[ARCHIVED THREAD] - Life Insurance (Page 1 of 2)
Posted: 4/18/2012 6:21:19 PM EDT
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Term vs. Whole Life/Variable Life
I would love to hear the thoughts on this topic from insurance salesmen and financial planners. I have someone still advocating to me that whole life is the way to go. Funny thing is, back in the 90's, he was advocating variable life. He's the only one I know who advocates this type of insurance. My impression is that if your net worth is seven figures or more, it's probably a good investment. For folks with less, my belief is that they're far better off buying term, and if the idea of investing after tax dollars to get tax free growth is appealing, then invest in a Roth IRA or a 401K Roth. Thoughts? |
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Whole Life can be good if you get it young and go with a Mutual Company that pays dividends. Eventually the policy will pay for itself (ten years used to be the rule of thumb) and extra dividends can usually be setup to buy additional insurance based on you attained age.
If you just want a whole lot of insurance right now then get term like a ten year level or so. |
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Almost every paragraph has a major incorrect point. It's always funny to hear those who don't understand life insurance trying to explain what is "bad" about it. First one––life insurance is not an investment. Comparing it to an investment is no different than comparing anything else to an investment––that isn't. 
A few weeks ago I heard the Great Whole Life Insurance Hater Dave Ramsey with his usual rant against whole life insurance (it's "stupid" and "a ripoff"). The lady caller persisted in saying she really felt she needed to keep the $100,000 policy on her teenage son, as she was only paying $18/mo for it (purchased as a tiny child), and they had NO cash to bury the boy should something happen. Ramsey's advice––get rid of that "garbage" and buy a "burial policy" because they are "like really cheap." There is no product sold as a "burial policy," but the vernacular meaning of it is simply a small whole life policy, intended specifically for burial needs. But now that he's a teenager she would probably pay ten bucks per month to get a $10,000 policy. At least she wouldn't be getting ripped off with that "stupid" $100,000 one for $18/mo. 
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term. no question this. if you do any personal research you will come to the same conclusion. I sold insurance (term) for two years. if you buy whole life or universal life or super duper life, you're stupid and deserve to burn in a fire .... j/k, but seriously, buy term. |
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Almost every paragraph has a major incorrect point. It's always funny to hear those who don't understand life insurance trying to explain what is "bad" about it. First one––life insurance is not an investment. Comparing it to an investment is no different than comparing anything else to an investment––that isn't.
A few weeks ago I heard the Great Whole Life Insurance Hater Dave Ramsey with his usual rant against whole life insurance (it's "stupid" and "a ripoff"). The lady caller persisted in saying she really felt she needed to keep the $100,000 policy on her teenage son, as she was only paying $18/mo for it (purchased as a tiny child), and they had NO cash to bury the boy should something happen. Ramsey's advice––get rid of that "garbage" and buy a "burial policy" because they are "like really cheap." There is no product sold as a "burial policy," but the vernacular meaning of it is simply a small whole life policy, intended specifically for burial needs. But now that he's a teenager she would probably pay ten bucks per month to get a $10,000 policy. At least she wouldn't be getting ripped off with that "stupid" $100,000 one for $18/mo. sorry, you don't know what you're talking about.
whole life and universal life is the biggest rip off since ...well since ever. nothing compares. |
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Almost every paragraph has a major incorrect point. It's always funny to hear those who don't understand life insurance trying to explain what is "bad" about it. First one––life insurance is not an investment. Comparing it to an investment is no different than comparing anything else to an investment––that isn't.
A few weeks ago I heard the Great Whole Life Insurance Hater Dave Ramsey with his usual rant against whole life insurance (it's "stupid" and "a ripoff"). The lady caller persisted in saying she really felt she needed to keep the $100,000 policy on her teenage son, as she was only paying $18/mo for it (purchased as a tiny child), and they had NO cash to bury the boy should something happen. Ramsey's advice––get rid of that "garbage" and buy a "burial policy" because they are "like really cheap." There is no product sold as a "burial policy," but the vernacular meaning of it is simply a small whole life policy, intended specifically for burial needs. But now that he's a teenager she would probably pay ten bucks per month to get a $10,000 policy. At least she wouldn't be getting ripped off with that "stupid" $100,000 one for $18/mo. sorry, you don't know what you're talking about. ORLY––educate me please.
