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Whole Life Insurance Worked for Me

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AUTHOR: Jeff Bond on 1/22/2025

Many people are convinced that buying term life insurance is the best option from the standpoint of both affordability and coverage. However, I bought whole life insurance a long time ago. The agent represented MONY, and at the time MONY was a very highly rated insurance company. I got married (first time) in 1978. My employer at the time provided bare minimum benefits, and I thought insurance to protect my young wife, who was still in school, was a good idea. It was a small policy for either $10K or $20K. In 1978 that was real money.

Then in 1986 I called the agent to tell him there was a baby on the way and wanted to talk about additional protection. The following discussions resulted in my rolling the original policy into a larger one for $150K. My first son was born in early 1987. Son number two arrived in late 1989.

I do not remember the amount of my monthly payments for this new policy, but they were not insubstantial. I also remember that as young parents we rarely had much money left over at the end of each month. In retrospect, the purchase of the whole life policy resulted in an enforced savings plan. Even though it was not a great investment, both my insurance coverage and cash value increased each year.

Our family went on with our lives. I continued to make payments on the policy, but the various employers I had during that time provided life insurance in multiples of my salary. I even had disability insurance. I saw no reason to increase my policies with MONY, even though the agent checked-in several times a year. In addition to his life insurance credentials, he also became a financial advisor and wanted to administer my Vanguard IRA. I declined.

One day, a new guy called. The previous agent was no longer with MONY, and MONY was now AXA.  We met, but all he wanted was for me to increase my life insurance coverage and let him administer my IRA. Again, I declined.

Let us jump to 2013. The reasons I had taken out the initial policies were gone. My kids were adults and on their own, plus I had been divorced from my first wife for years. My financial picture had changed (for the better), and I was newly remarried. My priorities were quite different.

From 1986 to 2013 the whole life insurance policy had accrued substantial cash value. At 60, I still planned to work for several years (I retired at 67), but the one puzzle piece missing from my financial picture was long term care.  I eventually spoke to an insurance agent who suggested using the cash value of my whole life insurance policy to purchase a single premium LTC policy with Lincoln Financial Group. The policy is designed to pay a specific amount over the course of six years. Care can be provided either at a facility or in my home. If I never need LTC, a death benefit will be paid to my beneficiary.

One disadvantage of the LTC policy is that there is no cost of living adjustment associated with LTC payout, meaning the purchasing power of the policy has declined. However, it is better than paying, if needed, 100% LTC services out of pocket. When we get to that stage, I will augment costs with payments from my Social Security benefits, my IRA RMDs, and investment returns.

Here is the summary. In the beginning, I took out whole life insurance to protect my family in the event of my early death. Now I have converted it to long term care insurance to protect my estate from some of the expenses of long term care. This just happened to work for me. The decisions I made were based on information and financial options that were available at that time. I am not advocating for this process to other HD readers.

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Steve Spinella
16 days ago

I have no idea if a whole life policy is a good deal now. So much has changed! However, in the late 80s, around the time we started having children, I was a computer consultant for a life insurance general agency with a respected financial services company. At that time, I believed a modified endowment whole life policy was an excellent value–if you would actually keep it long term, I think the break even point I calculated was around 14 years.
I did buy the policy and I did keep it–about 21 years. I used the dividends to buy paid up additions. It was a good deal at the time, including a stock dividend when the company de-mutualized. I took the check to my discount broker’s local office since it appeared large to me and the person behind the counter said, “You could buy a Porsche!” Perhaps that was an indicator they weren’t the right candidate for such a policy?
In any case, there you have it. I bought whole life, used it appropriately, and don’t regret it. Of course, I also got a commission for selling my own policy and a service fee until I was no longer eligible, and I avoided all the policies that were marketed more heavily. The only agent I knew in our agency who sold those policies at that time was reputed to sell them to Italians from whom he personally collected the premiums in cash. The company never sent any more than the minimum required annual information statement and I came to believe it was because they hoped I would cancel the contract if they just neglected it long enough :-).

Edmund Marsh
17 days ago

Jeff, thanks for sharing your story about life insurance. You said you “would do it differently” if given the chance to do it again. I seem to remember that Jonathan’s original call to prospective writers for the site included some encouragement to share mistakes as well as victories. He reiterated the invitation in this article. I suspect all of us have a mix of financial moves in our past, some that we’d like to tell and others we’ll just keep to ourselves. Your story turned out fine in a way that satisfies you. Thanks again.

Edmund Marsh
17 days ago
Reply to  Jeff Bond

Me too!

