Life, health & Medicare
Term and whole life compared
The comparison this trade is worst at making honestly, and the reason is not subtle: the two products pay the person selling them very differently. Here is the arithmetic, including our own.
Term insurance covers you for a set period and pays only if you die within it. Permanent insurance — whole life, universal life and their variants — covers you for life and builds a cash value you can borrow against or surrender.
For the same death benefit on the same person, permanent cover typically costs five to fifteen times what level term costs. That gap is the entire argument, and everything else in this conversation is about whether what you get for it is worth having.
Say the commission out loud
First-year commission on a permanent policy is typically a large share of the first year's premium — and the first year's premium on permanent cover is many times the term premium. First-year commission on term is a share of a much smaller number. The result is that selling somebody permanent cover instead of term can pay the producer ten or twenty times as much for the same conversation.
That does not make permanent insurance a bad product. It makes the advice around it unreliable unless you know the incentive exists, which is why it is written here rather than left for you to discover. Ask us what we would be paid on each option and you will get both numbers before you decide.
Where term genuinely wins
For the overwhelming majority of households, and for one structural reason: the need is temporary. You need cover while children are dependent and a mortgage is outstanding. Both end. Paying a lifetime premium for a lifetime need you do not have is expensive.
The usual counter-argument is that term expires and you get nothing. That is true and it is what you paid for — the same is true of your car insurance in a year you do not crash. The relevant comparison is buying term and investing the difference, and over twenty years the difference is a large sum. The honest caveat is that this only works if you actually invest it, and many people do not, which is a real argument and not a trivial one.
Where permanent cover genuinely wins
A need that does not end. A dependant with a disability who will need support for their whole life is the clearest case, and term does not solve it at any price.
Estate liquidity. New York has its own estate tax with a threshold well below the federal one, and an estate concentrated in illiquid assets — a family house in Queens, a business — can face a bill that has to be paid in cash. Permanent insurance provides that cash at the moment it is needed.
Business continuity: funding a buy-sell agreement or covering a key person, where the obligation lasts as long as the business does. And, more modestly, somebody who has genuinely maximised tax-advantaged retirement saving and wants another tax-deferred vehicle — a narrow group, and one that should be having this conversation with a fee-only adviser as well as with us.
The illustration, and how to read it
A permanent policy is sold with an illustration projecting cash value over decades. On a whole life policy the guaranteed column is the promise; the non-guaranteed column depends on dividends that are not contractual. On universal life the projection depends on crediting rates or index performance that may not materialise, and a policy funded to a projection that does not happen can require far higher premiums later or lapse entirely.
Read the guaranteed column. Ask what happens if you pay only the guaranteed premium. Ask what the surrender value is in years one to five — on most permanent policies it is close to zero, because the first year's costs are front-loaded, and that is the fact most likely to be glossed over. Permanent insurance bought and surrendered within a few years is close to the worst financial decision available in this trade.
Switching is sometimes right and it is often oversold. Switching is sometimes right and it is often oversold. New York Insurance Law 2123 forbids misleading statements and incomplete comparisons made to get somebody to drop a policy they already have, which is the trade's name for its own oldest trick. Before we recommend a move we price what you lose as well as what you save: claims-free and tenure credits that restart, a policy period you are part-way through, and, on a motor policy, the New York lapse trap — a gap in cover on a registered vehicle costs you the registration and a civil penalty for every day of it, which is far more expensive than the premium you were saving.
Included as standard
How we handle this line
Both quoted side by side, always
Same face amount, same person, both premiums, on the same page. Showing one without the other is the comparison this statute is about.
Our commission on each, stated
Ask and you get both numbers. The incentive is real and you should be able to see it before you decide.
The guaranteed column read
On any illustration. The non-guaranteed projection is not a promise, and a policy funded to one can lapse.
Early surrender values shown
Close to zero in the first years on most permanent policies. It is the fact most often left out and the one that matters if plans change.
Buy-term-and-invest modelled
With the honest caveat that it only works if the difference is actually invested, which is a real point rather than a rhetorical one.
Referred out where appropriate
For estate and tax planning we will tell you to speak to an attorney or a fee-only adviser as well. We take no fee for that.
When to ring us
Signs this is worth a conversation
- You have been shown permanent cover without the term price beside it.
- You are being asked to replace an existing policy with a new one.
- You have a dependant who will need lifelong support.
- Your estate is concentrated in a house or a business.
- You bought permanent cover recently and are wondering whether to surrender it.
- You have been shown an illustration and nobody explained the guaranteed column.
Term vs whole life — what it typically costs
- What permanent cover typically costs against level term for the same death benefit and the same person. The gap is the entire argument.5× – 15×
This is a typical premium range for this area. It is not a quote, and it is not our price. We do not set premiums: a carrier files its rates with the Department of Financial Services and our commission is already inside the filed rate, so the same policy from the same carrier costs the same through any producer in New York. What genuinely moves your own number is which carrier writes it, the limits and deductibles you choose, and the facts on your record — which is what we would go through with you before anything is quoted.
Questions we are actually asked
Term vs whole life — frequently asked
Is whole life a good investment?
It is insurance with a savings component, and it should be judged as both. For most households the return on the cash value is modest and the first years are heavily front-loaded, so it compares poorly with term plus ordinary investing. It genuinely wins where the need is permanent — a lifelong dependant, estate liquidity, a business obligation — rather than as a general investment.
Why does everybody try to sell me whole life?
Because first-year commission on permanent cover is a large share of a premium that is itself many times the term premium, so the same conversation can pay ten or twenty times more. That is not a reason to refuse the product; it is a reason to ask what your producer is paid on each option. Ask us and you will get both figures.
Should I replace my existing policy?
Sometimes, and it is oversold. New York Insurance Law 2123 specifically forbids incomplete comparisons made to induce somebody to drop a policy they hold, because replacement restarts contestability, restarts surrender charges and reprices you at your current age and health. We compare both in full or we do not recommend the move.
What happens when my term policy ends?
Cover stops. Most term policies can be renewed annually afterwards at sharply increasing rates, and most include a conversion privilege letting you convert to permanent cover without new medical underwriting — usually only up to a stated age. If your term is approaching its end, that conversion window is the thing to check before it closes.
Related cover
Usually considered alongside this
Life insurance
How much, for how long, and the arithmetic that answers both — done before anybody shows you a product.
$220 – $900
Final expense
A small whole life policy sold hard to people who are frightened. We sell it, and we will show you the arithmetic first.
$40 – $180
Disability income
New York's statutory disability benefit is $170 a week and has not moved since 1989. Everything past that you buy yourself.
1% – 3% of income
Policy review
An hour with your actual declarations pages, looking for the three gaps that open quietly between renewals.
No chargeBring the declarations page and we will read it with you
Ask us what it would cost
Send or bring the summary pages of what you already have — those two sheets are where most of the useful conversation is. We will tell you what we would place it with and what that would cost, what we are paid for doing it, and whether you should move at all. Quite often the answer is that your current policy is priced fairly and you should keep it, and that is an answer we give in writing like any other.