Term or Whole Life? at SmartMoney.com

Posted 6:37 PM EST November 04, 2009

Posted by: bbick001

I think 8% dividend is high, but I agree. It's funny how everyone is going back to buying whole life insurance now that the market has scared everyone into reality...

Posted 3:36 AM EST November 04, 2009

Posted by: FinancialGURU

I'll agree with the opposition that Whole Life policies in general are crappy for the most part. What 99% of you don't understand, is that there are a few companies that have VERY competitive Whole Life products. Northwestern Mutual #1, New York Life #2, and a couple of others.

Over the last 20 years, a whole life policy with Northwestern Mutual has crushed the "buy term and invest the difference" approach. CRUSHED IT!!! That's based on a common stock portfolio as well (which is roughly speaking, the most aggressive asset allocation model you could choose). In terms of forced savings.... Here's a stat for you: Only 14 percent of those who go with the "buy term and invest the difference" idea actually nut up and invest the difference.

Anybody who disagrees can feel free to send me an email and I'll prove it.

Think of a Northwestern Mutual Whole Life policy as the Tortoise in the race. It advances slowly, but consistency is key. Why do you thin...(Read more of this comment)

Posted 3:43 PM EST July 26, 2009

Posted by: A0110915r

"I have both a large term policy and a smaller whole life policy."
Right! The problem is that too many salesmen try to get people to use the same amount of premium money to skip the term policy and buy a too-small whole life policy that doesn't provide the coverage they need.
"I plan to grow the whole life policy over time as I earn enough to pay more premiums."
If you get wealthy, this is a sensible strategy. Unfortunately, most people don't get very wealthy.
"I don't think anyone should dump all their savings into a whole life policy. But whole life is very valuable as a foundation for my wealth. It works very well in a portfolio with other assets like real estate, IRA, 401k investments."
If you are well off enough to have all of those things, then you need the tax protection that whole life can bring. But few of us have that luxury. In any case, whole life is more of a supplement than a foundation. Your foundation should be things like a Roth IRA.

"A f...(Read more of this comment)ew valuable things that whole life provides me -- a death benefit to the end of my life"
This benefits your heirs, not you.
"protection from potential creditors"
Again, the main benefit is for your heirs.
"disability protection" watch out. It probably only pays your life insurance premium. Time and time again I've found that this protection isn't all it's cracked up to be. In one case I know of where there's a disability clause for "long term care", the disability payments reduce the cash value by a corresponding amount, so all they really do is use your own money to pay for your long term care.
"Whole life is not an end in itself, but whole life will allow me flexibility in the use of my other assets." It plays a key role for those who have a lot of wealth. But you correctly note that it plays a role in a larger plan.

"I have to admit that I do not understand the love here for IRAs and other tax deferred investments. Roth IRAs are great, but a lot of us make too much money to invest in a Roth."
Exactly my point. 401Ks get you an employer match, but you have to beware of the high-expense investments many of them force you to choose. IRAs and other tax deferred investments are for people who have too much money for a Roth. The reason they are better than whole life is that YOU can get the benefits, and you control what you invest in whereas with whole life a substantial portion of the benefit is only for your heirs.
"I invest in an IRA, because I think it is useful, but it is not going to make me rich on its own. When I take finally get to take money out of my IRA I will be hammered by taxes." You are right about that, but no more than your fair share of taxes that all the rest of us owe too and many of us have already paid. An IRA or other tax protected investment allows you to defer taxes, not get out of paying them.
With whole life you have already paid the taxes before you paid the premiums, so the cash value is not "taxable" because you've already paid the tax. The death benefit goes to your beneficiaries, not to you. It is true that there are some shenanegans that a rich person can play with whole life to reduce taxes, primarily for their heirs. It's one reason why whole life plays a more important role in the financial plan of a wealthy person. The problem is that they push whole life on people who cannot afford it and need much more coverage than they can afford with whole life.(Show less of this comment)

Posted 1:58 AM EST July 24, 2009

Posted by: prestfx

I have both a large term policy and a smaller whole life policy. I plan to grow the whole life policy over time as I earn enough to pay more premiums. I don't think anyone should dump all their savings into a whole life policy. But whole life is very valuable as a foundation for my wealth. It works very well in a portfolio with other assets like real estate, IRA, 401k investments.

