Many financial advisors dismiss whole life insurance as an expensive “rip off” compared to term policies. But what if the higher costs actually provide substantial long-term benefits that term insurance can’t match? In 2025, whole life insurance offers unique tax advantages, guaranteed returns, and financial flexibility that make it worth reconsidering – especially with interest rates and economic conditions changing rapidly.
What You’ll Learn in This Article:
- Why Whole Life Costs More Than Term Insurance
- Is Whole Life Insurance Really a Scam?
- Benefit #1: A Superior Alternative to Traditional Savings Accounts
- Benefit #2: Become Your Own Banker (The Infinite Banking Concept)
- Benefit #3: Tax Shelter & Creditor Protection Benefits
- Benefit #4: Access to Cash Without Credit Approval
- Benefit #5: Financial Stability Even During Economic Downturns
- Finding the Right Whole Life Policy for Your Needs
In a world where price often reigns supreme, it’s easy to understand why whole life insurance gets labeled a “total rip off” or even a “scam.” After all, when comparing whole life insurance vs term life, whole life can cost anywhere from 5 to 10 times more than a term policy with the same initial death benefit.
For those simply looking to:
“Protect their loved ones in the event of their death”
Paying up to 10 times more on whole life insurance rates versus purchasing an initially much less expensive term insurance policy seems like a terrible “investment.”
Which is why we at I&E wanted to address exactly:
“Why does whole life insurance cost so much?”
Or phrased another way…
“Why is term life insurance so INEXPENSIVE?”
After all, there must be a reason… Right?
Why Whole Life Insurance Costs More Than Term Life Insurance
The truth is, there are several reasons for the huge price difference between whole life and term life policies, with the biggest reason being:
If you purchase a term life insurance policy, your chances of actually dying while the policy is “in force” are remarkably small.
This is good news! It means you’ll probably outlive your term life policy. And any time you “don’t die” has to be viewed as positive… Right?
Here’s the reality: Both term and whole life policies offer a death benefit, but with term insurance, that benefit isn’t guaranteed to ever pay out. The death benefit is only paid if you die during the “term” period of the policy, which is typically 10-30 years.
This means if you purchase a term life insurance policy, there’s a good chance you’ll outlive it. In fact, why would insurance companies offer such inexpensive coverage otherwise?
The Payout Statistics Insurance Companies Don’t Advertise
Insurance companies aren’t charities – they’re businesses designed to make money by taking “acceptable risks.” While it’s difficult to get definitive statistics, industry experts estimate that only 1-3% of term life policies actually pay a death benefit.
We’re not suggesting insurance companies don’t pay legitimate claims. Rather, insurance companies excel at what they do, which explains their profitability!
This is why term life insurance is initially much cheaper than whole life – with less than 3% of term policyholders ever collecting, many people end up paying for insurance that never pays out.
So Is Term Life Insurance a Scam?
No, not really. The insurance company fulfills their side of the agreement by providing affordable coverage for a specified period. It just happens that providing this valuable service allows them to profit handsomely.
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Is Whole Life Insurance a Scam?
No, whole life insurance is definitely not a scam. When someone purchases a whole life policy, the insurance company knows they will eventually be obligated to pay the agreed death benefit (as long as premiums are maintained). This guaranteed payout is one of the main reasons these policies cost substantially more than term life.
Watch: The Truth About Whole Life Insurance Dave Ramsey Doesn’t Tell You
Think Dave Ramsey’s advice on whole life insurance tells the complete story? Our agent reveals surprising facts that contradict Dave’s claims, including how properly structured policies can offer 4%+ tax-free returns, increasing death benefits (up to $2 million on a $549,000 policy), and break even in just 6-12 years. You’ll also discover how whole life ironically aligns with many of Dave’s own financial principles. This eye-opening video shows why the “whole life is a rip-off” argument doesn’t hold up against real policy illustrations.
For those willing to pay extra to ensure their family will receive the agreed death benefit, whole life insurance offers several additional benefits that could make it worth considering in 2025. Let’s examine the top five reasons why purchasing a whole life insurance policy might not be a “rip off” for you:
Benefit #1: A Superior Alternative to Traditional Savings Accounts
One key reason we at I&E often recommend whole life insurance policies, particularly high cash value whole life insurance, is to provide a safe place to “park” money outside of traditional low-yield bank accounts.