Mark Bergman
18 days ago

I would NEVER buy a whole life policy again – mine was a variable universal life policy. Mixing life insurance with investing is a no-no. These are policies meant to be sold, not bought. The sales commissions are enormous, which is why they are pushed on the unsuspecting. While the cash value of my policy has appreciated over time significantly, I would have to pay 5% interest once I withdraw above my basis. Basically, paying interest for the “Privilege “ of accessing my money ! The annual dividend is tiny and is totally wiped out by the premium cost of maintaining the policy death benefit. The premium will of course rise/get worse as i get older. By coincidence, I am in the process of converting my policy via a 1035 exchange into an annuity – not my preference but better the keeping the policy.
For those interested in taking a FAR deeper dive into whole life insurance, The White Coat Investor blog has published many highly persuasive articles over the years about the lack of suitability of these products for nearly everyone.

Charles Moser
18 days ago

My father purchased a $1000 for me when I was about 7 years old. ??? When he passed 25 years later I cashed the policy in rather than continue the premiums. I am sure the premiums were more than the cash value on an inflation adjusted basis. I also saw agents pushing whole life policies to young,healthy, single medical graduates. ??? Hence my distaste for insurance and insurance agents

David Lancaster
17 days ago
Reply to  Charles Moser

The whole purpose of life insurance is to protect against a loss of income from the person dying. Did you start your work career in the crib?

I also wonder what the resultant dollar amount would have been if he had just invested the premiums. I’m sure it would have far exceeded the 1K.

Rick Connor
17 days ago

Years after my father-in-law died I found a life insurance policy from his infancy. After some research and phone calls I found that it was paid up and had a cash value of about $500. I was told that at the time he was born insurance salesman sold “burial” policies door to door – just enough to bury an infant if they succumbed early in life.

Charles Moser
17 days ago
Reply to  Rick Connor

Exactly!

Norman Retzke
18 days ago

I too had a whole life policy and that was augmented with a “key man” policy because I was the principal in a business. When I left that business the key man policy was no longer necessary. Because of a settlement in 2001 I was given a few shares in the whole life company and I retain those today; the stock has appreciated nicely and pays a 4% dividend. As I approached retirement age I concluded the whole life policy was no longer necessary. I cashed that in and it allowed us to increase our retirement savings. G (my spouse) had a chronic medical condition but was diagnosed in remission. We applied for and after a grilling by a medical professional we were granted Long Term Care insurance policies. I understand the optimum age to purchase is about 60-65, but we did this when she was 57 and I was 68; every year of delay increases the premium. G’s condition returned but by then we had the policy. A few things to bear in mind: 1) It is possible the company may not be in business when we need the insurance, so we plan accordingly. 2) The policy is a backstop. Annual financial review indicates our savings are adequate. 3) Our fees increase 5% per year. 4) By purchasing two policies we were given a premium discount. Overall, having the policies provides us with additional peace of mind. Being in that state I think we make better financial decisions.

Last edited 18 days ago by Norman Retzke
Bob G
18 days ago

I have a very similar story. Here’s how whole life worked for me. When my wife and I got married in 1968, “everyone” bought whole life, including me. As our family grew (4 boys), I bought another policy and even bought one for my wife. Fast forward (and it was fast:) to my retirement and trying to figure out how to make it work; I knew we no longer needed life insurance. One day it hit me that if I cashed out all of our whole life policies, we got significantly more money than if either one of us died. The only way we would have gotten more money is for both of us to die. Effectively, we got the money, but we are both still here. It enabled me to establish an income stream in addition to Social Security that provided for our living expenses.

Maybe I could have done better with term and investing the difference, but this worked out great for us.

BTW, I’m a retired Pharmacist, not a retired Life Insurance Agent.

Last edited 18 days ago by Bob G
David Lancaster
18 days ago
Reply to  Bob G

Hey Bob,

You wrote, “It enabled me to establish an income stream.”

How did you do this by buying an annuity with the proceeds of the cash out?

Bob G
17 days ago

Yes.

DAN SMITH
19 days ago

When set up correctly some of those paid up permanent policies could work, but the premiums were expensive. Today many agents push the variable universal policies that involve mutual fund investments. The premiums can be much lower… often too low. VULs are dangerous because of market volatility. Combine those 2 things and the policy has the potential to crash and burn.
i have seen some interesting fixed annuities that guarantee an interest rate, and will pay up to 400% of the premium for long term care, and have no surrender charge. However, I have not read the small print so don’t know the possible drawbacks.

mytimetotravel
19 days ago

Interesting, it seems to have worked well for you. My first husband and I both had term life policies during our marriage. My employer provided both life and disability insurance and I dropped the term life after we divorced. I did carry additional disability insurance. Once IRAs and then 401Ks became available I saved the max in those. I don’t have LTC insurance, I hope my CCRC will make it unnecessary.

Rick Connor
19 days ago

Interesting story Jeff. From the beginning of my career my employer(s) offered decent term life insurance coverage at reasonable prices. They also offered spousal life insurance and short and long term disability. It was easy and lasted throughout my career. I consider myself fortunate; I’m not sure how available this kind of coverage is for current employees.

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