2020 Complete Guide To Whole Life Insurance

This is the 2020 complete guide to whole life insurance. This is an important topic, so I’m going to be thorough. Please let me know if there’s anything you want added to this resource. This will be a growing resource. Email all requests to: hello@protectwithinsurance.com

Life Insurance Quick Guide:

First… What IS Whole Life Insurance?

There are many life insurance options. What's the best?

Whole life insurance has several names, such as “Permanent life insurance”, “Traditional whole life insurance”, “PURE life insurance”, and if it is for seniors-> “Burial insurance”, “Final expense policy”, or “Funeral policy”. These are all blanket names for whole life insurance, and these are all exactly the same in every way.

Whole life policies that differ, are:

  • Traditional whole life insurance (All of the life insurance types I just mentioned. This type is the main focus of this blog/resource)
  • Jumbo whole life insurance (This requires EXCELLENT health and has a reduced cost and higher whole life insurance coverage)
  • Universal life insurance (This requires Great or better health and grows in cost over time, as well as benefit over time)

What ISN’T Whole Life Insurance?

There are many types of life insurance. This is why it is so important you work with an extremely competent agent worthy of your trust; An agent that pairs you with the ideal life insurance program, based on YOUR needs (Such as budget and goals) and the needs of your loved ones (Financial needs after your passing).

Whole life is permanent life insurance- Meaning, until death, as long as you make your payments. Therefore, this resource will NOT be spending much energy on temporary life insurance (Does not go until death- it goes until the end of the term), such as:

  • Traditional term life insurance (1 – 30 year renewals that expire and then you get reinsured)
  • Return of Premium term life insurance (20 – 30 term period and then you get all your premiums/payments returned to you at the end of the term)
  • Accidental life insurance (Only pays your loved ones if death is in the accidental death category)
  • Return of Premium accidental life insurance (same as accidental, above, but als 100% return of premium at approximately age 75)

One important note about traditional term life insurance. Unfortunately, many agents (and some life insurance companies, as well) out there are selling term life insurance, dishonestly. When selling a 10-30 year term policy, it has become common for these policies to be sold, by selling the idea of the FULL length of time a term can truly insure a client.

As example: Bob gets a 30 year term policy at age 40.  The 30 years will expire at age 70. However, the agent selling the policy tells Bob, don’t worry about the 30 years, because these terms can technically continue until age 120 (or whatever the higher age is). Bob thinks this is great, and gets the policy.

What the agent SHOULD have said, is technically Bob can continue the policy past age 70, IF he is willing to pay MUCH more from that point forward. Typically, year 31 will be 10-20 X the cost up until that point. The cost will continue to rise each year, thereafter. If Bob was used to paying $80 per month. At age 71 (31 years after starting the 30 year term), he will likely need to pay over $1,000 per month, and the cost will increase at age 72, 73, 74, 75, etc. AND, the cost increases will be exponential. So, sure, Bob- feel free, if you can afford it.

Term policies CAN be fantastic, but they need to be explained accurately and understood, clearly. 95% of people past 60, should be in a permanent whole life insurance policy. The reason this is so, is there are many characteristics of whole life insurance that we need as we get older.

The Characteristics of Traditional Whole Life Insurance, are the following:

What is guaranteed life insurance?
Guaranteed life insurance policies do not ask any health questions. This is a great way to bypass health complications and put life insurance in place for your loved ones.
  • NO expiration date
  • Build cash value
  • NO medical exam
  • Easier to qualify
  • Guaranteed issue options ages 50-80
  • Locked health until death
  • Locked price until death
  • Locked death benefit until death
  • 100% tax exempt
  • Completely skips probate (If built, correctly)
  • You can add an accidental rider to most policies (Doubles the payout to your loved ones, if death falls within the accidental death category)

If the whole life insurance policy is setup, competently, it is the last life insurance policy you will ever need. And today’s prices will be locked, so it’s easy to budget. Traditional whole life insurance, commonly has $5,000 – $40,000 coverage amounts. This is usually just death benefits for your loved ones. It can also have living benefits.

Living Benefits

What are these mysterious “living benefits”? In general, these are benefits to YOU, the insured, while you are alive. Please understand, the following living benefits may not be in the policy you end up selecting. Tell your agent, if any of these benefits are important to you, so you can be paired with the best option.

