Can’t Judge a Book by Its Cover – The Story of Whole Life Insurance

I was recently making some comments on a financial blog, and was not all that surprised to find what I already knew- most people have a small scale idea of how whole life insurance really works. Traditionally whole life insurance has been seen as a cost, which, when crafted in the traditional way, is. It emphasizes high death benefit, while trying to maintain low costs. This type of policy structure creates low policy cash values, and can be rather expensive. This idea has become wide spread. Most people run from anything that has even the appearance of whole life, and understandably so.

The idea I would like to present here is that not everything is how it seems. I’m not sure who coined the phrase, “you can’t judge a book by its cover,” but I relate this intelligent phrase to the topic at hand. Whole life insurance may have more to it than you think.

There are a lot of individuals, especially those that take an interest in finance, that will tell you about the horrible product that is whole life insurance, and I understand their perspective. They contend that if there were anything good to it, “why have I not heard about it before?” The answer is rather simple.

The agent’s perspective:

When an agent writes a policy, their pay structure is based on what is called the “base premium.” The base premium is what determines the face value of the policy, along with a number of different criteria- age, gender, health- to name a few. The agent’s commission is based solely on this dollar amount, so naturally an agent would be interested in selling the most amount of base premium possible. Now put this into perspective. In the United States in 2008 there were 434,800 licensed life insurance agents ( What do you think the majority are promoting? I’d be willing to bet they promote whatever lines their pockets with the most cash.

Now there is another perspective on whole life insurance that I would like to introduce. One that, for reason stated above, traditionally goes unnoticed… unfortunately. It contrasts the traditional structure of whole life like black contrasts white. It creates a totally different machine, and a very efficient one I might add. I will refer to this type of policy as a “Banking Policy.”

When a banking policy is structured, the base premium (based upon which the agent is paid) is decreased to its absolute minimum, and the cash value is maximized. By maximizing the cash value, the policy inherits a large amount of benefits, benefits that I will explain shortly. To better emphasize this point, I will use an example of a 35 year old male in good health. I am pulling these numbers directly from an illustration by a highly rated insurance company.

Traditional Approach:

Base Premium = $10,000
Cash Value = $0
Face Amount = $808,943
Agent Commission = % of $10,000

As you can see the agent makes a substantial amount of money, and the policy holder pays strictly for death benefit. Now let’s look at how a policy is structured when it’s structured for high cash values: same contribution ($10,000).

Banking Policy:

Base Premium = $3,401
Cash Value = $6,599
Face Amount = $319,199
Agent Commission = % of $3,401

This is a complete reversal to the traditional structure. Analyze for a moment which one you think an agent will be interested in selling you, the former or the latter? Most agents promote the former; it is more beneficial to them. So if you are wondering why you have only heard of a traditional policy, this is why.

The Banking Policy:

The banking policy is structured much differently, as you can see, than the traditional whole life insurance policy. Most people are unfamiliar, or unaware, of this type of structure. Its purpose is not to emphasize death benefit, but to create a tax favored, liquid pool of money, that can be utilized as a personal bank. It is structured using what is called ‘maximum accumulation.’ To better understand maximum accumulation, we need a little background. In 1988, the government instigated a new law. This law disallowed large single deposits into an insurance policy without it becoming a modified endowment contract, inherently losing its tax advantages and becoming similar to a government qualified plan.

Maximum accumulation is a structure that maximizes the policies to create the highest amount of cash values, and the least amount of base premium, without the policy being categorized as a MEC (Modified Endowment Contract) under government law. This is the basis of how a banking policy is structured, high cash values and low costs while maintaining important tax advantages. It maximizes all the possible advantages that can be found in an insurance policy.

So how does this policy look in the next 5, 10, 20 years?

