Whole life insurance was the most popular way the wealthy saved.  It should be again!


This story begins in the 1960s with, of all things, a common misconception about how whole life insurance is designed and how it works.  At that time the life insurance industry was relatively uncomplicated and had only two life insurance products: “term” and “whole life” insurance. The most popular insurance chosen was the whole life. 85% of insurance policies were whole life because of the combination savings feature, and death protection


But what many members of the general public did not know or understand from an actuarial standpoint was that “term” and “whole life” insurance were conceptually similar products that obeyed the same rules of design and pricing.

"Consequently, in order to provide coverage for a period spanning a whole lifetime, a specially designed term policy , that would provide for the life of the insured, will need to be created in such a way that an actuarial relationship between the fixed premiums, cash values, and death benefit are to be “just sufficient enough, and no more, to cause the policy to endow” (become fully paid–up). Bob Murphy

In other words, a whole life policy matures and becomes paid up.



With a whole life policy, the insurer will pay out the death benefit claim, either upon the actual death of the insured or (sometimes) when the insured reaches the designated age (originally 100 but now often 121 years) and the policy endows. "This is not a speculative strategy, but rather a set formula designed to reach a designated end. “


 Whole life is not more expensive, but it has a longer-term. Ironically, the same lack of understanding prevails today. Properly understood, there is no price differential between the term and whole life products since they are both priced according to the length of time of their coverage. A term policy whose coverage is so long that the insured will almost certainly die during its term becomes very similar to a “whole life” insurance policy

Term protection for a lifetime is naturally going to be more expensive than a 10-, 15-, or 20-year term policy

Debunking “Buy Term and Invest the Difference”

By Robert P. Murphy

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