While many people view life insurance as insurance, the way TPE looks at whole life insurance is as an investment. Whole life insurance is insurance that is in full effect for the life of the insured. It’s in contrast to term-life which expires after a specific period. Whole life (AKA Universal Life) can be compared to a long-term fixed income or bond instrument. This calculator computes the returns (AKA yield) based on projections of mortality of the insured, the insured amount and the annual premium. Users can use this to compare to returns they would get by buying the bonds of the insurer or long-term bonds of the US Treasury. Life insurance, generally, is lower credit risk than the risk of the company providing the insurance. Further, as most large life insurance companies are highly rated their insurance can be compared to high grade corporate bonds or govt bonds. Future versions of our calculators will include term life (which typically expires after a fixed period such as 10 years).
Whole life insurance stays in effect for the insured's entire life, unlike term life insurance, which expires after a set period. TPE treats whole life less as pure insurance and more as an investment — comparable to a long-term fixed income or bond instrument.
It computes the return, or yield, on a whole life policy based on projected mortality of the insured, the insured amount, and the annual premium — similar to how you'd evaluate the yield on a long-term bond.
Since a whole life policy behaves like a long-term bond, you can compare its computed yield to the yield on bonds issued by the insurer itself or by the US Treasury, giving you a sense of whether the policy's return is competitive.
Life insurance is generally lower credit risk than the risk of the insurance company itself, and most large life insurers are highly rated — comparable to high-grade corporate or government bonds — though you should still confirm the specific insurer's credit rating.
Not yet — it currently covers whole life insurance only. Future versions plan to add term life, which typically expires after a fixed period such as 10 years.