There are a couple things to note about the performance of a policy. The first is that in the year one a portion of the contribution goes to the cost of insurance, as well as in year two. Year three, however, is a different. Year three’s contribution is fully accessible the moment you place it in the policy. This is now a fully functioning bank. It takes an additional two years to recoup the original cost of insurance, but by that time- year 5- you are about breakeven. The total amount of money you have put in is now available in cash value. This includes the cost of insurance. At this point it is no longer necessary to make contributions, the growth in the policy will sustain and grow the policy on its own.

After year 5 this policy becomes a more and more efficient machine. It becomes similar to an airplane. The longer it is in flight the more gas it burns. The more gas it burns, the lighter the aircraft becomes, and the better gas mileage it gets. The longer you’ve had the policy, the faster it grows.

For a more visual representation of what these values can grow to, please visit and watch this video: Whole life insurance banking policy.

Now that we have established the difference between a traditional whole life policy and a banking policy, I want to make a quick point. The banking concept is very conceptual, and is not a form of investing. It is process by which wealth is created. The whole life insurance policy may provide good returns, but that is simply the tip of the iceberg. It represents the smallest portion of the value of the banking concept. Allow me to explain.

According to, the average American has a 401k balance of $66,900.

According to, the average credit card holder has a credit card balance of $15,788 at an average APR of 14.48%. This creates a minimum payment of about $315.76.

According to, the average car loan balance is $24,864, with an average monthly payment of $479.

So the average American is saving for the long term, which is commendable, but this long term savings is inaccessible, creating a predicament. This average American is going to have a need for capital at some point. He will need to buy a car, pay a medical bill, go on a vacation, and the list goes on. So where does he go for capital? The money inside the 401k is untouchable without serious tax consequences, so that’s not the best option. If he has the cash to pay for it, we then must assume that he could have contributed more to his 401k, not maximizing his retirement fund. He will also miss out on what that money could have earned had he not paid cash for his purchase. What the average American tends to do, however, is look for an outside source for that capital. We see this by the average balance on credit cards and car loans. Let’s look at a balance sheet for this average American.

Balance Sheet

401k Value 66,900
CC Debt (15,788)
Car Loan (24,864)
Total 26,248

From a balance sheet perspective, we are in the positive… that’s good, right? Let’s break it down a little more, let’s look at the annual profit/loss statement. We will assume a 10% return on the 401k.

Profit / Loss

Interest Earned/Paid

401k 6,900
Credit Cards (3,789)
Car Loan (5,748)
Total (2,637)

By finding the difference in interest paid and interest earned, we find that the average American here is paying $2,637 more in interest than he earns in his investments. Wouldn’t he be better just paying cash for his purchases and not contributing as much to his 401k? What if you were paying yourself that interest and not someone else? You’d have some pretty strong year end growth, and you would have a eliminated a lot of risk in the process. So the problem here is the place where his money is being stored. Apart from multiple other reasons why his 401k is not benefiting him, it doesn’t allow him access to his money. So what if he utilized a different fund. A liquid fund that allowed him to grow his money tax free, a fund that allowed him to access the money at any moment he wanted, that guaranteed him a 4% growth on his money, and that had been around for over 200 years without fail?

Would it not be better for him to be able to access that capital, maximize his investments, and redirect the finance cost and/or opportunity cost back to his own fund? He would plug the holes where he is losing money, and he would have high, predictable returns on his investment dollars. I could write another 5 pages on risk here, and why there is no reason he should be taking any, but within this process he will also be eliminating that. This is the purpose of the banking policy. It allows you to maximize investment dollars, gives you access to capital you are going to constantly need, and it helps you capture money that you normally lose either unnecessarily, or unknowingly

Indexed Universal Life Insurance Policy

When it comes to universal life insurance, it means a policy which is based on cash value that is credited monthly with interest. But, the policy is debited monthly by the cost of insurance charges and other policy charges and fees will be drawn from the cash value if ever no premium payment is made on that specific month.

The indexed universal life policies credit interest based partly on the major stock market index. In short, if the market does good or well then you will benefit too. More cash value and more supplemental will be your retirement income.