A few valuable things that whole life provides me -- a death benefit to the end of my life, protection from potential creditors, disability protection, liquidity. Whole life is not an end in itself, but whole life will allow me flexibility in the use of my other assets.

I have to admit that I do not understand the love here for IRAs and other tax deferred investments. Roth IRAs are great, but a lot of us make too much money to invest in a Roth. I invest in an IRA, because I think it is useful, but it is not going to make me rich on its own. When I take finally get to take money out ...(Read more of this comment)

Posted 1:24 AM EST July 24, 2009

Posted by: prestfx

Posted 10:53 PM EST July 17, 2009

Posted by: A0110915r

"First you lump all permanent life insurance policies into one heading of whole life." Some may but I don't. Whole life is better than universal but still far more expensive than term and inappropriate for young people who need more coverage than they can afford with whole life.
"This gives wholelife a bad name." You poor insurance salesmen have been brainwashed into believing whole life is good. It is not for most people, and certainly not when they cannot afford the coverage they need with whole life.

"Dividends in a true whole life policy are not market driven. You are not investing your money in the market." Hold on. Those last two statements are not equivalent. The insurance company is investing your money in real estate, stocks, and who knows what. Some went under in 2008 as a result of this. They guarantee dividends (if the insurance company doesn't go under) but they are a relatively poor investment.

"Whole life policies if you choose the correct strong i...(Read more of this comment)nsurer to go with have guaranteed cash value growth where you are guaranteed to have a return of more than what you pay in premiums over the span of the policy in cash value growth"
You also do in savings bonds, treasury notes, and lots of other things that have stronger guarantees.

"and then you also have a dividend paid into the policy" The "dividend" is one of the biggest scams in the business. It is actually a return of excess premium paid (which is why the IRS does not tax these dividends!). The dividend represents your share of what the insurance company made on your money - if they made money. If they lost money, you may not get those "dividends".

"which adds to your tax free cash value growth and your death benefit." See above re taxability.
You already paid tax on this money - your premium was after tax money.

"If you choose a top rated insurer who is not a mutual company but a public company they ...(Read more of this comment)have guidelines set out that due to them being a public company they must give so much of their profit a year back to their whole life policy holders." Yes, ain't that grand. You give them your money, they invest it, and they give you part of it back.

"Cash value in a whole life policy goes up even in a negative market like last year." If the company doesn't go under.

"Also it will beat out the S&P 500 over the long term when you take into account taxes on market investments with capital gains and income taxes" Not if you invest in the S&P 500 in a tax sheltered account like an IRA or 401K. In fact, a ROTH IRA investing in a low cost total market index fund will beat an insurance policy by a mile over the long term.

The case where whole life makes sense is if you are very rich, exceed the limits for IRAs and such, and still want to tax shelter your investment. But note that the benefit goes largely to your heirs, not to you. The cash value doesn't equal the coverage until you reach 100.

There's another benefit of whole life, and this is real. For people who lack the inclination or the discipline to invest, whole life is like forcing you to save. It's in a relatively poor but conservative investment. But it won't make you rich unless you are already rich and need the tax shelter.(Show less of this comment)

Posted 9:10 PM EST July 17, 2009

mattkate1

1 Comments

First you lump all permanent life insurance policies into one heading of whole life. This is false and please correct this for future use. There are many permanent life policies out there but whole life is different than others. You then have people commenting on universal life policies as though they are whole life. This gives wholelife a bad name. Dividends in a true whole life policy are not market driven. You are not investing your money in the market. Those are universal life policies which in my point of view are unfortunate life policies. Whole life policies if you choose the correct strong insurer to go with have guaranteed cash value growth where you are guaranteed to have a return of more than what you pay in premiums over the span of the policy in cash value growth and then you also have a dividend paid into the policy which adds to your tax free cash value growth and your death benefit. If you choose a top rated insurer who is not a mutual company but a public company they ...(Read more of this comment)