The most common living benefits are terminal or critial health benefits. These living benefits send YOU the total insurance amount, with a medical letter/diagnosis from your doctor. Send the letter to the insurance company, and you get 70% – 100% of the policy amount, right then and there.

Other living benefits:

  • Confined Care (Up to 5% of insurance amount, per month, for confined care)
  • Chronic Conditions (24% – 75% of insurance amount for chronic diagnosis/letter from doctor)
  • Sizeable discounts on dental care, prescriptions, eye exams, lasik surgery, contacts/glasses, hearing aid batteries
  • Discounts on legal fees
  • and more.

Bottom line- Most of us get our life insurance becasue we want something in place for our loved ones, and the living benefits tend not to get much attention. However, you are paying the bill, and sometimes these policies WILL benefit you, directly.

One benefit, highly worth clarifying is “Cash Value”.

Cash Value

Cash value is a dollar amount that slowly accumulates, as you make your payments to the insurance company, over a longer period of time.

Cash value is an important thing to understand. Understanding it can be the difference between securing a whole life insurance policy that will genuinely protect your loved ones, or having a life insurance policy that will greatly disappoint your loved ones.

The short version, is, don’t touch your cash value, unless you are experiencing a financial emergency. When you withdraw your cash value, it actual creates a small interest loan that negatively impacts your policy. You can either repay this loan (Which only 1% of people actually repay), or leave the loan, and it (along with interest) will be subtracted from the death benefit before your loved ones are paid.

Example #1: Suzie Q gets a whole life insurance policy at age 60. At age 70, she pulls out $5,000 cash value, to pay some bills and have fun at the casino. Suzie Q does NOT repay the loan from the withdrawal and passes away at age 80. the total insurance amount is $12,000. Suzie Q’s loved ones receive: $12,000 – ($5,000 + interest) = approximately $6000. The $6,000 helps her loved ones, but not as much as $12,000 would have.

Example #2:  Alex Trebek gets a $40,000 whole life insurance policy at age 60. He budgets the cost, and pays the premiums every month until age 75. At age 75, he then lets his cash value make the payments for him, rather than making the payments. Each cash value “payment” creates a loan and accumulates with the other “payments”, reducing the value of the life insurance policy.

If Alex continues letting the cash value pay the premiums, and he lives to be 85+, the policy will have little or no payout to his loved ones.

Example #2 is a common story, thanks to lousy agents making the recommendation to let cash value make payments after a certain duration. It’s heartbreakingly terrible advice, and I report it to the Dept. of Insurance, any time I hear of it.

Who is Life Insurance FOR?

Life insurance CAN be a terrific solution for anyone under the age of 86. There are times when term life insurance, accidental only, or disability insurance are better choices. However, traditional whole life insurance is the best option, most of the time, at all ages under 86.

  • Ages 1-17 – (95% of policies in this age range are “Children’s Whole Life Insurance”)
  • Ages 18 -40 (60% of policies in this age range are: 1) “Family whole life insurance” or 2) “Jumbo whole life insurance”)
  • Ages 40-50 (52% of policies in this age range are “Jumbo whole life insurance”)
  • Ages 55-85 (95% of life insurance policies in this age range, are “Burial Insurance whole life insurance policies)

Accumulatively, most whole life insurance policies are for seniors, making burial insurance the #1 most popular type of whole life insurance. Whole life is ideal for most seniors. Now, insurance companies have seniors in mind, when developing new policies, or establishing actuarial tables.

Actuarial Life Table

The actuarial table shows the probability of a person at a certain age dying before their next birthday. Life insurance companies spend hundreds of thousands of dollars, or more, researching how they will adjust their rates and health ratings, based on these statistics. These companies weigh a multitude of health conditions, and whether they will approve, decline or modify a policy, depending on what conditions a client may have.

