Comments on: Since Whole Life Insurance Has a Cash Value, Is That Better Than a Term Policy?

By: Maria

Maria — Tue, 14 Jun 2011 01:24:05 +0000

Obviously you sell cash value policies, which pays you 8 – 10 times more commission than term, which is why you must defend it. What you are not saying is that the tax benefits only helps about 2% of the population. You need to have a couple of millions in assets for this to be true. Otherwise, your money will accumulate much faster if you invest it separately on your own, especially when the policy doesn’t begin to accumulate cash value for up to 5 years because of the high commissions it pays out to the agent.

By: Maria

Maria — Tue, 14 Jun 2011 01:14:35 +0000

That is not necessarily true as long as you choose a company that offers term life that is renewable to another term insurance, without drawing blood. I know of one company that does this till the age of 90, and by then, chances are you won’t need life insurance anymore.

By: confused

confused — Mon, 02 Aug 2010 05:46:25 +0000

I currently have a money market and mutual funds account through Northwestern Mutual. I recently met with an acquaintance who works for Synergy Group. Synergy Group offers an Index Universal Life Insurance Policy which (allegedly) pays 5-8% interest annually (payouts are apparently measured by the S&P 500′s annual performance. If the market does well, your savings earns interest based on the performance, and if goes down, you don’t lose anything – unlike basic universal). Index is relatively new, so I’m trying to do my due diligence to find out the possible cons. Which is better? Whole or Index Universal?? The broker at NW Mutual is trying to sell me a 200K whole policy in addition to an 800K term policy (as security against any potential future health issues) (p.s. may not matter, but I’m 25 with no family of my own).

By: darryl

darryl — Tue, 20 Jul 2010 13:50:52 +0000

the biggest prbs with whole life (which i own by the way and am not associated with the industry):
1. the cost is very high. there just isnt enough transparency and good competition in the industry to reduce the price on these things. the agents make a ton of money for what they provide, a lot goes into stuff that has no value to you, and they get it within the first few years so they have little incentive to make sure the policy continues to work for you and frankly the insurance company is better off if you cash surrender or miss a payment etc then get the death benefit so they care much more about your ability to make initial payments then the long term plan.
2. you need to be sure u will be able to make those expensive payments far into the future. my 2 million whole life through guardian costs 35-36k per year initially and although dividends reduce premium each year its very costly for 1.5 decades. how many people really know they will have that type of money lying around given the economy.
3. once u start you are stuck or u take a big loss. while you can take out loans, ending a policy early on means a big financial loss.
4. even if u like the guaranteed features of whole life, dividends are not like dividends on a stock. what they really are is a refund of money you overpaid that year. its like paying too much on your taxes and being happy that you get a refund when really you should just pay less during the year. this is just one of the many areas where insurance agents dont appropriately explain things. They try and make you think the company is doing a great job investing and thus u made money.
5. finally given the high cost of whole life what many people do is under insure themselves in order to afford whole life. they likely need higher death benefits to support their family and given all they have spent on whole life, now cant seem to afford additional term.

while i have whole life (and term by the way), if i had to do it all over again, id buy more 30 year term (im 39) and either invest the extra or just spend it. tying it up in whole life has made it such that im more vulnerable to any unexpected prb except death and given my health those are all more likely to happen.

By: james

james — Tue, 06 Jul 2010 07:07:17 +0000

While I was struggling for life insurance company, I found a company that offer you a big discount and many other benefits on your life insurance.

By: sandy

sandy — Thu, 01 Jul 2010 08:11:07 +0000

Great article 5 stars.Really helpful information.

By: taketheredpill

taketheredpill — Sun, 31 May 2009 20:11:30 +0000

Mark,
Whole Life insurance is NOT an investment. Investing by definition involves risk of loss. You invest in something with hopes of a positive return. Whole Life insurance is a guaranteed permanent death benefit that has a savings (not investment) component. There is no risk. Universal and Variable Universal policies are different, and in most cases crap. That’s why insurance companies keep changing them, because they can never get them to work the way they are sold. That being said, there are Whole Life policies out there that are crap. I would stick to one of the 4 major mutuals (Mass, Northwestern, New York Life, Guardian) when it comes to WL policies. I personally hate term, and will convert as much as I can each year. I want to own my life insurance policy, not rent. I am paying into my life insurance policy (structured to completely paid off by age 65, unless I choose to use the dividends to pay the premiums), much like I am paying a mortgage so one day I will be 100% owner of my home.