Posted 4:25 PM EST June 15, 2009

Posted by: A0110915r

When the rubber meets the road ...
I recently was called in to help with an elderly (86 year old) relative who is being moved into an assisted living facility. The problem was: how to pay for it. His "nest egg", which he believed to be sufficient, consists of a variable annuity and a universal life policy with a long term care rider. Both had been held for almost 40 years, with different (very well known, mutual) insurance companies, although see below. I want to report on how poorly he was served by these products. Note: the variable annuity was actually the last in a string of them - he had shuffled from one variable annuity to another, roughly once every ten years, as salesmen had convinced him that his previous one was not good enough. Each time, of course, he incurred sales charges.
Anyway, the situation at the present is as follows:
- Universal life policy
-- He paid premiums until about ten years ago, when he was convinced that he should simply use dividends to ...(Read more of this comment)pay premiums. He was assured that they would greatly exceed the premiums. However, due to poor returns, his "pay the premium through the dividends" program has resulted in a reduction of his cash surrender value to less than 1/4 what it should be.
-- the "long term care rider", which cost him quite a bit extra, is essentially worthless. It is only applicable under an extreme set of conditions and is unlikely to ever apply. Furthermore, once he is eligible, all it does is pay $1000 monthly and reduce his death benefit accordingly until the death benefit is exhausted.
-- Over the years he has put in roughly twice what the policy is currently worth.
- Variable annuity
-- Because this is only 5 years old (purchased by cashing out a previous one), there are still 7 more years during which there are significant surrender charges. To have sold this to a man who was, at the time, 81 years old (now 86) strikes me as criminal. Now that he needs the money he cannot get it without a significant expense.
-- Furthermore, the investments are poorly chosen for a man his age and thus they went down significantly in the past year.
-- Finally, I asked about whether it could be converted to an immediate annuity. The answer is "yes", BUT - the return is far below par for such an annuity for a man his age and, furthermore, the only options offered are 15 and 20-year certain, which means that the payouts are rather small and unless he lives another 15-20 years he will not be able to reap much benefit. His heirs will get what's left, but they don't need or want it - HE needs it.
---
Some will say that he should have chosen a better company or paid more attention to his policies. But first of all the man is quite old and he is not able to understand what is going on. Secondly, the sales pitches used by the companies that did sell things to him illustrate the reason why so many people distrust insurance companies.
The man has five children and all of them have learned from this - stay away from life insurance companies. If life insurance companies don't want that image, they had better clean up their industry.
---
Final remark: what saved him is a reverse mortgage he acquired when real estate prices were much higher than they are today and, thus, his home was appraised at a rather high amount. Despite the atrocious charges for this mortgage, he lucked out. He can take a "lump sum" of the entire appraised value, less what he has taken out so far in monthly payments, and if the house sells for less (which it surely will), government insurance will cover it. Thank goodness for the government!
(Show less of this comment)

Posted 10:52 PM EST June 05, 2009

smongie

1 Comments

There is one problem with your analysis: you use a 10% constant rate of return when comparing term with whole life. please can someone show even 1 fund that has delivered a constant 10% rate (not an average return). You are leading people to believe that 10% is achievable. please use attainable returns in your analysis. by the way, I have owned whole life for a long time and it has delivered exactly what it was supposed to and I can show you lots of elderly couples who bought whole life in there 30s and 40s who will tell you that it was one the best financial decisions that they have made. It is difficult to find many people who have mutual fund portfolios who are happy!!! I sure am not happy with mine!!!

Posted 3:56 PM EST April 29, 2009

deschack

1 Comments

Sell your house, rent an apartment invest the difference! Sell your car buy a bicycle invest the difference! Sell your kids invest the differece.