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I work in insurance (underwriting) and issue hundeds of policies each week. Really it depends on your needs and your responsibility level. If your looking for income replacement as a result of your death buy term, you get a much higher death benefit as a lower premium. If your are the kind of person who lets just say is a little unreliable with making payments from time to time you want whole life. Most policies have a NFO (non-forfeiture option) that keeps the policy inforce, or buys paid up life term insurance with the cash values so there is at least something to cover your final expenses. If your looking for an investment life insurance is not it, whole life goes by a lot of names and agents really push it because they get huge commissions for selling it but it is not a good investment. Like I said it has it's place but don't listen to a pushy agent who wants to make a fortune off you. |
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First step, decide if you want to buy insurance or an investment plan. Whole life as an investment plan is generally real lousy, and as insurace it's real expensive. The salesman forgets to tell you that IF you take out the cash value at retirement or any time, the insurance only stays in force as long as there is money in it to cover the "cost of insurance" If you look on the tables the cost of insurace jumps way up as the years go on. So what you believe is whole life insurance really isn't if you remove cash from it or use it as an investment. I was involved in a class action suit against Prudential 20 years ago over whole life insurance. |
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Almost every paragraph has a major incorrect point. It's always funny to hear those who don't understand life insurance trying to explain what is "bad" about it. First one––life insurance is not an investment. Comparing it to an investment is no different than comparing anything else to an investment––that isn't.
A few weeks ago I heard the Great Whole Life Insurance Hater Dave Ramsey with his usual rant against whole life insurance (it's "stupid" and "a ripoff"). The lady caller persisted in saying she really felt she needed to keep the $100,000 policy on her teenage son, as she was only paying $18/mo for it (purchased as a tiny child), and they had NO cash to bury the boy should something happen. Ramsey's advice––get rid of that "garbage" and buy a "burial policy" because they are "like really cheap." There is no product sold as a "burial policy," but the vernacular meaning of it is simply a small whole life policy, intended specifically for burial needs. But now that he's a teenager she would probably pay ten bucks per month to get a $10,000 policy. At least she wouldn't be getting ripped off with that "stupid" $100,000 one for $18/mo. sorry, you don't know what you're talking about. ORLY––educate me please. it's like trying to educate liberals on the philosophies of conservatism, I don't have the time to waste, and if your so entrenched in your beliefs why would i spend that time? |
| Great timing for this thread, I am debating between term and whole life myself. I have been looking at a New York Life term policy that gives $250k coverage for $25 a month, with ten years of coverage. Does that sound fairly typical of most term policies in the $250k range? |
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Quoted: Great timing for this thread, I am debating between term and whole life myself. I have been looking at a New York Life term policy that gives $250k coverage for $25 a month, with ten years of coverage. Does that sound fairly typical of most term policies in the $250k range? Your gender and age? Good health? Term premiums depend completely on the above factors. I issued a $2M face amount 5 year term last week on a 72 Y.O. in standard health for his age. Premium was over $38K quarterly. If he would of been in excellent health (reduced risk compaired to his peers) premium would of been $8K quarterly. |
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Quoted:
Almost every paragraph has a major incorrect point. It's always funny to hear those who don't understand life insurance trying to explain what is "bad" about it. First one––life insurance is not an investment. Comparing it to an investment is no different than comparing anything else to an investment––that isn't.
