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Whole Life Insurance is a total Rip Off, unless…

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whole life insurance rip off

In a world where price is often “king”, it’s easy to understand why Whole Life Insurance is often viewed as 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 life policy with the same initial death benefit.

And for most folks just looking to purchase a life insurance policy to…

“Simply protect their loved ones in the event of their death”

Paying up to 10 times more on their whole life insurance rates vs purchasing an initially much less expensive term insurance policy just seems like a really bad “investment”.

Which is why we here at I&E wanted to take a moment and discuss exactly why…

“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?

Well… The truth is, there are several reasons why there is such a huge price difference between purchasing a whole life insurance policy vs a term life insurance policy with the biggest reason being…

If you end up purchasing a term life insurance policy….

You’re chances of actually dying while actually owning the policy or while the policy is “in force” is actually very small.

Which is a good thing because it means that you’ll “probably” won’t die during the time period your insurance policy was purchased for.

And any time you “don’t die” has to be viewed as a positive…  Right?

You see…

While both term insurance and whole life policies offer a death benefit, in the case of a term policy, that “death benefit” isn’t guaranteed.

This is because…

with term life,  the “death benefit” is only paid out in the event that you die during the “term” period of the policy being purchased.

Which means that…

If you purchase a term life insurance policy, there is a really good chance that you’ll end up “out living” the policy otherwise why would an insurance company choose to offer you coverage for so cheap?

After all, the life insurance companies are not charities, they’re business is designed to make money, by taking “acceptable risks” with who they will and won’t insure.

In fact…

While its pretty much next to impossible to get any kind of definitive estimates on what percentage of term life policies actually pay a death benefit, most “insurance experts” seem to agree that its somewhere between 1 to 3 percent of all term policies will actually pay out.


We’re not suggesting that an insurance company doesn’t choose to pay out in the event of an insured’s death, were only suggesting or “pointing out” that life insurance companies are really good at what they do, which is probably why they are so profitable!

This is also why…

Term life insurance is really cheap initially compared to whole life insurance because if its true that less than 3% of term policy holders will ever collect, that leaves a lot of folks paying for insurance that will never pay out.


Is this a bad thing?  Is term life insurance a scam?

No, not really, because after all, the insurance company did live up to their side of the bargain in that they provided coverage for a very affordable price during a set period of time.

It just so happens that in doing so, they’re able to profit handsomely for providing this valuable service.

So, is whole life insurance a scam?

No, it is not a scam.

You see, 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 amount assuming the insured keeps paying their premiums which is one of the main reasons why these policies cost so much!

Now the good news is…

That for those willing to pay the extra bucks to ensure that their family will receive the agreed upon death benefit by purchasing a whole life insurance policy, there are a few “added benefits” that could make one seriously consider purchasing a whole life insurance policy.

Which brings us…

To the point in this article were we like to point out five reasons why purchasing a whole life insurance policy “might” not be a total rip off for you.

Top 5 Reasons Why Whole Life Insurance Isn’t a Rip off!

  1. When I say “Whole Life” you say “Savings Account!”

One reason why we here at I&E will often recommend folks purchase a whole life insurance policy or a “cash value whole life insurance policy” is so that than can have a safe place to “park” their money, other than a super low savings account at their local bank.

And yeah…

There was once a time when money in the bank would actually earn folks a decent return, but sadly those days are long gone and now as many of us know, the interest rate earned on money sitting in a savings account is pretty much insulting at best!

This is why…

For some who aren’t interested in putting their money into the stock market, and are fearful of another housing bubble looming in the horizon, using a whole life insurance policy as a way to “hold” one’s cash isn’t such a bad idea.

Especially considering the fact that if one chooses to use dividend paying whole life insurance in this manner, they’ll essentially maintain the liquidity of their existing savings account in addition to significantly increasing the interested earned when comparison to a typical saving account at a local bank.

Now we’ll be the first…

To acknowledge that this particular reason goes against the “conventional wisdom” of many financial advisors out there who will tell you that whole life insurance policies are terrible investment tools, but we’re not suggesting that you use whole life insurance as an investment we’re simply suggesting that you use it as a “savings account”.

And the benefit of having a guaranteed rate of return on your cash value is a huge benefit when so much of our life is uncertain.