Posted 2:18 AM EST April 28, 2009

bevanwilde

1 Comments

I think that most who want to buy Term and invest the difference have no idea what they are doing, they simply are uninformed. Term has a place, but it is temporary. Think about it, you cancel your term later in life to turn all your assets into life insurance. Your assets will go to someone, heirs, friends, Goven't, Financial Inst, etc: That is a form of Life Insurance. You can't spend all your assets, because most of us will have the fear of out living our money. So what do we do? We preserve the assets, live only on the interest and when we die, leave our assets to other people. This looks like life insurance to me, the most expensive form of insurance. Build and preserve your hard earned money and NEVER touch it because of FEAR, live only on the interest, then leave the rest behind. Great financial Plan, NOT!! This is the basis to financial planning and it can't and will never work.

If you could spend your life insurance while you're a live, how much would you ...(Read more of this comment)

Posted 4:33 PM EST April 24, 2009

Posted by: NYL_Financial_Advisor

Posted by: A0110915r
"With insurance companies you have to guess which of the "we're as solid as Gibralter" claims you can trust."

That's your problem. You've been putting your "faith" into publicly owned Life Insurance companies that could care less about the long term interests of their policy holders.

Good luck investing in the bear market "rally."

NYL Financial Advisor
Series 7 & 66 Investment Advisor

Posted 4:29 PM EST April 24, 2009

Posted by: NYL_Financial_Advisor

Fail to plan. Plan to fail.

But don't take my word for it; here's an article for you to glance over from your friends at Forbes.com 02/10/2009

http://www.forbes.com/2009/02/10/mutual-life-insurance-financial-adviser-network_0210_financial_planning.html?partner=whiteglove_google

Posted 6:53 PM EST March 13, 2009

Posted by: A0110915r

Much has been said here about how insurance companies guarantee things whereas investment is risky. Did anyone happen to notice the article in the Wall Street Journal yesterday (3/12/2009)about how many insurance companies are in financial distress and hoping to get some TARP money to bail them out? The reason is simple: they have to invest the premium money in order to obtain the financial resources to provide the benefits they provide, and many of them have the same kinds of investment problems as the rest of us. At least in my 401K I know how things are and can make sensible judgments. With insurance companies you have to guess which of the "we're as solid as Gibralter" claims you can trust.

Posted 10:43 AM EST March 10, 2009

cdotey

1 Comments

Did anyone ask the Whole Life Agent "who keeps the cash?" With almost all whole life products if the insured dies the insurance company "KEEPS" the cash. How do they get away with this?
Read your policies carefully and ask the question
"who keeps the cash if I die?" And if there is a loan on the policy "do they remove it from the face value"
ALWAYS BUY TERM!

Posted 7:16 PM EST February 26, 2009

Posted by: eezerik

A0110915r,

That's good. Nobody is saying (or should be saying) that WL or permanent policies are the be-all end all of investing. No. Never. They shouldn't.

However, permanent policies 1) do have a retirement benefit, and furthermore, 2) will leave $ to your family, and 3) basically guarantees to take care of final expenses and 4) estate tax free...

So it all depends on what you want to do. If you only need protection for a limited time and limited budget, then term. But, WL and/or Universal Life definitely have its places, especially to the beneficiaries.

Posted 3:51 PM EST February 26, 2009

Posted by: A0110915r

"and uh...sorry..how have their "investments" done? 30 years of growth to get back to ground zero...or broke."
No, it doesn't work like that.

I just checked. I have data back to 1980. As of today, which is considered a market low for the past decade or so, my total investments are worth over 20 times what they were back in 1980. Now that is only 29 years, not 30, but you get the point. I could not possibly have afforded to purchase enough whole life back in 1980 to achieve this same result.

I also examined the fixed rate part of my investments (about 10% of the total and averages about 6% annual return over that span) and a small whole life policy I bought back then. I compared both with the stock portion. Over that 29 year period, even at today's low, and calculated on a proportional basis, the stock portion is worth significantly more than either of the other two and the life insurance cash value has grown at about the same overal rate as the fixed income portio...(Read more of this comment)

Posted 1:35 PM EST February 26, 2009

Posted by: eezerik

and uh...sorry..how have their "investments" done? 30 years of growth to get back to ground zero...or broke.

