The desire to take care of our loved ones is powerful. Mix that instinct with a topic that can be uncomfortable or scary (who wants to think about their own death?), life insurance products that can be confusing, and it’s unsurprising that many people get taken advantage of.
The systemic over-selling of permanent life insurance is a big problem. People get locked into policies that either make no sense for them or are not the best option available to them.
Permanent life insurance = more expensive annual premium payments (~6-10x higher than term), pays a benefit WHEN you die. Comes in many “flavors” that have different names, including “whole life”, “universal life”, “variable life” among others.
You often see “permanent” and “whole” used interchangeably, but “whole life” is actually just one type of permanent life policy.
Term life insurance = less expensive annual premium payments, pays a benefit IF you die during a fixed period of time (the "term") . The alternative to permanent.
To watch a short video about the different types of life insurance, check out What Are the Different Types of Life Insurance? A Quick Overview.
Buyer’s remorse
The facts are clear: even the industry’s own data shows that 40-50% of people give up on* the policy within 10 years; after 20 years, that percentage climbs to 60-75%.
If you drop a permanent life insurance policy in the first 20 years, you have not done well. Sadly, cutting your losses is often still the best available choice - when I teach a class on insurance at Harvard Business School I walk through a real-life example of a young alum of an elite business school who was still better off taking a 40% loss of his money than sticking with the policy.
During the first 10 years of a permanent life insurance policy, you are almost certainly losing money (often a lot). If you drop your life insurance during years 11-20, the outcome is typically between a loss and a poor return.
Think about that for a moment: 40-50% of people would rather lose a bunch of money than keep the insurance, and another 20-25% of people stick around for another 10 years to get by with a smaller loss or pittance of a gain.
That means this product disappoints around 60-75% of people who buy it.
This is dysfunctional.
So what’s going on? People getting paid. A mix of greed and ignorance.
Big commissions
The commissions on permanent life policies are much bigger than on term life. Unsurprisingly, big paydays for selling permanent have spawned a bunch of well-honed sales lines.
Not everyone who buys permanent is getting ripped off, and it’s entirely possible it’s right for you. There are a number of situations where permanent life insurance is the right choice. When permanent insurance is the right move, that truth is evident in the mathematical analysis. That is the analysis we run at AboveBoard. We do not recommend permanent life insurance unless we can prove to ourselves - and our clients - that it truly is the right path forward.
But oftentimes the permanent life insurance sales process elsewhere is neither analytical, rigorous nor truthful. Enter sales lines. They are the reason we need...
“BS vs. Truth” scale
Let’s rate some of the most popular permanent life insurance sales lines on our “BS vs. truth scale” - I believe I can safely say our "turds vs. flowers" framework is an industry first.
A Quick Bit of Background
Unlike term policies (where you hope your loved ones never receive a check from the insurance company) you’d buy a permanent life insurance policy because you want to pay money to the insurance company in exchange for your heirs getting the death benefit when you die. As the old adage goes, nothing is certain except for death and taxes.
Any permanent life insurance policy is an investment of sorts: you put money in (premiums) and your heirs get money out (the death benefit).
Some (but not all) permanent life insurance policies have "cash value", which is money you can access while you're still alive.
Some permanent policies offer steady growth with strong guarantees of future value, while others offer fewer guarantees but the possibility of huge upside if equity markets perform well.
Some permanent policies are pretty simple and do not have any "moving parts" whereas most have some "moving parts" that are important to understand if you're getting a permanent policy.
To learn more about the different types of permanent insurance, check out this video about the different types of permanent insurance.
“Now that you’re wealthy / high earning / a baller…”
So your insurance agent probably didn’t use the term “baller” but if they did, (a) that’s cool, and (b) that in no way enhances the credibility of their arguments.
Being high earning (relative to your expenses) and/or wealthy is necessary but not sufficient: permanent life insurance should be considered only if:
- You are already saving enough money that you're making contributions to the obvious tax-advantaged places you should save (like a 401k), and
- You are feeling that you are likely on track to "have something to pass on" to future generations to use after you’re gone
It’s also entirely reasonable to conclude that – despite being high-saving and/or wealthy – there are other uses of your money that are better-aligned with your goals, or represent better risk-adjusted return than what you could achieve with a permanent insurance policy.