Data from 2016:

Exact
age
Male Female
Death
probability a
Number of
lives b
Life
expectancy
Death
probability a
Number of
lives b
Life
expectancy
0 0.006364 100,000 76.04 0.005331 100,000 80.99
1 0.000432 99,364 75.52 0.000359 99,467 80.43
2 0.000284 99,321 74.55 0.000247 99,431 79.46
3 0.000234 99,292 73.58 0.000169 99,407 78.48
4 0.000170 99,269 72.59 0.000155 99,390 77.49
5 0.000157 99,252 71.60 0.000135 99,375 76.50
6 0.000147 99,237 70.62 0.000120 99,361 75.51
7 0.000136 99,222 69.63 0.000109 99,349 74.52
8 0.000120 99,209 68.64 0.000100 99,338 73.53
9 0.000101 99,197 67.64 0.000094 99,328 72.54
10 0.000088 99,187 66.65 0.000093 99,319 71.54
11 0.000093 99,178 65.66 0.000098 99,310 70.55
12 0.000130 99,169 64.66 0.000113 99,300 69.56
13 0.000209 99,156 63.67 0.000140 99,289 68.56
14 0.000320 99,135 62.68 0.000176 99,275 67.57
15 0.000441 99,103 61.70 0.000216 99,258 66.58
16 0.000564 99,060 60.73 0.000259 99,236 65.60
17 0.000701 99,004 59.76 0.000301 99,211 64.62
18 0.000851 98,934 58.81 0.000342 99,181 63.63
19 0.001007 98,850 57.86 0.000381 99,147 62.66
20 0.001173 98,751 56.91 0.000423 99,109 61.68
21 0.001331 98,635 55.98 0.000466 99,067 60.71
22 0.001455 98,504 55.05 0.000505 99,021 59.73
23 0.001531 98,360 54.13 0.000539 98,971 58.76
24 0.001572 98,210 53.22 0.000568 98,918 57.80
25 0.001602 98,055 52.30 0.000598 98,861 56.83
26 0.001635 97,898 51.38 0.000630 98,802 55.86
27 0.001669 97,738 50.47 0.000666 98,740 54.90
28 0.001708 97,575 49.55 0.000707 98,674 53.93
29 0.001752 97,408 48.63 0.000753 98,605 52.97
30 0.001794 97,238 47.72 0.000803 98,530 52.01
31 0.001835 97,063 46.80 0.000853 98,451 51.05
32 0.001880 96,885 45.89 0.000905 98,367 50.09
33 0.001930 96,703 44.97 0.000956 98,278 49.14
34 0.001986 96,516 44.06 0.001009 98,184 48.19
35 0.002052 96,325 43.15 0.001069 98,085 47.23
36 0.002125 96,127 42.23 0.001134 97,980 46.28
37 0.002196 95,923 41.32 0.001199 97,869 45.34
38 0.002264 95,712 40.41 0.001263 97,752 44.39
39 0.002334 95,495 39.50 0.001329 97,628 43.45
40 0.002420 95,272 38.59 0.001403 97,499 42.50
41 0.002530 95,042 37.69 0.001491 97,362 41.56
42 0.002663 94,801 36.78 0.001597 97,217 40.62
43 0.002823 94,549 35.88 0.001724 97,061 39.69
44 0.003013 94,282 34.98 0.001871 96,894 38.76
45 0.003229 93,998 34.08 0.002033 96,713 37.83
46 0.003479 93,694 33.19 0.002212 96,516 36.90
47 0.003780 93,369 32.30 0.002417 96,303 35.98
48 0.004140 93,016 31.43 0.002651 96,070 35.07
49 0.004553 92,631 30.55 0.002911 95,815 34.16
50 0.005007 92,209 29.69 0.003193 95,536 33.26
51 0.005493 91,747 28.84 0.003492 95,231 32.36
52 0.006016 91,243 27.99 0.003803 94,899 31.48
53 0.006575 90,694 27.16 0.004126 94,538 30.59
54 0.007170 90,098 26.34 0.004462 94,148 29.72
55 0.007805 89,452 25.52 0.004829 93,728 28.85
56 0.008477 88,754 24.72 0.005220 93,275 27.99
57 0.009181 88,001 23.93 0.005612 92,788 27.13
58 0.009916 87,193 23.15 0.006000 92,267 26.28