People don't understand, permanent or whole life insurance last AS LONG AS YOU LIVE. So, if you want to leave an inheritance, it's a good way to do so. Over the long run it's a 5-8% return and can be structured tax-free or tax deferred.

so in essence you put in more in the beginning but are at least your family is guaranteed a pay day, instead of a gamble whether you will die or not

Posted 12:37 PM EST February 26, 2009

Posted by: A0110915r

Here's a simple criterion. Find someone with expertise in the subject who is NOT an insurance agent or affiliated with an insurance company and not trying to sell you any investments or insurance policies. How many of them recommend whole life or variable life policies or variable annuities? So far I've found only a handful, and the ones I have found recommend such policies only for very specific situations that apply to very few people. By contrast, there are many independent experts who recommend term life and conventional investing. Among the ones who are nationally known are Scott Burns, Bob Brinker, and Suze Orman. (They do sell things but not investments or insurance or alternatives to these - in fact they all highly recommend insurance and investments -- term insurance and thoroughly researched investments.)

Posted 2:42 PM EST February 25, 2009

Posted by: NYL_Financial_Advisor

"I'm not quite sure about the connection between the marginal tax rates and life insurance since death benefits are not taxed." - rich703

Spoken by someone who just pointed out to all you have no idea what cash value life insurance is. Thanks for making the point for me.

NYL_Financial_Advisor

Posted 2:31 PM EST February 25, 2009

Posted by: NYL_Financial_Advisor

Top tax bracket for 2009 is at 35% for income over $372,950.

Top tax bracket in 1945 was at 94% for $200k.

You're smoking something if you really think tax marginal tax brackets are going to remain at some of their lowest rates going forward especially in today's economy where Debt-to-GDP ratios dwarf to that during the Great Depression.

The messiah has already stated higher taxes for those over $250k....

It's apparent you don't fully understand the USD as a fiat currency.

Posted 2:12 PM EST February 25, 2009

rich703

2 Comments

I'm just wondering if you remembered to tell your clients that 35k in 1945 is worth almost a measly 400k in today's dollars. But if you didn't, thats ok, because they walk out that door happy with what you sold them; you did your job!
Its obvious that a client's perception of his or her product is arbritrary to the life agent's "sales pitch". I'm not quite sure about the connection between the marginal tax rates and life insurance since death benefits are not taxed. Tax-deferred growth can be enjoyed in many other investment options.

I see way too many whole life or variable policies being sold to individuals who are unaware of the many conditions and variables in the policy that should have been disclosed when they first purchased the policy. I'm not saying that all UL and Whole life products are bad, its just that there are only a small percentage of clients who can actually benefit from the product.

Posted 12:18 PM EST February 25, 2009

Posted by: NYL_Financial_Advisor

Nice to see this thread still alive and well....

Nothing wrong with Term. Nothing wrong with Whole Life. In my case, I get paid the same either way. As long as the client is happy and feels like they are in a better position after having worked with me, my job is done.

I will add this. If for any reason to justify whole life, look at the marginal income tax rates from years 1932-1945 following the Great Depression.

If you made a measly $35k in 1945, you would find yourself in the 68% tax bracket! Make over $100k, then 92% of your hard-earned cash goes to IRS.

Historical Tax Rates here:
http://www.taxfoundation.org/publications/show/151.html

If you like paying taxes or rolling the dice, then go ahead and put the majority of your portfolio into products & investment vehicles that have no guarantee on what tax rate you'll be paying on once you begin withdrawing since nobody has any idea what Congress will decide in the future. We ...(Read more of this comment)

Posted 3:49 PM EST January 22, 2009

rich703

2 Comments

Why not do a 20-30 year Return of Premium term policy and invest the difference?

Posted 8:57 AM EST January 12, 2009

Posted by: dawson12

eezerik:
Which numbers are you referring to? The Whole Life death benefit and cash value are based on an illustration using the current dividend scale for the mutual company I represent. Dividends are not guaranteed.