If you’re worried about having a taxable estate at the Federal level (in 2025 it’s $27.98mm for a couple married filing jointly or $13.99mm for an individual...currently, the law is set to cut those amounts in half on January 1, 2026) - or you live in a state with lower limits - then life insurance can be a way to achieve your estate planning goals (be sure to engage a qualified attorney for the legal structuring component). Even in this situation, it's important to run the math on how much (if anything) you'd actually gain with a trust structure.
To read more about what factors indicate permanent insurance could be a smart move for you, read When does permanent life insurance make sense? (We also go into the top 3 indictors that it is not a good idea.)
“You’re throwing money away on term”
This line is total BS and yet it is incredibly effective - we see the "fallout" from its appeal a lot here at AboveBoard when people come to us with totally inappropriate life insurance coverage, trying to figure out better options.
I can assure you the insurance companies are not confused – they didn’t fail to understand there’s a 100% probability that all humans die at some point.
Term is much cheaper than permanent precisely because it is unlikely you will receive a payout, and that’s great because you really don’t want one! The odds are in your favor that you will survive the entire term and thus never receive a payout. Term life insurance is like homeowner's or auto insurance in this way: you buy it to have protection if something bad happens, not because you expect a payout.
You pay premiums on a term policy only for insurance (IF you die during the term, your loved ones will get enough money to live the life you'd want for them). That is a totally different product from permanent life insurance, which puts a contractual obligation on the insurance company to pay money whenever you die.
To learn more about term insurance and why it is a good deal for what it is designed to do, watch Video: Term Life Insurance: Why It's Much Cheaper Than Permanent, and the Pitfalls of Annual Renewable Term.
"Think about your future self"
This is great advice generally -- getting a dog, eating a burrito, considering permanent life insurance...any decision, really. As people age and enter a life stage where they can name more than one or two close friends who have passed away, "leaving a legacy" often starts to matter more.
And buying permanent life insurance while you're young is indeed less expensive in terms of annual payments than when you're old. But importantly, the rates of return (which is frankly what you should really care about) are often not hugely different if you wait until you're older, assuming your health history (e.g. you get a cancerous mole) and lifestyle risk profile (e.g. you take up car-racing) don't worsen.
That assumption is a big gamble and one we generally don't recommend taking. Thankfully there's a good middle ground, one we often recommend here at AboveBoard in our independent insurance brokerage: if you feel like your earnings trajectory or wealth level might justify permanent life insurance some day, but it does not make total sense today, then you should upgrade to one of the best-quality conversion options (the right to convert your term insurance to permanent insurance without having to prove you're insurable).
But watch out for misuse: "leaving a legacy" does not require permanent life insurance. Perhaps a legacy takes the form leaving a vacation home to your heirs or funding 529 plans for (future) grandchildren.
While permanent life insurance is often a smart move for people who are ready to plan a legacy, sometimes health considerations either prevent getting coverage or make the coverage so expensive that insurance not the right tool for the job. At AboveBoard, we take the unique approach of simply sharing our analysis with you and telling you if this is the case. We only want you to buy permanent insurance if we can prove, through rigorous mathematical analysis, that it is truly a smart thing to do. To hear more about how we do that, listen to Podcast: The Role of Life Insurance in Tax-Efficient Financial Planning and Wealth Transfer.
If you are feeling financially on track, then it's worth putting permanent life insurance on the list of things to consider.
“The tax advantages are AMAZING…”
Permanent life insurance often gets presented as a great choice because of "the tax advantages". There is definitely truth in the assertion that life insurance has tax advantages, and in some situations those tax advantages appropriately justify the purchase.
The problem is that in some situations, the tax advantages don't justify the purchase. Many people who bought permanent policies fundamentally misunderstand what the tax advantages actually are (sometimes because they were given incorrect information).
The details of what the tax advantages are is a topic for another post, but the key point here is that you cannot focus on the tax advantages in a vacuum - the proper analysis includes all the factors that ultimately affect your and your heirs' rate of return on the policy across multiple scenarios. Taxes are one factor, but investment performance, rates of return on the underlying assets supporting the policy and your own opportunity cost matter, too.
“Why rent when you can buy?”
Seriously, don't ever buy an insurance policy because you're moved by this this line. It's total BS.
It misses the fact that you're not "renting" anything with term life insurance - you're buying protection against a bad event. (Are you "renting" homeowner's insurance? No. You are buying protection against something going wrong. Same deal with term life insurance.)
This line illustrates a tactic for manipulation: speak to an emotional inclination or bias, regardless of whether it’s factually accurate or relevant.