59 0.010683 86,329 22.37 0.006397 91,714 25.44
60 0.011533 85,407 21.61 0.006848 91,127 24.60
61 0.012434 84,422 20.85 0.007358 90,503 23.76
62 0.013302 83,372 20.11 0.007893 89,837 22.94
63 0.014109 82,263 19.37 0.008453 89,128 22.12
64 0.014913 81,102 18.65 0.009063 88,375 21.30
65 0.015808 79,893 17.92 0.009761 87,574 20.49
66 0.016868 78,630 17.20 0.010581 86,719 19.69
67 0.018101 77,303 16.49 0.011535 85,801 18.89
68 0.019544 75,904 15.78 0.012646 84,811 18.11
69 0.021206 74,421 15.09 0.013919 83,739 17.33
70 0.023122 72,843 14.40 0.015413 82,573 16.57
71 0.025265 71,158 13.73 0.017089 81,301 15.82
72 0.027585 69,360 13.07 0.018861 79,911 15.09
73 0.030070 67,447 12.43 0.020705 78,404 14.37
74 0.032794 65,419 11.80 0.022703 76,781 13.66
75 0.035963 63,274 11.18 0.025035 75,038 12.97
76 0.039588 60,998 10.58 0.027766 73,159 12.29
77 0.043511 58,583 10.00 0.030822 71,128 11.62
78 0.047720 56,034 9.43 0.034227 68,936 10.98
79 0.052358 53,360 8.88 0.038062 66,576 10.35
80 0.057712 50,567 8.34 0.042539 64,042 9.74
81 0.063886 47,648 7.82 0.047663 61,318 9.15
82 0.070782 44,604 7.32 0.053278 58,395 8.58
83 0.078442 41,447 6.84 0.059378 55,284 8.04
84 0.086997 38,196 6.38 0.066132 52,001 7.51
85 0.096603 34,873 5.94 0.073763 48,562 7.01
86 0.107390 31,504 5.52 0.082465 44,980 6.53
87 0.119456 28,121 5.12 0.092370 41,271 6.07
88 0.132853 24,762 4.75 0.103546 37,459 5.64
89 0.147599 21,472 4.40 0.115997 33,580 5.23
90 0.163689 18,303 4.08 0.129706 29,685 4.85
91 0.181104 15,307 3.78 0.144636 25,835 4.50
92 0.199810 12,535 3.50 0.160741 22,098 4.18
93 0.219765 10,030 3.25 0.177971 18,546 3.88
94 0.240913 7,826 3.03 0.196270 15,245 3.61
95 0.261868 5,941 2.83 0.214769 12,253 3.37
96 0.282225 4,385 2.66 0.233174 9,622 3.16
97 0.301555 3,147 2.51 0.251158 7,378 2.96
98 0.319421 2,198 2.37 0.268378 5,525 2.79
99 0.335392 1,496 2.25 0.284481 4,042 2.63
100 0.352162 994 2.13 0.301550 2,892 2.48
101 0.369770 644 2.02 0.319643 2,020 2.33
102 0.388259 406 1.91 0.338821 1,374 2.19
103 0.407672 248 1.81 0.359151 909 2.06
104 0.428055 147 1.71 0.380700 582 1.93
105 0.449458 84 1.61 0.403542 361 1.81
106 0.471931 46 1.52 0.427754 215 1.69
107 0.495527 24 1.43 0.453420 123 1.58
108 0.520304 12 1.35 0.480625 67 1.47
109 0.546319 6 1.27 0.509462 35 1.37
110 0.573635 3 1.19 0.540030 17 1.27
111 0.602317 1 1.11 0.572432 8 1.18
112 0.632432 0 1.04 0.606778 3 1.09
113 0.664054 0 0.97 0.643184 1 1.01
114 0.697257 0 0.91 0.681775 0 0.93
115 0.732119 0 0.84 0.722682 0 0.86
116 0.768725 0 0.78 0.766043 0 0.79
117 0.807162 0 0.73 0.807162 0 0.73
118 0.847520 0 0.67 0.847520 0 0.67
119 0.889896 0 0.62 0.889896 0 0.62
 a Probability of dying within one year.
b Number of survivors out of 100,000 born alive.
 The period life expectancy at a given age for 2016 represents the average number of years of life remaining if a group of persons at that age were to experience the mortality rates for 2016 over the course of their remaining life.

