E19 - Whole Life Insurance Explained: Why It Fails as an Investment (And Where It Actually Works)

If you’re trying to make whole life insurance beat the market, you’re right to hate it.

That belief — that whole life insurance should function like an investment — is the root of almost all the frustration, backlash, and misinformation surrounding it online.

In this episode of Before the Returns, I break down what whole life insurance actually is, what it isn’t, and why comparing it to stocks, real estate, or other investments guarantees disappointment. We talk through why misuse leads to blame, how expectations get set incorrectly, and where whole life insurance actually fits inside a real financial strategy.

This isn’t a sales pitch.
 It’s a framework shift.

If you’ve ever felt confused, skeptical, or conflicted about whole life insurance — or you’ve heard strong opinions on both sides — this episode will help you understand where it works, where it doesn’t, and why the distinction matters.

What You’ll Learn in This Episode

• Why labeling whole life insurance as an investment breaks the entire model
• The difference between investments and financial tools
• Why whole life insurance always “loses” when compared to the market — and why that’s not the point
• How misunderstanding expectations leads to disappointment, not product failure
• Why term insurance and whole life insurance serve fundamentally different purposes
• How whole life insurance functions as a capital warehouse, not a growth engine
• Real-world examples of using policy loans for real estate opportunities
• Who this strategy is actually for — and who it is not

Learn more at www.jadenzubal.com | Follow @jadenzubal | Join the *Before the Returns Weekly* newsletter

📩 Questions or ideas? Email: jadenzubal.wealth@gmail.com

⚖️ Disclaimer: This podcast is for educational purposes only. It is not financial, tax, or legal advice. Always consult with a qualified professional before making financial decisions.