LI Girl,
I don’t know where you get your information, or what policies you have seen, but that’s absurd. Most policies have a period of 2 years where the company can contest the claim if the applicant committed fraud or suicide. However, once your policy is delivered, you could die the next minute and that benefit is payable period. There might be some crap companies out there that will make it difficult for you to receive your claim, but they will have no case as long as there is no fraud or suicide. After that 2 year period, you can jump off a bridge and the company has to pay the claim.

By: life insurance girl

life insurance girl — Sun, 31 May 2009 16:29:58 +0000

I have noticed lately that there are alot of concerns about life insurance policies and the fact that you have to keep them for at least a year or whatever the term says before you can actually bank on the policy. So if you get a life insurance policy and you die in 2 weeks, then you do not get the life insurance payoff because you died too fast (no matter what the reason is). It is important to check out the life insurance company you are going to be dealing with on this aspect.

By: Mark

Mark — Tue, 17 Feb 2009 05:19:40 +0000

If a whole life insurance is an investment, why is it regulated by the insurance commission and not by the securities and exchange like any other investment? If whole life has an investment, why is it that agents do not need an investment license to sell them?

By: taketheredpill

taketheredpill — Fri, 10 Oct 2008 04:14:05 +0000

JRay,
Your mentality is unfortunately why so many retirees, widows, etc are contemplating suicide right now. To assume a 10% rate of return is completely foolish. You are talking about an average first of all, which is debatable, but historically I think 8% is more accurate. But what happens if one year the rates go way down? As soon as you start making withdrawals, you are solidifying those losses. For example, if you are living off of a “10%” interest per year on $650,000, you have $65,000. Did you factors taxes, INFLATION, or market fluctuations into that equation??? Let’s say one year, the market goes down (today they DJIU dropped below 9000), and you end up up with a negative return. Your wife needs some money, so she has to dip into the $650,000. Now let’s say there is $600,000 left. Oh thank goodness, the next year we got 10%. But now it’s only $60,000, and the liberal administration just raised taxes across the board. Inflation went up a modest 3%. Uh oh. But the next year is better and an amazing 15% return gives your wife a whopping $90,000. Problem is now she is in a higher tax bracket, so she decides she is just going to take $65,000, and now you have 625,000 in the mutual fund. Score! Next year, major problems, a terrorist attack, political turmoil, market crisis, and you got a negative return of -5%. Your wife has to dip in again, but she has some more expenses because she started her own business and the kid is looking at colleges. Plus, inflation is now roughly 10% higher than what is was the first year you died, so that $60,000 just doesn’t cut it, so when all is said and done, she decides she needs $100,000 to meet her needs.

Basically, every morning, your wife will walk down the driveway and pick up the newspaper and go straight to the Business section to gauge how much money she can expect to spend.

I’m not putting my family through that nonsense.

If you know anyone retiring or retired, ask them how they are doing? Some might be okay, but youre bound to come across some real hard core suffering. Do you spend more money during a work week or during a week of vacation? Retirees are supposed to be on vacation, but many having to go back to work, and many are not able to. Like I said, there are some retirees that are enjoying retirement right now. I’d be willing to bet that some of those can thank their whole life insurance policy and a good solid foundation of protection for that.

I’m not saying that one should not invest in the market or real estate or other potentially higher yielding investments. However, if you don’t have a solid foundation of protection and contingencies, you effectively have no plan.

Just look around you right now. It’s happening all over, and it is extremely sad, because someone with your mentality convinced these people to buy term and invest the difference, or put their money in stocks and real estate, whatever. They were not shown the truth. Failure should NOT be an option when it comes to a financial plan, but you are essentially basing your financial strategy on ideal and unrealistic predictions, assumptions, and opinions about the future. Your plan should be able to work under any circumstances, and be based on facts and economic principles. Then, if you have money in there to play with, by all means, throw into the ring and see what happens.