This actuarial table data is actually public record, based on large number mathematical likelihood. Obviously, this does not predict the future of individuals. However, based on large numbers of people, this proves reliable, and allows life insurance companies to logically and soundly choose prices and weigh coverage amounts, etc. It may seem a bit morbid, but it allows these companies to create financial security for our loved ones in the form of life insurance.

If you get traditional whole life from a younger age and continue your payments, for many years, your policy will “Mature”.

Your policy is SO mature!

Life insurance is important, but don’t take it TOO seriously.

A mature policy is one that you have paid into for so long, that it no longer has any premiums that are due. It’s all paid up! If you think YOUR policy has matured, please confirm this with your insurance agent or carrier/underwriter, so that you don’t make the mistake of having your cash value make payments for you, behind the scenes.

Your printed policy will display a maturity date. If you cannot find it, simply call your provider and they can easily tell you what your maturity date is. Depending upon your payment schedule, it can be 10-30 years, or even 30-50 years.

Some companies/policies offer the option of paying MORE, so that the entire policy is paid within 10-20 years. Most companies/policies stick to the tried and true method of lower monthly payments, that have a later maturity date. Most clients wish to get their premiums as low as possible- and later maturity dates help accomplish this goal.

A Few Words of Wisdom

Here is some advice, based on many years of life insurance experience, as well as exposure to a multitude of complicated life insurance situations:

1) When you get your whole life insurance policy, tell your beneficiary where you keep your final documents. Whether or not you tell them you have life insurance, is up to you. Keep the contact info of your agent, with your insurance policy. Your agent *should* go above and beyond to help your beneficiaries, upon your death. Certainly, all of our agents pride themselves on involvement at this step.

2) Obviously your budget is a crucial part of the life insurance package you choose. However, if your budget is tight, consider your current expenses and what you might be willing to sacrifice, so that you have life insurance to protect your loved ones. Do 3 less coffees per month make a difference? 1 less meal out per week do the trick? Consider this “cost” VS the benefit of protecting your loved ones, once you pass away.

3) CHOOSE A SOLID AGENCY. Clearly we think we are a preferred choice. But honestly, don’t feel the need to contact us. Just make sure that the agent AND agency you choose, is truly “top notch”. Most agents are selling themselves and selling you, WELL before they even consider (If they ever do) your needs. A solid agent/agency worthy of your trust will go the 12th mile for you, because this is one of the most important choices you will ever make. It directly benefits your loved ones, in a major way, at one of the hardest times they will ever have to endure, full of financial stress and emotional turmoil. Choosing a solid life insurance agency will line up all your other ducks in a row and put the best options at the lowest prices, on your plate.

4) Don’t OVER insure. There is often a fine line between the right amount of life insurance and what you can afford. One way to test the integrity of your agent, is throw a big budget at them. If you say your monthly budget for life insurance is $800, and then for the next 20 minutes they are pushing around that number, they likely have no interest in you- only interest in your bank account. When you start discussing your life insurance needs, your agent’s first questions should focus on YOUR goals and the needs of your loved ones. It’s good to know budget, but it’s far less important, initially, than what the policy will accomplish. On the otherhand, if you place a $500 monthly budget at the feet of your agent and they recommend a policy that costs $147 per month, your agent is not likely thinking about your bank account, and is more likely considering your needs and trying to save you money, where possible.

5) Get enough coverage, to compensate for inflation. Chances are, you expect to be around for awhile. As long as it is affordable, consider getting 10-20% more than the current cost of covering the financial needs the policy is designed for. If you are under the age of 60, consider 30% – 40% more than current needs for your loved ones, as inflation is… inflating. Obviously your budget needs to be heavily considered. Have this discussion with your agent so you can make sure you have what you need. Remember- the price today is locked. So in 10-20 years your payment will be the same, while new whole life insurance policies that your friends, family and neighbors have, will cost quite a bit more.

6) You CAN get more insurance in the future. Careful with this one. You can get more coverage down the road, but it will cost quite a bit more, as insurance is priced based on your age and your health. The best deal you will ever get on life insurance is now. However, you CAN add more later, if need be. Waiting will simply cost you.

PHEW!

Please email us at hello@protectwithinsurance.com with any requests for anything else you want added to this blog, and information will be updated, regularly. This content was provided by Chad McMahan, CEO of Protect With Insurance.

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