A few weeks ago I heard the Great Whole Life Insurance Hater Dave Ramsey with his usual rant against whole life insurance (it's "stupid" and "a ripoff"). The lady caller persisted in saying she really felt she needed to keep the $100,000 policy on her teenage son, as she was only paying $18/mo for it (purchased as a tiny child), and they had NO cash to bury the boy should something happen. Ramsey's advice––get rid of that "garbage" and buy a "burial policy" because they are "like really cheap." There is no product sold as a "burial policy," but the vernacular meaning of it is simply a small whole life policy, intended specifically for burial needs. But now that he's a teenager she would probably pay ten bucks per month to get a $10,000 policy. At least she wouldn't be getting ripped off with that "stupid" $100,000 one for $18/mo. No, it's not 100% accurate, but for those that want a quick and dirty I thought it was a pretty good. If someone is making a full decision on anything based off 12 internet bullet points then they need more help than most experts can provide. |
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I work in insurance (underwriting) and issue hundeds of policies each week. Really it depends on your needs and your responsibility level. If your looking for income replacement as a result of your death buy term, you get a much higher death benefit as a lower premium. If your are the kind of person who lets just say is a little unreliable with making payments from time to time you want whole life. Most policies have a NFO (non-forfeiture option) that keeps the policy inforce, or buys paid up life term insurance with the cash values so there is at least something to cover your final expenses. If your looking for an investment life insurance is not it, whole life goes by a lot of names and agents really push it because they get huge commissions for selling it but it is not a good investment. Like I said it has it's place but don't listen to a pushy agent who wants to make a fortune off you. Term is "if you die" versus whole life "when you die". For large estates or joint business partnerships, liquidating capital or portions of a business to pay estate taxes can get hefty if you factor in capital gains or ordinary income taxes from other investments. Guaranteed rates of return with an outlined withdrawal schedule post retirement outweigh that same amount of money had it been invested with the taxes included. |
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The whole life premiums for newborns (after three months) for zero age is like pennies per thousand. It will never go up as it is based on the issue age. You can get up the $250k without any income verification. And like I said before if you go with a mutual company (NYLIC is one) they pay dividends per thousand based on the policy's age or policy year, those dividends will eventually exceed your annual premium and the policy will be free at that point - used to be around ten years for this to happen. Excess dividends (those in excess of the premiums) can either build cash value or buy additional insurance based on attained age.
If your older, you probably need term. |
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It depends upon your needs. The answer is not as clear cut as many like to claim. This. For most people, term is perfect. Term is designed to provide high dollar coverage at a minimum cost for a fixed period of time. Some people have needs which are not met by term insurance and for them a permanent product like whole life, UL, or VUL is best. Frequently, a mix of both whole life and term can achieve optimum results of providing maximum coverage when you need it and long lasting coverage for things like final expenses and estate tax liabilities. To make things more confusing, there's a growing number of hybrid or bundled products on the market. There's nothing wrong with whole life, but for 99% of the population whole life alone will not meet their needs. Lastly, LIFE INSURANCE IS NOT AN INVESTMENT. EVER. ETA: This article is trash. |
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It depends upon your needs. The answer is not as clear cut as many like to claim. This. For most people, term is perfect. Term is designed to provide high dollar coverage at a minimum cost for a fixed period of time. Some people have needs which are not met by term insurance and for them a permanent product like whole life, UL, or VUL is best. Frequently, a mix of both whole life and term can achieve optimum results of providing maximum coverage when you need it and long lasting coverage for things like final expenses and estate tax liabilities. To make things more confusing, there's a growing number of hybrid or bundled products on the market. There's nothing wrong with whole life, but for 99% of the population whole life alone will not meet their needs. Lastly, LIFE INSURANCE IS NOT AN INVESTMENT. EVER. ETA: This article is trash. You perhaps are of the opinion a 75 y/o women with no life insurance or assets wouldn't be well served with the current AARP term to age 80 policy. 
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Your gender and age? Good health?
35 year old male, perfect health and non smoker with no pre-existing conditions. At my old company, you could get a $250k 20 yr policy for roughly $21.72/mo if you qualified for the ultra preferred rate. No war time exclusions and full coverage in combat zones and while deployed. Even if you only qualified for a preferred rate, you'd be looking at $26.52 for a 20 year policy. That NY Life rate of $25/mo for $250k @ 10 yrs isn't very competitive. I could have put you in a 10 year $250k policy without a physical for $29.52, even as a fatass with some considerable health problems. Unfortunately, I let my licenses lapse when I went into law. I used to be licensed in GA, among other states.
Keep shopping. |
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Keep shopping.
Thanks for the advice! Happy to help. You can frequently obtain a cheaper rate if you undergo a paramedical (paramed) exam. Talk to your agent about it. If you're LE or in a deployable position, make sure you inquire whether you're covered while working or abroad. |
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Wow, who new life insurance was another beans/no beans, 45/9, DLR/Hagar topic?