Posted 4:54 PM EST January 11, 2009

Posted by: eezerik

Dawson12, your numbers look a little generous.

Posted 1:38 PM EST December 05, 2008

Posted by: dawson12

A0110...

The example I laid out is just that, an example. I understand the need for larger amounts of life insurance at a younger age. This example was merely meant to illustrate the long term benefits of a Whole Life plan. Cash deferred growth, increasing death benefit, and level premiums. Cash value can be used to supplement retirement income on a tax free basis through withdrawls up to the cost basis and then through policy loans.

Your assumption that no one needs life insurance after age 56 is way off base. Sure if someone is debt free and remains in perfect health until they die in their bed of old age, life insurance would not be needed. That is a perfect, but far fetched possibility. Extended LTC and other medical costs could wipe out any retirement nest egg they may have had, and then what?

Posted 4:50 PM EST December 04, 2008

Posted by: pumbaleap

Dear A0110 ....
The term analysis that you refer to also ignored the taxes potentially acrued with the difference account was build, trying to use a roth is not possible for many people, and a dozen other errosions that were unmentioned to the termite assuming he would qualify for reinsurance ... but also the termite has a non inflation adjusted pile of static resources of face amount while the whole life policy is inflation adjusted ...
in no way OTHER than death within the first 10 years, will a term and invest the dif ever match a permanent insurance plan coordinated and integrated to the family specific ... it is neither all one or the other but a plan to accomplish both that works best

Posted 4:28 PM EST December 04, 2008

Posted by: A0110915r

'Summary ... Purchasing 50 years of Term and Investing the Difference...'
That's a rather strange whole life plan you've described, with all the varying amounts over the years, but I'll accept that there are plans like that available. I pity the poor schmucks that buy such a policy. The problem is that the coverages are just exactly the opposite of what most people need. You provide only $250K of coverage at age 26, when what you need is a million or more (to cover the expenses of bringing up your children and your spouse's expenses, if you happen to die young) and you have much more insurance coverage than most people would need after age 60 or so(when all you should need is enough to cover burial costs).
In fact, most reputable and independent sources recommend dropping almost all life insurance by the time you are about 50 or 55 (the children are adults by then and no longer should need your support and you and your spouse should have a reasonable retirement next egg going b...(Read more of this comment)

Posted 12:46 PM EST December 04, 2008

Posted by: dawson12

Whole Life Policy Vs. Term and Investing the Difference

The Term Policies:

1. Age 26 - 20 yr Term with a Death Benefit of $250,000
- Annual Premium $282
- Total Amount paid on the contract is $5640.

2. Age 46 - 20 yr Term with a Death Benefit of $371,300
- Annual Premium $1245.
- Total amount paid into the contract is $24,900.

3. Age 66 - 10 yr Term with a Death Benefit of $750,000.
- Annual Premium $9245.
- Total amount paid into the contract is $92,450.

At Age 76 amount paid into the policy is $122,990. Amount of Death Benefit $0, amount of cash value is $0.

Investing the difference of the term premium vs the Whole Life

1. The First 20 years (ages 26-46) -$2298 (WL Premium) - $282 (Term Prem) = $2016 a yr. Total amount invested is $40,320.

2. The 2nd 20 yrs (ages 46-66) - $2298 (WL Premium) - $1245 (Term Premium) = $1053 a yr. Total Amount invested is $21,060.

3. The...(Read more of this comment)

Posted 9:59 AM EST October 31, 2008

Posted by: A0110915r

I was asked for suggestions and gave my advice, which I stand by. It has served me well - much better than several relatives and friends who have fallen for the sales pitches of investment advisors who've sold them loaded investments and insurance agents who've sold them costly whole life policies (not to mention loan brokers who've sold some of them home equity loans or poisonous mortgages).
'Please, if you're gonna make recommendations, present both sides of the story and at least do more research under your own diligence instead of having to rely on Orman, Brinker, Burns, etc. for your info.'
I don't know how anyone could recommend against doing research and educating oneself. Those three are among the most highly recommended independent sources of information. They are NOT trying to sell insurance or investments, so they give a straight story on both. They all have the same goal for their readers - to make them financially secure. Talking to an insurance agent is not a way...(Read more of this comment)

Posted 9:35 PM EST October 30, 2008

Posted by: NYL_Financial_Advisor

In reply to A0110915r comments:

Please, if you're gonna make recommendations, present both sides of the story and at least do more research under your own diligence instead of having to rely on Orman, Brinker, Burns, etc. for your info.

