Protect Yourself Against Financial Uncertainty Using Whole Life Insurance

Jake's Story

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Initially, I set up a custom whole life insurance policy which would address many of his concerns, and we planned to incorporate other strategies, as needed, to make up for any shortfall in his savings. Unfortunately for Jake, his life was about to take a turn for the worse. Shortly after buying a custom whole life policy from me, he was terminated from his job, had trouble finding a new job that paid as much as his old one, and proceeded to suffer financial blow after financial blow.

His whole life insurance policy, however, did not give up on him. Here is his story.

The Problem

  • Jake was a very conservative investor, but was inundated with high-risk financial strategies by other financial advisors.
  • He had concerns over needing long-term care in his extreme old age, but also had concerns about the constantly rising costs of long-term care insurance.
  • He wanted a simple and effective way to save money for his future retirement.

Case Study Prepared By David Lewis AKA The Rogue Agent. David is a licensed independent life insurance agent (License No./NPN: 8462895), specializing in life insurance planning and The Perfect Policy™ design concept. He is also the owner of Monegenix®. To learn more about him and his work, read his full bio.

The Problem

Jake (42) came to me many years ago with a problem. He was a little late in getting started in life and had not saved any money yet. He was recently divorced, with no kids, but a decent income and lots of motivation. A problem he faced was he had no real investing experience and was concerned about taking a lot of risk with his money. He was willing to save a lot of his income and forego the higher potential returns of the stock market for the peace of mind that came with consistent (or even guaranteed) growth of his savings.

A bird in the hand, as they say…

He had considered a few options like TIPS, high yield savings accounts, Bank CD IRAs, and several other very conservative investments.

A few other things came up during our initial conversations. One of which was his grandmother. He had watched his grandmother suffer with dementia for several years before passing away and it scared him. She wasn’t wealthy, and she had no long-term care insurance to pay for the care she needed in the final years of her life. She also didn’t have life insurance when she died, and the family struggled a bit to figure out how to pay her final expenses.

He loved his grandmother, of course, but he also didn’t want to end up in the same situation she was in.

At the same time, he didn’t have any dependents and… he had always been told that life insurance was only really necessary if you had dependents. So, he never seriously considered buying it.

Another thing that weighed heavily on his mind was… even though his doctor told him he was perfectly healthy, he was (and is) still concerned about what might happen when he gets old. Long-term care insurance was on his radar, but many of the insurance companies he looked at had provisions allowing the insurer to change his premiums later on and the benefits seemed low compared to the premiums he would have to pay.

Jake listened to what I had to say, and even though he was initially a bit skeptical about buying life insurance, he eventually agreed it was a good idea to get some. The policy had a death benefit to take care of his final expenses, it allowed him to build a guaranteed savings that he could use for retirement, and it also had provisions for his old age.

Ultimately, he decided he could afford to save ~$1,146 per month. So, I designed an insurance policy around that sum.

And Then Came A Series Of Unfortunate Events

Unfortunately, just 3 years into his policy, he was terminated from his job and found himself unemployed.

Obviously, this was a huge blow. And, even for me as his advisor, it was a little concerning. Whole life insurance works best when it’s funded for several years before using the cash value. It was uncharted territory.

But… we had to deal with it.

He put his policy on hold for a while until he got back on his feet. Normally, this is a problem because whole life insurance can be rather rigid in those required premium payments.

But… this plan was a custom whole life policy which was designed to be very flexible. Meaning, he could start and stop premiums in the event he got into trouble.

Unemployment trouble? Check.

Using the accumulated dividends in the policy, we paid the minimum premium allowed in the contract — just a few thousand dollars per year.

In addition to that, he borrowed $8,000 from his insurance company (secured by his cash surrender value) to help pay for expenses while he was laid off.

After a little more than 6 months of being unemployed, Jake had found another job, but… it didn’t pay as much as his previous job and so he couldn’t really afford to save much money. Not only that, he wasn’t really making enough to cover all his bills and wasn’t collecting unemployment anymore, so… he took another $8,000 policy loan to help keep himself afloat.

Each year, we tracked the progress of his insurance policy to make sure it didn’t lapse:


Net Outlay



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But by this time, he was getting a little worried… concerned he’d bitten off a little more than he could chew.