This recommendation challenges the conventional wisdom of many financial advisors who claim whole life policies are terrible investment tools. But we’re not suggesting using whole life insurance as an investment – we’re proposing it as an enhanced “savings account.”
How Whole Life Outperforms Bank Savings in 2025
| Feature | Traditional Savings Account | Whole Life Cash Value |
|---|---|---|
| Average Return Rate (2025) | 0.5-1.5% | 3-5% (guaranteed + dividends) |
| Tax Treatment | Interest taxed annually | Tax-deferred growth |
| Creditor Protection | Limited FDIC insurance | Strong protection in many states |
| Access to Funds | Immediate access | Policy loans available anytime |
| Additional Benefits | None | Includes life insurance protection |
The benefit of having a guaranteed rate of return on your cash value provides significant peace of mind when so much of life remains uncertain.
| Traditional Bank Savings Account | High Cash Value Whole Life Insurance Policy | |
|---|---|---|
| Earnings Rate | The national average yield for savings accounts is 0.58 percent APY as of Dec. 18, 2023 (*Bankrate, December 13, 2023). But actual earnings are less after tax and not guaranteed. | Guaranteed (average) 3% interest. Plus an additional 2%-4% dividends. Tax-free, so net earnings of 5%-7%, which may increase as interest rates increase. |
| Withdrawals and Earnings | Amount available for withdrawals is lower because gains in the account are taxable. | Full amount of cash value is available for withdrawals. |
| Loans | Does not offer loans. Loan would have to be obtained through a bank or other lender. | Loans are available via the cash value, with no approval needed. Plus, the amount borrowed still continues to generate interest and dividends. |
| Loan Repayment | Amount and due date of repayments is determined by the bank or lender. If payments are late or missed, it negatively impacts your credit score. | No required loan payments. Policyholder determines when and how much is paid - or even IF payments are made. |
| Added Benefits Upon Death | Paid on Death (POD) to a beneficiary. | Death benefit is paid to beneficiary income tax free. |
| Living Benefits | None | ~Chronic Illness Rider - With a chronic illness diagnosis or need for long-term care, funds may be accessed from the death benefit. ~Accelerated Death Benefit - Death benefit funds may also be accessed in the event of a terminal illness diagnosis. ~Protection from 3rd party creditors - In most states, whole life insurance is protected from creditors, lawsuits, and bankruptcy. |
| Costs | Potential savings and checking fees. | Premium is required for death benefit. However, premium payments are leveraged for a larger death benefit payout - which is received income tax free by the beneficiary(ies). |
| Creditor Protection | Minimal. | Creditor protection based on individual state laws. |
Benefit #2: Become Your Own Banker (The Infinite Banking Concept)
Another compelling reason to consider whole life insurance is when you have savings combined with debt. This unique situation makes you an ideal candidate for the “infinite banking” strategy.
What Is Infinite Banking?
Infinite banking was developed by Nelson Nash, who discovered he could use his whole life policy to accomplish various financial goals – including becoming his own banker.
By owning a whole life policy with accumulated cash value, you can borrow against that value for major purchases like vehicles, homes, or other expenses. Instead of taking out loans and paying interest to financial institutions, you use your own policy’s cash value and repay yourself with interest!
This approach effectively eliminates the traditional role of banks and bankers in your financial life.
Who Benefits Most from Infinite Banking in 2025?
At I&E, we recommend these infinite banking policies to:
- Younger people who can build cash value over time
- Older individuals with the means to “pre-pay” their policies using a paid-up additions rider for immediate advantages
Still not convinced? Try calculating how much you pay other institutions for the “right” to use their money annually. Multiply that amount by the number of years you’ll likely continue relying on creditors to finance your lifestyle. The result often reveals how much you’ll end up paying these institutions over decades and highlights the potential savings of becoming your own banker.
Benefit #3: Tax Shelter & Creditor Protection Benefits
The third major reason to consider a cash value whole life insurance policy is the excellent tax shelter these policies provide.