The real question is: do you only want to buy insurance, or do you want to blend insurance and investing? That is a valid question, and it is possible to answer correctly whether it is a good idea for each client, based on their situation and goals. There is not one right answer that applies to everyone.
To learn more about why this sales line should not persuade you, please watch Video: Term Life Insurance: Why It's Much Cheaper Than Permanent, and the Pitfalls of Annual Renewable Term.
“Protect your family forever”
Everyone wants to protect their family forever. But you don’t necessarily need permanent life insurance to do it. The analysis might show that permanent life insurance is the best way to achieve this, but it might not.
You do need to protect your family from the risk that the financial support or unpaid care you provide suddenly “disappears” prematurely – a breadwinner dies when the family still relies on that breadwinner’s income, or a care provider dies when the family would need to hire paid caregivers to help out. Term insurance will usually achieve this for you.
However, if you’re looking for protection longer than 30 years, you can encounter a limitation with term. There are some 35 year term or 40 year term policies on the market, but there are only a few and the pricing is not always great. Check those out, but you should also consider permanent if you definitely need insurance for more than 30 years.
If you want "protection forever" and do not care about having any cash value to use in your own lifetime, then Guaranteed Universal Life ("GUL") can be a great choice. You can think of it as "term for life". GUL is just one type of permanent life insurance - to learn more about your different options, watch this video.
Our Life Insurance Guide helps you figure out the right term, and whether you should consider permanent.
“You can borrow from yourself”
It is true you can borrow against the cash value life insurance policies. Sometimes this feature gets marketed as "cheaper than the rates on credit cards or consumer loans" - but so what? If your financial situation is such that you rely on credit cards or consumer loans, then you should definitely not be considering permanent life insurance at this particular time.
If you are growing your savings in a Roth IRA, you can generally also withdraw your contributions to a Roth IRA at any time and without penalty (penalties happen in most cases if you take out gains before age 59 ½).
For people who are higher income and on firm footing financially, borrowing against a life insurance policy for certain use-cases can be a really smart idea. Even still, it is important to understand the terms of the loan -- different carriers and different policies can have very different approaches. Some loan structures are very attractive, while others are not.
You can save money in a brokerage account and "borrow from yourself" at any time. No paperwork, no expenses or interest charges. However, you will likely pay long-term capital gains or income taxes when you take money from your brokerage account (assuming your investments have gone up in value).
There are trade-offs, and the good news is that all these different factors are analyzable - your goals, time horizon and tolerance for risk all determine the right answer for you. Here at AboveBoard, we run that analysis for you and explain your options clearly.
“You stop paying after [20] years!”
It’s true that many permanent life policies have specific payment periods where you stop “cutting a check” after a defined period.
What continues on – and is often poorly disclosed or glossed over – is that the insurance company continues to debit your account for an amount related to administrative and mortality expenses.
This is why it is so important to look at what you get from the policy, across many different scenarios, assuming the permanent insurance policies you are considering have any "moving parts" (which many of them do).
That is exactly how we approach the analysis at AboveBoard -- looking at what you and your loved ones would get in different scenarios from the policy.
Gimmicks or fixation on one piece of the puzzle - without looking at the whole thing - are not the right way to do it.
To learn more about how we evaluate permanent insurance and determine whether it is a client's best option, listen to Podcast: The Role of Life Insurance in Tax-Efficient Financial Planning and Wealth Transfer.
“There’s a guaranteed rate of return!”
For many permanent life insurance policies, this is entirely correct. And the right way to think about this is always: a guaranteed rate of return is worth something, it is not worth anything.
If the sales pitch crosses into “…and therefore we don’t need to compare this policy to buying term and investing the difference” then the rating would flip to
What are the life insurance sales lines you’ve heard? Share them with us -- send us a message.
*When we say “giving up on” a permanent life insurance policy, we’re referring to when a consumer allows a permanent life insurance policy to “lapse”, which basically means the consumer decided they are either no longer willing or able to pay for the policy they initially bought. To get technical, the US Individual Life Insurance Persistency Study (released 2012) by the Society of Actuaries and Life Insurance Market Research Association, defines “lapse” as:
For purposes of this report, lapse includes termination for nonpayment of premium, insufficient cash value or full surrender of a policy, transfer to reduced paid- up or extended term status, and terminations for unknown reason. This is consistent with the definition of lapse applied to other LIMRA and the Society of Actuaries experience studies.