Have you notice now a day that most people rely on their insurances and you can see different kinds of insurance had spread almost everywhere and more and more insurance companies cater to the different security which they think needed by the people anywhere. Some people have different types of life insurance they purchased in different insurance companies.

The indexed universal life can be considered as life’s contract and a good choice for those that who don’t only seek for life security but as well as financial growth or stability. Covers almost everything and the limit is not only for life security but also brings highlights to have your investment grow and also allows the holder of the policy to come up with cash value deferred tax and this is a great access for one’s own retirement.

It is a flexible kind of permanent life insurance that offer low cost protection in term of insurance and as well as savings. The Indexed universal life insurance policy offer a variety of popular indexes to choose from and it allows the policy holder to choose or decide the percentage of the funds which they want to allocate to the fixed and indexed portion.

The indexed universal life insurance policy offers bright financial plan and insurance but this is not for everyone. Not all life insurance policy are advantageous, there is also some disadvantages. Having the IUL policy needs a planning and you also need to educate yourself regarding this policy. This kind of policy needs some monitoring to see where your money goes, so you need to think of all the possibilities before having this investment.

Educate yourself before having this IUL policy since this need monitoring, financial planners as well as attention since it is not only a life insurance but as well as investment. Always study the consequence or steps as to insure stability and security. For sure you don’t want to engage in an investment like this that when you retire, you got nothing. Remember that most people who have life insurance seldom monitor their policies.

If IUL has an advantage so as well as disadvantage since this two comes always hand in hand, the advantage and disadvantage. So better do your research before getting IUL policy and if ever you have a friend who have IUL policy better ask and let your friend explain it to you. Always try to know the disadvantage of every life insurance policy, not only their advantages. Don’t be melting or tempted with the magical words of their advertisement.

The Advantages of Auto Insurance Companies

Discrimination in selecting your auto insurance policy is advantageous for you on so many critical counts that without comparing companies and policies, it is unwise to proceed with insuring your car. An unethical insurer and/or a bad policy can spell untold financial and psychological harassment for you. To make matters worse, you will seldom have the time or the money to sue anyone for damages as the unscrupulous can always find a way to interpret your contract to their advantage.

The advantages of signing up with a reputable company

If you are a first-timer in securing car insurance the first thing to do will be to ask around from your friends and relatives about which auto insurance companies they can recommend to you. If you don’t like approaching other people for such matters, you should get a top something list of car insurance companies on the internet. An outfit with a name and a good reputation will be offering some of the best policies and coverages in the insurance market.

If there is a government office regulating insurance in your country, you can visit their website or office and research on the number of clients that your selected auto insurance companies have. This will be your next move…verifying their reputation.

Select the company with the least number of listed complaints

At the same government office, you can research on the number and types of complaints ever filed against everyone in your list. While you are at it, note down the issues which came out most frequently for each company. Those are the aspects you may have to take extra measures to secure if you decide to have your car insured by any of them.

You may find a few surprises in this phase of your research, information that will require you to re-do your list of desirable insurers.

Consult with the car repair shops

To get to know something about how fast car insurance companies process car repairs and services, you should consult with some of the car repair companies. If you are not absolutely sure that management is telling you the truth, try asking their employees. These will often be impartial enough to be valuable resources for this data.

You need to be sure that your insurance company will be willing and able to repair your car in the shortest time possible to minimize your losses in terms of time, money and business opportunities when that occasion arises.

Select the coverage and premiums that will be practical for you

After eliminating undesirables from your list of insurers, you should get acquainted with the list of policies that each one offers. Towards this end you may have to create another listing for the purpose of comparison.

Many people are blinded by easy premiums and don’t bother to examine in minute the details, the specifics about the coverage; when and where the insurance is applicable and conditions when it is not.