The thing is, this person IS advocating whole life as an investment. I am not hearing the folks here, who advocate whole life, advocate it as an investment. Perhaps this is something we should discuss in IM or over the phone. So who is the right candidate for whole life? Should someone have both term and whole life? If so, why? |
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Quoted: The thing is, this person IS advocating whole life as an investment. I am not hearing the folks here, who advocate whole life, advocate it as an investment. Any agent will tell you: It is not legal in the United States to represent Whole Life Insurance as an Investment. That is a big no-no and they all smirk about it. A lot of Whole life representatives and companies will skate really close to the edge on it , throwing in a whole bunch of "holistic wealth management strategy" obfuscaton along with "time value of money" and other grandiose language in order to baffle the average consumer. Bear in mind that the typical commission for a sales guy writing you your whole life policy will be half of the premiums you pay in the first year. That's one of the reasons sales guys push whole life so hard and treat you like shit when you want to buy term. As I understand it, it's not uncommon to see million dollar whole life policies well over $1000 a month, and the sales guy is making $6K out of you for signing that deal, plus potentially some residual commission as you keep paying through the years (and if you don't keep paying, and the cash value doesn't accrue to the point where it can pay the premiums, you lose - and they win because they keep everything you paid and you didn't die, so they really made out big). I have a buddy who got laid off and now sells whole life and has been doing so for about a year. He's a very smart guy and a great salesman. Last month he claims he made more in commissions in March than he made in the whole year at his last job. There are some obvious benefits to whole life in terms of estate planning for the wealthy (especially business owners who want to pass businesses on to their heirs without risking the breakup of the business entity to pay the death taxes), and (as a side effect) creating a tax advantaged vehicle for money that can be used as collateral (i.e. you can "borrow" against it). And for the wealthy and sophisticated individual it can play a part in their overall financial planning. But if you get your "financial advice" from a guy selling investments and insurance, as opposed to a fee-based Certified Financial Planner who actually has to have your best interests at heart, there's a high probability that you do not need whole life. Or at best, you need a small whole life policy and a bunch of term to see your through a period where you do need a high level of coverage (10x your gross income) in order to protect your dependents. |
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Quoted: Quoted: ORLY––educate me please. it's like trying to educate liberals on the philosophies of conservatism, I don't have the time to waste, and if your so entrenched in your beliefs why would i spend that time? Oh this is getting good  I recently ran some numbers on a whole life vs term policy from one of 2 companies that still pays dividends based on the ownership (that I know of, I don't claim to be that informed). Anyway, I need to have x amount of life insurance as a stipulation for an SBA loan...I think I might actually go with the whole life. It's certainly not a good investment at all, but even if the dividends are about 2/3rds their past performance, I should be able to see a self funded policy in 12-13 years and, at 8 years or so, have some cash on hand for a quick loan if I needed it. Whole life is a weird thing indeed, but in my situation, it might be a better option than pissing away the money on term payments. Speed |
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Quoted: Consider a "Return Of Premium" term policy then?Whole life is a weird thing indeed, but in my situation, it might be a better option than pissing away the money on term payments. Pay the premiums for the coverage, let the insurance company "invest", and get your premiums back at the end of the term if you didn't die. |
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Quoted: The term I was quoted pays dividends as well...I don't know about return of premium coverage but it sounds interesting.Quoted: Consider a "Return Of Premium" term policy then?Whole life is a weird thing indeed, but in my situation, it might be a better option than pissing away the money on term payments. Pay the premiums for the coverage, let the insurance company "invest", and get your premiums back at the end of the term if you didn't die. I'm a 32 year old smoker; the difference between the term and whole life premiums was about $50/month for similar coverage....taking that extra $600 year into account, the whole life seemed like a no brainer, plus it's tax deductible AND I have the option down the road for some quick cash if some cool opportunity comes up. It's going to be a few more months before I buy any life insurance (I still have to negotiate on the business I want to buy...ugh, THEN, do the SBA paperwork). I'll look into that return of premium stuff though. Thanks! Speed |
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If it hasn't already been mentioned, here is something else to consider.