  1. Change your “role” in the banking world.

Another reason why we’ll often suggest purchasing a whole life insurance policy might be a good idea for someone is when we encounter a client who has “savings” combined with debt.

These folks…

Whether they realize it or not are in a unique situation where “should they decide” to “change” their way of thinking might be able to utilize a financial strategy called “infinite banking”.

Infinite banking

Infinite banking  is a term that was coined by Nelson Nash who discovered that he could use his own whole life policy to accomplish many of his own financial goals.  One of which was to ultimately “become his own banker”.

You see…

By owning a whole life insurance policy that has accrued “cash value”, the owner of such a policy can begin to borrow against his or her own cash value to make large purchases such as a car, a home, ETC.

Only now, instead of paying for these expenditures by taking out a loan and paying interest, the policy holder is able to use their accrued cash value in their own policy to pay for these items and then simply pay themselves back with interest!  Thereby eliminating the role of the bank or banker.

This is why…

We here at I&E love recommending these “types” of infinite banking policies to younger folks who can build up their “cash value” over time, as well as to older folks who have the means to “pre-pay” their cash value whole life insurance policies using a paid up additions rider so that they can immediately take advantage of these opportunities.

Still not “sold” on this advantage?

No problem, all we would suggest for you to do is try and determine just how much you pay other “institutions” for the “right” to use their money each year.  Then take that dollar amount and multiply it by the number of years you plan on continuing to use creditors to finance your way of life.

If you do so, we believe that you’ll begin to see how much you’ll end up paying these other institutions over the years and decades and understand the “earning/saving” power of becoming your own banker.

  1. Gimme Shelter

No, we’re not talking about the classic Rolling Stones song here, what we’re talking about in reason number 3 for why you may want to purchase a cash value whole life insurance policy is that these types of life insurance policies provide excellent tax shelters for your money.

You see…

Within a cash value whole life insurance policy, the cash value accumulation doesn’t get reported to the IRS, as a result, this cash value doesn’t need to be included on your asset reports.

Student Loans FAFSA

You’re currently a student or you’re helping a student finance his or her education, this also means that this money won’t appear on one’s Free Application for Federal Student Aid or FAFSA application.

Social Security

Additionally, cash value life insurance allows you to take out money through withdrawals or loans and not have it count against this social security tax.

Creditor Protection

Is also totally protected from creditors in many states and partially protected in others.  Which for some is all the reason they need to want to purchase a whole life insurance policy.

  1. I’m approved!

Once your cash value whole life insurance policy has accumulated cash, you don’t need to worry about loan approvals.

In fact…

Borrowing against your life insurance policy’s cash value doesn’t even appear on your credit report because in essence all you’ve done is “borrowed” money from yourself!

Now if you combine this reason with the fact that the accumulated cash within a participating life insurance policy is protected from creditors in many states, it’s not hard to see why so many folks who owned these “types” of policies were quite happy with their decisions to purchase them during the last housing crisis!

  1. Make your money go to work!

The beauty of whole life insurance policy is that it allows your dollars to perform many different functions. Functions such as

  • paying your premium,
  • accumulating cash value,
  • create a waiver of premium rider,
  • increasing your death benefit,
  • leveraging your cash value through loans
  • etc


While banks, businesses, and government sectors were closing their doors, one sector of the economy stood strong and steady, unaffected by these horrible circumstances… Life insurance companies.

So, you see…

While it is true that these “types” of life insurance policies do tend to cost quite a bit more than a term life insurance policy, when you factor in the fact all of the ways that they can be used towards your benefit, one can easily begin to make the argument that there actually quite affordable.

The trick is…

You have to be able to find a life insurance agent who fully understands these “types” of life insurance policies and is willing to take the time and explain how they may benefit you and your family.

But don’t fret…

Because here at I&E, this is exactly what we do.  You see, we’re not here to tell you what “type” of life insurance that we think is going to be the “best” for you.  Instead, we want to hear about what your needs are so that we can present to you several options which we feel might meet your needs.

The good news is…

That because we work with some many companies which offer a variety of different products, there’s a really good chance that we’re not only going to be able to find a great solution for you, we’re going to find it for you at a premium you can afford!

So, what are you waiting for?  Give us a call today and see what we can do for you!

2 comments… add one
  • hughey gresham June 27, 2020, 8:01 am

    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 June 29, 2020, 9:35 am

      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

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