Tax Advantages in 2025
Within a cash value whole life policy, the cash accumulation isn’t reported to the IRS. This means your cash value doesn’t need to be included on asset reports, providing several advantages:
Student Loan FAFSA Benefits
If you’re currently a student or helping finance someone’s education, this cash value won’t appear on the Free Application for Federal Student Aid (FAFSA) application. This could potentially improve eligibility for financial aid.
Social Security Advantages
Cash value life insurance allows you to take withdrawals or loans without counting against social security tax calculations, potentially reducing your tax burden.
Strong Creditor Protection
Perhaps most significantly, cash value is fully protected from creditors in many states and partially protected in others. For some individuals, this protection alone justifies purchasing a whole life policy.
Benefit #4: Access to Cash Without Credit Approval
Once your whole life policy has accumulated cash value, you don’t need to worry about loan approvals or credit checks.
Borrowing against your life insurance policy’s cash value doesn’t even appear on your credit report because you’re essentially “borrowing” money from yourself!
Combined with the creditor protection mentioned earlier, it’s easy to understand why many people who owned these policies were grateful for their decision during the last housing crisis. They maintained access to funds when traditional lending sources dried up.
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Benefit #5: Financial Stability Even During Economic Downturns
A whole life insurance policy allows your dollars to perform multiple functions simultaneously:
- Paying your premium
- Accumulating cash value
- Creating a waiver of premium benefit
- Increasing your death benefit
- Providing leverage through policy loans
Perhaps most importantly, during the 2008 financial crisis when banks, businesses, and government sectors were shutting down, one sector remained strong and steady: life insurance companies.
While we hope never to experience another major economic downturn, the demonstrated stability of life insurance companies provides extra peace of mind in uncertain times.
Finding the Right Whole Life Policy for Your Needs
You can now see that although whole life insurance policies cost more than term life policies, the various ways they can benefit you make them quite affordable when viewed holistically.
The key is finding a life insurance agent who fully understands these policies and will take time to explain how they may benefit your specific situation.
How I&E Can Help You in 2025
At I&E, helping clients understand their insurance options is exactly what we do. We don’t presume to know which type of life insurance is “best” for you. Instead, we listen to your specific needs and present options that might address them.
Because we work with numerous companies offering various products, we’re likely to find not just a suitable solution, but one with premiums you can afford!
What are you waiting for? Contact us today to explore whether whole life insurance might be right for you!
Not Sure Which Life Insurance Policy Is Right for You?
Let our experienced agents help you compare quotes for both traditional and hybrid policies. Get personalized guidance at no cost.
14 comments
Tomas Tamo
So you can expect a 5-7% return on your “investment” correct? Your investment is your premium MINUS fees/commissions. What percentage of the premium goes to fees? On average? Let’s discuss this, it’s important. I’ve heard as much as 100% in the first few years??? Seems to me that most all plans start in the negative and take several years to actually start to gain money (5-7% return) vs putting your money in a conservative fund in the market where the fees are drastically less some virtually $0. Other than the death benefit (if needed early on) I see no advantage of whole over term life and investing in the market… Term/market investing wins from day 1.,.. thanks to the “fees” . You make money on your investment immediately, all of it…
Insurance&Estates
Hi Tomas,
It’s not about rate of return as much as it is about:
1. Control – becoming your own banker with flexible access to your money without credit checks or applications
2. Tax efficiency – cash value grows tax-deferred and can be accessed tax-free through policy loans
3. Financial certainty – guaranteed growth regardless of market conditions, providing stability during economic downturns
4. Leverage – using your money multiple times simultaneously through policy loans while your full cash value continues growing
5. Asset protection – enjoying creditor protection benefits unavailable with most investments
6. Legacy creation – providing guaranteed, tax-free wealth transfer to the next generation
7. Multi-purpose tool – a single financial vehicle that serves as emergency fund, investment capital, retirement supplement, and estate planning solution
Rate of return is just one metric. Properly structured whole life insurance provides a financial foundation that works in harmony with other investments to create lasting wealth and financial freedom.
STEWART OGILBY
You write: “when an individual decides to purchase a whole life insurance policy, the insurance company realizes that they will one day be on the “hook” for the agreed death benefit…” WRONG, (as you probably know). The death benefit in increasingly paid for by the “cash values” which are the property of the company (they can be borrowed). The company get off the “hook” for paying a death claim, especially at later years.