If you get say, a ten year term policy. It's a good deal if you die, but what happens if you are still alive at the end of the ten years? Do you still need life insurance? If so, you are now ten years older and will be facing higher premiums based on your age. You will need to consider what those premiums will be versus what the whole life premiums would have been from ten years ago. Another extremely important consideration is, will you still be insurable in ten years? What if you had a major health event, (cancer, heart attack, etc.), will you even be able to qualify for another term policy, and if so, at what cost? Just something else to think about. |
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Quoted: not sure about the tax deductibility: http://www.irs.gov/publications/p535/ch06.html#en_US_2011_publink1000208856I'm a 32 year old smoker; the difference between the term and whole life premiums was about $50/month for similar coverage....taking that extra $600 year into account, the whole life seemed like a no brainer, plus it's tax deductible <snip> A $50 a month differential between term and whole for the same coverage? That sounds very strange. Policies I've looked at in the past have had a $50 a month term cost, and a $1000+ a month whole life cost for the same coverage. |
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Quoted: Quoted: not sure about the tax deductibility: http://www.irs.gov/publications/p535/ch06.html#en_US_2011_publink1000208856I'm a 32 year old smoker; the difference between the term and whole life premiums was about $50/month for similar coverage....taking that extra $600 year into account, the whole life seemed like a no brainer, plus it's tax deductible <snip> A $50 a month differential between term and whole for the same coverage? That sounds very strange. Policies I've looked at in the past have had a $50 a month term cost, and a $1000+ a month whole life cost for the same coverage. I'll have to dig out the quote but I think it was about $78 for $300k in term and $135ish for $250k in whole...it wasn't the exact amounts in insurance, but I'm still not sure how much the SBA loan will be for  ETA: I'm an idiot. The term life is for $250k, but the whole life quote was only for $100k I think I have some more research to do Speed |
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Quoted: Great timing for this thread, I am debating between term and whole life myself. I have been looking at a New York Life term policy that gives $250k coverage for $25 a month, with ten years of coverage. Does that sound fairly typical of most term policies in the $250k range? My wife was 27, non smoker non drinker, no adverse health history and we pay $31.50/mo for a $750k 25 year policy. Yours sounds a bit high for a 35 year old, but maybe I'm wrong. My firm does nothing but sue insurance companies when they wrongly refuse to pay benefits, and thus, I could tell a hundred stories about term vs. whole life and every other aspect of life insurance, but I'll resist that and just provide one piece of advice: BUY MORE COVERAGE THAN YOU THINK YOU'LL NEED. Term is ridiculously cheap and the jump from $250k to $500k or even $1m in coverage is not that significant. I'll tell you that almost universally, my clients wish they would have opted for more coverage for a few more dollars a month. Obviously this all depends on your individual insurability. |
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Quoted: Life insurance makes no sense to me. I think the entire concept is flawed. We have a 4 year old son and a daughter on the way and if my wife and I die, I want my kids to have the same financial benefits (or at least something) in life that they would have had if I were able to continue to provide for them until they are adults. It's that simple. |
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Quoted: The only opinion I trust in such matters is Dave Ramsey and he would only advise term life insurance. Whole life is a rip off. I used to have the same blanket approach. And for maybe 90% (or is that 99%?) of people, that is likely a true statement. But there are always exceptions where a whole life policy has value. |
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The only opinion I trust in such matters is Dave Ramsey and he would only advise term life insurance. Whole life is a rip off. Yet I cited above where I heard him with my own ears actually advise dropping the "rip off" whole life and replace it with a <much less advantageous> whole life policy. He doesn't know crap about life insurance beyond spouting his mantra about how it's "a rip off" and "stupid" and "a poor investment." Why do you think he has a disclaimer every little bit on the show? 
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Term only. NorthWestern Mutual invested in commercial real estate and that has been dropping like a rock. Anyone who had a paid off whole life wound up paying more every year to sustain their policy because of the decline in commerical real estate prices. That's not correct. Whole life policies have fixed premiums. That is one of the most fundamental aspects and traits of them. 
Perhaps you meant universal life? Even at that there would be no direct link between real estate price drops and premiums. Interest rates are down everywhere, and on everything, so most interest-sensitive policies are paying at, or possibly just above, their guaranteed interest rate. Even that is typically around 4%. Try getting that guaranteed anywhere else. There sure is a great deal of BS in this thread from those who know "just enough to be dangerous." Of course, they always know it loudest too.
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