Transcript

SPEAKER_00 0:00

If you're trying to make whole life insurance beat the market, you're right to hate it. One of the biggest reasons that people are confused about whole life insurance is because they're judging it as an investment. And that's not what it's designed to be. So in this video, I'm going to spend the next 15 to 20 minutes breaking down what whole life insurance really is intended to be, what it should be compared to, what it should not be compared to, and give you a clear pathway for the actual use cases of whole life insurance. Hello and welcome to another episode of Before the Returns. I'm your host, Jaden Zuball, and today we will really focus on whole life insurance, its use cases, and the things that it's not so good at. Thank you for joining us. And if you find this video valuable, please subscribe and share. It really helps us grow the channel. So all the time we see this online noise, right? You constantly see it on TikTok, Instagram, Facebook, no matter where you look, people talking about how whole life insurance is this investment tool and you can run your entire income through it and then borrow against it to magically create all this extra money, right? If you've ever heard something along those lines, I don't blame you for not liking whole life insurance. I think that it is often misrepresented and sold with a promise that simply cannot be kept. It's not here to beat the market. It's not this idea of, I'm even going to compare a little bit today of this buy term and invest the difference concept, right? There's a very prominent financial podcaster speaker, somebody that many of you have probably heard of, and you probably even can figure out who I'm talking about right now. But he talks all the time about whole life insurance and his complete hatred towards it. And I think it's interesting that there's such a deep hatred for this financial product. When I look at big financial pictures and I look at all the different tools that we can use and the ways that we can invest, it feels it feels like there's a big misunderstanding there or a lack of strategy involved when you just simply tell somebody, absolutely, this is a horrible thing, completely avoid it altogether, right? It's not that it's a horrible thing, but it can be a horrible thing if it's used incorrectly. So remember the key point here when we talk whole life insurance is misuse leads to disappointment, and then it leads to blame and this endless hatred that we often see on the internet. And so there's this constant battle between the people who absolutely love it and the people who absolutely hate it, right? And there seems to be no middle ground between the two. So my goal today is to maybe create a little bit of middle ground and help people understand when tools are used correctly, what they can actually do for you. Okay, so first off, if we label whole life insurance as an investment, we've got the wrong comparison. We are already getting off on the wrong foot, right? You cannot compare it to stocks, bonds, real estate, private investments in businesses. You can't compare it to any of that stuff. In those situations, whole life insurance always loses, right? Because it will, like it's not designed to win compared against your investments. I'm a huge proponent of real estate investing, as you guys have probably seen on the channel. I invest in real estate frequently, I talk about it, I share different stories, and I'm going to continue to share more. In fact, we have two duplexes that we've recently acquired and done some rehab work on and are in the process of renting. And I'm going to be sharing some stories about those coming up in the not so distant future as well. So I'm a huge proponent of investing, and I see massive value in putting money into these long-term tools, but that does not replace what my whole life insurance does for me. Okay. I've had my whole life insurance policies for 10 years now, and they serve a very different purpose than my investments serve. Each one plays its role, and it's important to acknowledge that role in our big financial strategy and our big financial picture. Just to prepare for today's podcast, I had a conversation back and forth a little bit with ChatGPT, which has become an incredible tool, right? We really should do a show on AI in the future here. But in this conversation back and forth with ChatGPT, I was asking it to pull some data for me. And I always look for research-backed studies and things that I can back up with real data. And so I asked it to pull some data for me on the percentage of life insurance policies that actually pay a death benefit. So something that actually passes on to a family member in the future and actually contributes to long-term family wealth. And what the statistics show is that if you look at insider data of insurance carriers and just big, large mutual insurance companies in the United States, data shows that somewhere around 98% of term insurance policies don't pay a death benefit because term insurance is meant to be temporary. That doesn't mean that term is bad. In fact, many Americans have it today, and it's the more common insurance tool. And I have nothing against it. I have some term insurance on myself. But what's important to understand is that term insurance does not contribute towards long-term wealth in the way that whole life insurance does. The percentage of whole life insurance policies that don't pay a death benefit is extremely low. And that's because they are intended to be long-term permanent policies. And when we say long-term and permanent, that doesn't mean you contribute permanently. You don't have to pay a premium forever. I have clients right now who are not paying premiums. But the point is that once you structure it and set it up for what you're trying to do, and that's the key thing here, is strategy, right? It has to be designed the right way. When you do it that way, you can structure this in a way that you accomplish your goals and you actually build long-term family wealth, right? You can build the wealth using these tools if they're done the right way. I can't say that enough. So why does calling whole life insurance an investment break the model? Why does it ruin the picture and throw people off the track and make this a horrible tool? It's the same idea as that if you're building a house and you decide that you need to cut some wood and you're you're, let's say you're framing the house, right? So you have to cut the two by fours, put it all together. When you go to frame that house, if you bring a handsaw and a hammer, you can get the job done, but it's gonna take you a long time. That's that is not very efficient in terms of what can be done and how quickly a home can be built today, right? Today we use power tools, we use nail guns, we use things to speed up that process. Comparing whole life insurance to an investment does the same thing. It says, I'm gonna use this tool that is really intended to protect and grow my capital safely without risk, right? Because you actually have contractual guarantees on it. So I'm gonna use that tool as my lot, my long-term investment tool. Not a good idea, right? I don't do it myself and I sell life insurance. I do not use life insurance as my long-term investment tool. I use it for the other things. I use it for the Chaos Hedge, I use it for the tool to protect my capital before I invest in things, but isn't it is not the end-all be-all of investing, right? So you just you can't make that comparison. You can't use your hammer when your nail gun is a better fit. So let's classify then for a moment what actually is an investment. Well, an investment is something that is going to have some risk, it is going to fluctuate, it is going to grow, but the growth that I expect on my investments should be seven, 10%, sometimes 15% returns. Those are not unusual returns when you're investing, but it takes on some risk to make those returns typically apply. With whole life insurance, those same returns are not the case. Anyone who tells you you're going to get those kind of