Steven Gibbs
Stewart, if you think that a reputable whole life company makes a habit of “getting out of” legitimate death claims, you have alot to learn. You are correct in your assertion that policy loan proceeds reduce the death benefit. However, this isn’t a hushed mysterious way for companies to “get out of” claims. Rather, this is common knowledge and entirely reasonable because the cash value finds the death benefit, as you point out. So, the natural impact of having unpaid loans is to have the death benefit reduced. So, I encourage you to take a fresh look because your perspective of what is right or wrong about high cash value whole life is skewed. As a side note, we get inquiries from all of over the world, asking if they can get this asset and the answer across the globe is that corruption has eliminated this option for most world wide. This is pretty much the only asset where one can invest in guaranteed growth, with tax relief and even share gains (dividends) in the case of mutual participating companies. Seriously, seek some understanding on this. Best to you.
Steve Gibbs for I&E
Steven Gibbs is a licensed insurance agent, and the following agent
license numbers of Steven Gibbs are provided as required by state law:
Resident License; AZ agent #17508301,
Non-resident Licenses: TX agent #2273189, CA agent #0K10610,
LA agent #769583, MA agent #2049963, MN agent #40563357,
UT agent #655544.
Terry L & Judith J Blush
What happens when you are old and the premiums become cost prohibitive?
Steven Gibbs
Hi and thanks for connecting,
The life insurance component of any policy does become more expensive for a new applicant based upon age and thus the sooner someone locks in, the better. However, with whole life, the premiums are fixed and level and thus do NOT increase with age once the policy has been issued and accepted. This is actually why a properly designed whole life policy offers a massive advantage over term and even arguably IULs because the cost will decrease and eventually can be fully paid off depending upon choices and design. Othger options for folks who are older and can’t afford premiums for a new policy could include an annuity (if suitable) because this isn’t handled in the same way for cost purposes.
tom haws
You all arw extremely biased for wli. it is one of the worst investments ever devised by the insurance industry(and that is really saying something). Your criticism of Raul was extremely weak and mad no sense. Why do you think 70 % of the buyers of WLI cancel it within 10 years. Raul said the person would have had 24000 dollars and he was counting zero return on his money for that comparison. You ignored that and started talking about fees and commissions in mutual funds. In Raul’s example the customer coud put the money under his mattress and come out way ahead of the ripoff WLI policy. You are typical WLI salesman. Your arguments are ludicrous.
Insurance&Estates
Hello Tom, in respect of your freedom of speech and differing opinion I welcome your comment and yet disagree whole heartedly for a few reasons as follows:
1. As an estate planner, I don’t advocate for whole life as an “investment” however, when a dividend pays 4-6% which is a documented fact and the “asset” is a safe and predictible one which allocates all the risk to the insurance company, I am at a loss to how you harness such a inaccurate view of it. Actually, the real tragedy is when folks lack life insurance at an vulnerable age and often regret cancelling it. And, most people cancel because it was not properly sold or designed and/or they lacked a commitment to building it.
2. As far as Raul, I’ll just say that the “would have had” syndrome is a common one in the gamblng world of Wall Street that primarily serves the movers and shakers there. Commissions in whole life are extremely modest by comparison.
3. I am a far cry from the “typical whole life salesman”. I am an attorney with 20 years of estate planning experience and personally practice what I preach about “high cash value whole life”. Myself and our many clients deem properly designed dividend paying whole life to be among their most valuable assets, as do most large banks and major corporations in the U.S.A. Consider whether you are the typical Wall Street devotee with blinders on.
Best, Steve Gibbs for I&E
Raul Chavez
Too bad you can’t have a non biased article from a whole life insurance agent. Couple of facts to consider:
Purchasing a very affordable Term policy and then taking the substantial difference in cost between a Term policy and a Whole Life policy and investing that difference will result in the person ending up with way more money in their investments than what they would ever have in a Whole Life policy.
Even investing in a simple S&P 500 Index mutual fund has historically had over a 10% rate of return.
Another interesting stat would be the actual number of people that keep their Whole Life policies past 30 years. Here is a very good example that happens all the time. Two families: One purchased a $100 a month Term policy and is investing $500 a month.
