re: Whole Life Insurance??

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Whole life seems a lot easier, but the truth is, it’s very expensive, and part of your premiums will be used for maintenance and fund management charges.

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Maintenance and fund management charges? This isn't variable life or universal life.

There are charges in whole life, like every financial product. The premium you pay in whole life is made up of:

- insurance risk of the insured expected over the life of the policy
- expected performance of the company's assets.
- reserve costs
- expected and real up front expenses/overhead (commission to agent(s), expenses of the home office (salaries, benefits, etc.), rent and so on).

Those are the items which make up the premium of a whole life policy (really, any life policy term or permanent).

What causes a dividend in a whole policy (if the insurance company is a MUTUAL company vs. a stock company) is the ACTUAL performance vs the EXPECTED performance.

(Note: Mutual companies mean the policyholders actually have ownership in the company. When many insurance companies demutualized in the 90s to take advantage of the equity markets, the policyholders received stock in those companies. The policies they owned no longer received a dividend, but the shares of stock do).

What will increase a dividend (or expected dividend you will see on the illustration)?

- people living longer than expected (meaning people will pay longer on the policy).
- insurance company was good at taking risk, meaning it insured pool has a longer life span.
- insurance company makes a higher profit than expected.
- insurance company is more efficient expense-wise. Actual costs are lower.
- reserve policy changes allowing lower reserves.
- people canceling their policies, especially in the first 10-20 years.

A dividend of a whole policy is considered a return of premiums. That is a key reason why the dividend are not tax until the amount received is in excess of the dividends paid.

Another issue that affects the dividend of whole life policies - and one that is surprising to most - is the expected cancellation rate of these permanent policies.

Agreed, expenses are expenses, regardless of the name. However, please represent the expenses fairly by name.

Just to be fair, those annuities, IRAs and such have the same or similar maintenance and fund management charges.

You might want to run your advertisement by your compliance department.


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I think I ranted a bit but I hope it helps.

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a 70 year old male can still purchase 20 year level term

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From what company? Most companies will not sell any term policy that wil extend past the age of 70...maybe 80. So, as far as I know, a 70 year old could purchase 10 year term, but not 20.

Maintenance and fund management charges? =/= expected and real up front expenses/overhead (commission to agent(s), expenses of the home office (salaries, benefits, etc.), rent and so on). ?

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Read the fine print...you die and they KEEP your investment??? That makes no sense. If you were to die, you would get paid out the death benefit...they don't KEEP it!

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Upon you death, they pay the face value of the policy, not the face value + the investment balance. The investment portion dies with you.

what about term life with return of premium? Sure it is a higher price, but there is no chance you lose your investment. Sure, you could make more investing the difference, but I have looked at it as a super safe investment that allows you to be more risky with some of the other investments.