Try and get the best and the most appropriate coverage for the smallest premium available in that order of importance. Coverage is the value that the insurance holds for you and you have to make sure you get the most value for your money.

Annual Holiday Travel Insurance – The Pros and Cons

Travel Insurance should be an important part of everyone’s travel, whether they make it a short jaunt or a month long voyage. The issue however is that most people don’t look for the most cost efficient way or method to obtain the insurance. The key here is that the most cost effective insurance plan is the annual holiday travel insurance rather than purchasing individual plans for each trip that you take.

It is important to analyze your travel plans for a year. Try to determine whether you are going to take several trips or just one or two. If you are going to take one or two, it may be better for you to purchase an individual plan for each trip. However, if you are going to be travel a lot throughout the year, then you should carefully consider a travel insurance policy that will meet all of your needs.

There are three very important advantages to purchasing an annual holiday travel insurance policy.

Advantage #1 – Cost Efficient

You will find that it is most cost efficient if you are traveling a lot. You will save a great deal of money when you purchase an annual holiday insurance plan versus an individual insurance policy. You will not pay as much in the long run when you purchase the one policy.

Advantage #2 – Convenience and Efficiency

It is much easier to make one payment than it is to pay twelve payments. Once you make that one payment, you are covered for the entire year. This makes it so easy to jump in the car for a weekend getaway, or book that 3-night 4-day cruise. You can rest assured that you can travel and be well taken care of.

Advantage #3 – Bonuses

Now the underwriters and insurers definitely want you to purchase annual holiday insurance. Now there are often extras that are offered so that the buyer will be enticed to purchase an annual holiday insurance policy. Some of the extras include coverage for the kids and the grandkids of the traveler, extra coverage for the various events that you can get involved in when traveling. You can get coverages for sporting activities, adventure activities and even business activities to name just a few.

There are a couple of disadvantages that should be considered when purchasing annual holiday travel insurance.

Disadvantage #1 – May Not Fit Your Needs

If you are someone who only makes one or two trips a year, the annual holiday travel insurance policy may not fit your needs. For this type of traveler, the individual travel insurance is probably the best choice to make.

Disadvantage #2 – May not be able to meet customized requirements

It may not suit very specific insurance requirements. If you have very customized requirements, the insurance agent may not be able to meet your needs. There are some requirements that cannot be met such as certain age requirements

How To Buy Home Insurance Online The Easy Way

Home insurance has its advantage and disadvantage and it is also up to you to know a thing or two about insurance so you won’t fall on its disadvantage side. That’s the reason why doing research is important so that you would know how insurance works also you would know their advantage and disadvantage and can prepare for it.

Getting home insurance can be very expensive but today you could find affordable and cheap insurance using the internet. Thanks to new technology you can find insurance even when you’re in your office or in your home with just the use of your computer. Here is some information about getting homeowners insurance online.

The advantage in buying or getting homeowner insurance online is that its hassle free and its faster compared to getting it in your local area. However if there’s an advantage there is also a disadvantage and since it’s on the web there’s a big possibility for you to fall victim of scam websites.

But before buying your home insurance you need to do some research first about it and how it works. You should also know the different coverage under home insurance so you would be able to choose the right coverage that would protect your home, property and your family.

Then you find and list down the insurance company that you can find online that will give you a good home insurance. Be sure that you trust the insurance company site that you have chosen. Then ask the requirements you would need to comply in applying for their home insurance.

When you’re on it getting homeowners insurance quotes can also help you decide and choose the insurance company that offers you the best home insurance. For insurance quotes would let you know the estimate amount that you are going to pay with your policy.

When you buy for a policy be sure that you carry enough coverage that will protect your home for any damages that is caused by a disaster such as flooding or hurricane in your area.

And if you think your premium is very expensive then ask if you can avail for any discounts or you could increase your deductibles this is some ways of lowering your premium even for a while.

You need to get all the requirements needed to apply for your online home owner insurance and when you have this you can then submit them and wait for the results.