The other purchased a Whole Life policy for the same amount of coverage but paying $600 a month.
Say 4 years go by and the family faces a significant financial emergency. There is no way that family will be able to make those $600 a month payments and to add insult to injury they don’t even have any Cash Value build up in their Whole Life policy because for the first 5 to 7 years the clients get hit with SURRENDER FEES. Why is that? Because of the HUGE COMMISSIONS the agents get paid for selling those whole life policies. So what ends up happening with this family is that they loose everything, they life insurance policy and all the money they gave the insurance company.
Now let’s take the same scenario with the other family that bought the $100 a month Term Policy but then invested the difference of the $500 a month. So after those 4 years of paying for the life insurance and now facing a significant financial emergency this family WOULD be able to still maintain their Term life policy because it’s ONLY $100 a month and NOT $600 a month. They would also have access to the money they have been investing, which not even counting any growth in their investment that would be $6,000 a year or $24,000 over the 4 years. So they would have $24,000 available to take care of any financial emergency and still be able to pay the $100 a month premiums to KEEP their Term Life insurance and protect their family!
That is precisely why every 3rd party source that has NOTHING to do with the insurance industry always recommend Term Insurance as the best and most affordable option to protect one’s family (Consumer Reports, Money Magazine, Kiplingers, etc. etc.)
Insurance&Estates
Thanks for commenting Raul, we all have our biases; however, mine are based upon creating predictability, as an alternative to the gambling wheel of Wall Street, and given the smoke and mirrors that are pushed by Wall Street and term agents. Your objections to whole life are commonly touted, and while of few of your points are worth considering, many are simply wrong.
For started, the idea of 10% “average returns is a rolling 20 year average and extremely misleading. How many people do you know that leave assets in the market for 20 years. If its a mutual fund, how about those fees?
Also, the idea that whole life agents make “huge” commissions is a gross exaggeration. Simply put, commissions are very reasonable when compared to what fund managers or those in the financial arena get to charge under the radar. Also, for those selling high cash value policies, commissions are even lower and a high level of expertise is required.
As far as folks not continuing to pay, this point says zero about the value of the permanent coverage. Actually, the opposite also occurs where people let coverage lapse or their valuable “term” insurance expires and then can no longer get life insurance due to health changes.
I promote various solutions, first as an estate planner and NOT as a biased insurance agent. With that in mind I’ll say that there are too many flawed assumptions to count in this very one sided look at whole life. We’ve addressed all of these in detail in numerous articles and videos.
I sincerely hope you stop listening to the financial entertainers and Wall Street talking heads and look deeper.
To your success. Steve Gibbs, for I&E
Shantanu Paul
At least lets be truthful about commissions.
Average commissions on Whole life for the agent is ~70-110% of first year premium and 1-2% residuals.
YOu are really going tell people this is less that 0.05% management fees on index funds and ~.5-.9% of actively managed ETFs?!!
Insurance&Estates
Hi Paul, thanks for the comment. The whole life policies we are advocates of pay commissions of 20-30% depending on the policy design. In contrast, actively managed ETFs are charging .70% year in and year out. So as your account grows, so do your fees. So if a whole life policy premium is $20,000, our commission would be around $4,000. Contrast with an actively managed ETF that would take .70% a year, every year for however long the account is open. Over the long term you would pay much higher fees with the actively managed ETF then the start up cost for the whole life policy.
Best to you!
Steve Gibbs, for I&E
Steven Gibbs is a licensed insurance agent, and the following agent
license numbers of Steven Gibbs are provided as required by state law:
Resident License; AZ agent #17508301,
Non-resident Licenses: TX agent #2273189, CA agent #0K10610,
LA agent #769583, MA agent #2049963, MN agent #40563357,
UT agent #655544.
hughey gresham
If I buy a $10,000 whole life policy . When I reach the $10,ooo in payment do I quite paying and still have the full amount .
Insurance&Estates
Hello and thanks for commenting. The short answer to your question is yes, you can design a whole life policy to be “paid up” in 10 years. I’m not sure what you mean by “full amount”. For a more detailed look, I suggest that you connect with one of our Pro Client guides starting with Jason Herring at jason@insuranceandestates.com.
Best, Steve Gibbs, for I&E