He hadn’t made premium payments in 2 years and he’d taken quite a lot of policy loans against his cash value.

Jake Was In For More Bad News…

During this time, his life insurance company was forced to reduce the dividends paid to the policy (like many other life insurers at that time)… so then we were facing a dividend reduction on top of everything else.

This is exactly the sort of thing he had read about on the Internet — that life insurers typically do not pay the same dividend originally quoted. And that he probably would get lessthan what an agent illustrated for him.

Naturally, this was very upsetting to Jake (even though we had previously discussed the possibility of dividend reductions in the future). It’s one thing to see it on paper. It’s something else entirely to experience it.

At one point, his (former) brother-in-law (who he was still friends with) tried to talk him into canceling his policy but… he stuck with it.

After 2 very long years of uncertainty, Jake finally landed a new job that paid him more than he was making when he first took out his policy.

And so… he went to work paying back all his policy loans as best he could… he reinstated the premiums and paid them out of pocket, taking the burden off the policy to keep itself in-force.

But… just as things were looking up for Jake, the transmission in his car died. He needed to get it fixed, quickly. So, he took another policy loan for $4,000 for a new transmission and repaid that loan as quickly as he could. During this time, he was still paying off some of his previous policy loan debt:


Net Outlay



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Looking Ahead

We don’t really know what the future holds for Jake, but his whole life policy has held up like a champ, and he loves it.

His plan is to use the accumulated dividends to help supplement his future retirement income and use the death benefit to hedge against any chronic illness in his old age.

We had discussed the possibility of long-term care insurance, but he wasn’t sure he wanted to commit to years of expensive long-term care insurance premiums since the insurance only pays out if you need long-term care. If he didn’t need it, it was money down the drain. And not just a little money — a lot of money. With most types of insurance, premiums are low compared to the potential payout of the policy. But with long-term care insurance, premiums can be extremely high compared to the benefit payment.

Dementia and Alzheimer’s is a risk a lot of people face, but buying a dedicated long-term care insurance policy can itself be a risk if the condition never fully manifests. On top of that, many long-term care policies allow the insurer to raise premiums after the policy has been purchased.

It’s a significant risk that’s difficult to quantify and not one Jake wanted to take on.

Enter, the chronic illness benefit of his custom whole life policy.

Jake’s policy provides for a future chronic illness benefit. This benefit is not long-term care insurance. However, it can be used if Jake becomes chronically ill and cannot take care of himself. When triggered, the insurance company will allow Jake to spend down a portion of his death benefit before he dies. The money may be used for any purpose, though typically it’s used to help defray the cost associated with the chronic illness (i.e. healthcare needs).

To keep things conservative, I re-ran the illustration for him assuming the lower dividend scale was permanent (i.e. that the insurer paid less than they originally assumed at the start of his policy). This, combined with his previous years in the policy produced these results:


As you can see, despite a lower-than-expected dividend scale from the insurance company, Jake is still able to accumulate roughly $482,000 in cash surrender value by his age 65 (his desired retirement age).

At that age, he may elect a “reduced, paid-up” life insurance policy. This permanently ends his premium payments and allows him to draw dividends as cash, take policy loans for income, or do a combination of both.

We assumed he lives a healthy life well into his 80s. If he needs to spend down his death benefit, he can do so at any time as long as he meets the criteria in the policy. Typically, this would require him to be permanentlydisabled due to his chronic illness. In this scenario, we assumed the chronic illness benefit is triggered at age 85. Under this assumption, he continues to receive dividend payments from the insurance company in addition to ~$135,000 per year for several years to help defray the cost of a permanent chronic illness.

At the end of his life, he would be left with $50,000 in life insurance death benefit to help pay his final expenses.

Despite being single, with no children, Jake benefited enormously from his whole life policy. He survived unemployment, a setback in his salary and ability to save money, car trouble, and going forward… he has a stable and reliable source of savings and insurance which can provide for him in his old age.

Learn More About The Perfect Policy™

If you want a deeper understanding of the underlying principles that drive this type of life insurance planning, then keep reading about The Perfect Policy™.