get around to maximizing my other investments, I probably will be much older and not get a favorable premium any more.
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.

A corollary to the liquidity issue is the concept of flexibility of your contributions. Even with a 401(k) or IRA, where you can’t access your money without penalty, you can always choose to stop contributing for a period of time if you need that money for other purposes. In the meantime, your account stays intact, steadily earning tax-deferred returns on the money you’ve already put in.


As for your question, I don’t believe I’ve ever reviewed a USAA whole life policy so I can’t comment on then specifically. I would simply encourage you to start by clarifying your personal goals and to then evaluate each option based on how well it will help you meet them. With that said, of your main goal is investing for retirement then I would typically encourage you to max out traditional retirement accounts before considering any kind of life insurance.

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In any case, I thought I might chime in given that I disagree with your statement about all of these policies being legal robbery. As a disclaimer, I should point out that I agree that unscrupulous life insurance agents definitely do have a tendency to oversell these policies where term life would do, and I do not disagree that commissions are often the likely motivation in many of these cases.
Then I would try to find a good, honest, independent life insurance agent who could help you evaluate the policy and show you what your options are. If the death benefit is valuable to you, you may be able to exchange it for a different policy that eliminated or reduced the need for premium payments, which might be a huge help. If you would like some help finding an agent, email me at matt@momanddadmoney.com.
First, you compare whole life as a retirement vehicle to a savings account or CD. I’ll get to whether or not it’s actually better than those vehicles next, but regardless that’s an improper comparison. When people save for retirement, they generally do so with things like stocks, bonds and real estate. Savings accounts and CDs are not very good long-term investment tools. So whether it’s better than those things for retirement or not, the point is irrelevant.
Additionally, this can be a great way to compliment a financial plan that is linked to the markets performance. When I am in my 60’s nearing retirement and have a good amount of cash value in my policy–I will not be terribly worried about the market performance (401(k)s/mutual funds/ IRA/ stocks). I know that flucuations in the market will occur and if a recession happens when I am 62, I will use my cash and policy cash value to hold me over until the markets recover. Again, my aim is not to buy high and sell low, it is to buy low and sell high.
Of course, the other way to get that death benefit is with term insurance. Look, if you want to make sure your children receive money no matter what and you don’t want to save the money yourself, then whole life insurance could be a good option. But you can get term insurance with a 30 year term that should be more than able to cover your children during the period of their life when they depend on you financially. If you go all 30 years and don’t die, you didn’t “get nothing” as you say. You protected your children and any other beneficiaries for that entire period of time. That is very much something. Any argument otherwise is a misunderstanding of how insurance is supposed to work.
Virtually every state mandates that insurance agents and brokers meet licensing requirements, which normally entails the successful completion of a written examination. Prelicensing educational requirements may also apply, which can vary depending on the state and license type. Separate licenses are necessary for each line of insurance, including Life and Health and Property and Casualty. In addition, agents and brokers may have to meet ongoing continuing education requirements to maintain their licenses.

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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