IPB 027: Life Insurance Policy Expense Comparison

In today's episode, we dipped into the mailbag and pulled out a question from one of you, our listeners. To be more precise, the question was part of a comment that was asked after episode 25 (Life Insurance as a Retirement Tool Part 1).

Kevin asked:

You guys touched on the expenses associated to the Life Insurance and how they compare to the other investment tools available.

Could you do a podcast elaborating the “researched” numbers comparison that was broadly talked about in this podcast? I understand your method is different from the vanilla type structured policy, but it would be even better if you can compare your structured policy’s expense to vanilla version policy’s expense to the common market based retirement account’s expense.

We thought this was a great question and is something that we've discussed privately at length. So, Brandon got to dust off Excel and get to work crunching numbers. He was excited to say the least.

What did he discover after plugging in all the numbers?

Listen to find out.

And we wouldn't be doing our job if we didn't encourage you to contact us if you'd like us to do some specific number crunching for your situation. Life insurance isn't always the best answer but often times it can be a piece of the puzzle.

2 thoughts on “IPB 027: Life Insurance Policy Expense Comparison”

  1. So your comparison was done on participating whole policies that where payable up to 65 or 100? How about 10 or 20 pay whole life policies. I am curious on that as my wife has 20 pay MassMutual.


    • Hi Steven,

      Thanks for the question.

      It’s hard to answer your question directly as policy expenses are very much dependent on the initial policy design. To illustrate–you could compare a policy that is payable to 120 to a 10 pay and the expenses would differ very much depending upon the base policy-term-pua mix. However, it’s impossible to say which one would be less expensive unless we are comparing the same person, at the same company, with the same premium, paid over the same duration.

      In the case of Mass Mutual we’ve had cases where a 20 pay whole life was more advantageous than the L100 product (if we’re evaluating the IRR on cash). But for another person of different age, with a different premium, paying for a different duration, that may not be the case. It’s very much dependent on the variables.

      Not sure that provides any clarity to you but it’s a great thought exercise nonetheless.


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