returns, turn and run the other direction, right? Because that's not what you get with whole life insurance. But you do get protection. So again, two very different things. We're looking at the right shoulder and the left shoulder here. And you need both parts. It's important to have both parts if you're a strategic long-term thinker, but you can't replace one with the other. So talking about our tools again, then we have to have tools that store money, we have to have tools that protect money, tools that allow us to access money, and tools that allow us to build and grow our money, right? And sometimes these tools can overlap each other, but it doesn't mean that you're going to have one thing that does it all, because that one thing isn't going to be able to do everything perfectly. Just keep that in mind. So, what does whole life insurance do? It is predictable, it is accessible, it gives us control over timing, and it allows us a little bit of extra protection. Okay, so what do I mean by timing control or accessibility with whole life insurance? So I'm going to give you a real-world example here for a moment. More recently, we acquired some duplexes. And when we purchased those duplexes, I used whole life insurance to take a policy loan and use that for a portion of the money that we put down and that we did rehab expenses with. Sometimes when you find specific investments and specific opportunities, they're not going to be there very long. Because if it's a good deal, if it's a good opportunity, those things usually go by pretty quickly, right? Because there's a lot of other smart investors out there that are going to see the same thing and are going to be able to take action on it. So the question becomes, who can take action quicker? And if you don't have liquidity, if you don't have access to capital that is ready to go, it's not going to be you. You're going to watch opportunities come and go all the time. And there are other ways to access capital. But you can certainly do things like hard money loans, you can borrow money from other people, you can finance in all sorts of different ways. So I'm not saying that whole life insurance is the only way, but I am saying that it is one of the lowest risk, highest potential gain opportunities that exist for us because we have full control, right? So this isn't about a percentage return. This is about the ability to control the money because otherwise I might have some opportunity cost. I'm going to lose opportunities, which we can't even calculate what that lost dollar figure is. We can't calculate that cost because there's who knows how many opportunities are going to go right past you that you don't take advantage of because you didn't have access to capital at the right time. So whole life insurance is not for maximum returns. It is for reducing chaos and opening up the door for opportunities. So why do people get burned when they set up insurance policies? I'm sure many of you, if you've made it this far into the show, have probably known people or even been the person who had whole life insurance and felt like you got burned by it. Felt like it didn't work out, it didn't do what you thought it would do, and it was just a big disappointment, right? Oftentimes, it's not necessarily a product failure in and of itself. It is an expectation failure because the people that set this up, the companies, the advisors, don't set the expectations correctly and don't help you actually understand how the product works and what it even is, right? Because if the expectation is set incorrectly, you're going to miss a lot of opportunity, just like in any other financial tool that you use. If you don't understand it and you're unable to use it correctly, how many opportunities do we miss that we don't even know about? So the product itself is a sound product that's been around for 200 plus years at this point. Old product. But it's had changes in that time period and it does things now that it couldn't do 200 years ago. For example, access to cash value is a little bit quicker now when the policy is set up to do that. So it's important to understand the product correctly before you just jump in the boat. You don't want to jump in a boat that's already sinking. So if you're ever told that whole life insurance is an investment or outperforms investments or is the end all be all, again, turn and go the other direction. It's not what that is meant to be, and it should not be sold that way. So if you get into it with the wrong purpose, you're gonna walk away with disappointment almost every single time. How should we think about whole life insurance? We should really think about it as our capital warehouse, right? It is our warehouse where your money is stored and you have the ability to use it when needed. And if it's not needed, it's still there, it's still protected, it's safe, it's doing something productive. It's just earning a nice high interest savings account type of yield while you're looking for the next opportunity, right? That's what I've been doing for 10 years is I look around for different real estate deals and business opportunities and things that I can invest in to grow my capital. And then when those opportunities come up, I take a policy loan, I borrow the money against the insurance policy, and I put it to work. That leaves the door open to solve problems along the way. Anytime that I've ever had something go wrong in an investment, I've done the same thing. I've taken capital from the insurance policies, used it to solve the problems, and then I pay the insurance policies back when I'm ready to do so. So who is whole life insurance really for? And who is it not for? As you may have figured out from this podcast, whole life insurance is for long-term thinkers. It's for people who want control and flexibility, and it's for intentional investors, people with purpose, people who want to do something different with their financial lives, with their businesses, and with their investments. Who this is not for is autopilot money, right? If you have this idea in your head of putting your money into your investments and just letting it do its thing for the next 40, 50 years, while you can put your money in whole life insurance and do that, again, it's not an investment. So you gotta do more, right? You've got to do more than just let it sit there for 40 or 50 years. A big thing that I am a believer in is that you won't get wealthy with insurance alone. It's when you combine insurance with the other things that you're already going to do, that's when you create true long-term wealth overall. So you're not gonna get the quick wins here, and you can't have this hands-off type of thinking in this type of financial strategy. So again, this is not instead of investing. It's not for everyone, and it's not a set it and forget it type strategy. It needs some thought and some process behind it so that you can get the results that you're actually setting out to get. Okay. If this is something that has created some different thoughts for you about the insurance space or about financial strategy and investing in general, the next step is not to run out and buy the product. The next step is to continue to research, continue to understand it better, follow my channel, follow other people out there, which I'm happy to give recommendations on other people that do a good job of this as well, and learn more about it. Try to understand this financial strategy deeper before you jump in the boat. Because the better you understand it, the better you're going to be able to utilize it, and the better your results will be. Okay, in future videos, we'll talk about policy loans, we'll talk about bigger mistakes that happen in the life insurance space, and we'll talk more about fit. Where does it fit and how can you get the best results possible out of this? So I'll continue breaking these concepts down so you can make informed decisions, not rushed ones. And if you've enjoyed this video, please consider again liking, subscribing, and sharing. It helps grow the channel, and we appreciate all the support.