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:

• What Is Whole Life Insurance?

• What ISN’T Whole Life Insurance?

• The Characteristics of Traditional Whole Life Insurance

• Living Benefits

• Cash Value

• Who is Life Insurance FOR?

• Actuarial Life Table

• Your policy is SO mature!

• A Few Words of Wisdom

First… What IS Whole Life Insurance?

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:

• 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!

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.