1st - Seriously, how can you refer someone to the likes of Suze Orman? Granted I can agree with her on several positions, but bottom line, she's in the business to make money off selling her books and increase her tv show ratings. Her words and recommendations are not suited for everyone.

2nd - If annuities are so bad, then why is it that
our Federal Chairman, Ben Bernanke, has the majority of his portfolio in 2 annuities? One of the world's most influential, financial front-men in annuities? Who would have thought?

3rd - If Northwestern is set up on the securities side like I think they are, they will have a separate Investment Brokerage entity. If so, they can get ANY mutual fund, load or no-load, from ...(Read more of this comment)

Posted 5:48 PM EST October 29, 2008

Posted by: A0110915r

'Looking for a little advice here. '
Here's my recommendation. First of all, do some reading. I suggest you consider the Bob Brinker web site (bobbrinker.com), which has a lot of useful information including a number of recommended books (look under Favorites - John Bogle's book on mutual funds is a classic that I recommend in particular). Next try the Scott Burns site (scottburns.com) - Scott has a slightly different take on things and he's particularly articulate in explaining what's bad about variable annuities. His 'couch potato' portfolios are one simple way to invest. And of course try the Suze Orman books and web site (suzeorman.com). Also watch her TV show on CNBC on Saturday night. Burns has a newspaper column but I don't know if it's in your newspaper; Brinker has a radio program on Saturday afternoons.

Stay away from 'get rich quick' books. You need
to know the vocabulary, the kinds of investments
available, the risks, and such. It isn't hard to know th...(Read more of this comment)

Posted 2:57 PM EST October 28, 2008

Posted by: pumbaleap

Dear lgmoore ...

Note not spel checked ...

you have 4 things in your favor that will NEVER happen again ... the first of which is you are young and are savers ... I do not know your 'facts' so here is a generic reply ...
you should do the following with your cash flow ...
a) BUILD up to saving consistently 15% of your gross income ... thus you will inflation-technology-obsolecence-tax-emergency wise proff your plan ...
b) 1/3 of your savings cash flow should be placed in employers QP but NO MORE that necessary to reach the full match, then no more until there is more cash flow that you know what to do with it ...
c) 1/3 of funds to go into permanent coverage ... you pick the carrier, does not really matter, as long as you plan to fund policies for a minimum of 22 years, that your combined term and perm coverage is equal to 15-20 times your gross earnings and you use/do item f) below ...
d) build up to and between 6 mo and 12 months of liquid bank-...(Read more of this comment)

Posted 12:48 PM EST October 28, 2008

Posted by: lgmoore

Looking for a little advice here. An agent from Northwest Mutual is trying to sell my husband and I on a whole life insurance policy. We are in our late 20's and early 30's. We went to Northwest for investment options. We have both maxed out our employer 401K's and our AGI does not allow us to contribute to an ROTH IRA. We have a term life insurance policy through another company that we purchased a few years ago. After reading this article and postings, it does not seem that a whole life insurance policy is the best investment vehicle for us. Any suggestions?

Posted 9:36 AM EST October 15, 2008

Posted by: A0110915r

'All too often the idea of buy term and invest the difference becomes buy term and spend ( or lose ) the difference. And then there is nothing to show for the term premiums.'

In other words, whole life is for those who cannot manage their money in a disciplined manner?
That seems to be the prevailing opinion of those who aren't selling whole life.

But there's another factor - if you have dependents you may need a LOT of insurance when you are young, and few can afford the amount they need if they buy whole life. With term, they can buy 5 times as much coverage (or more) for the same premium - at a time when they cannot afford much.

Posted 9:30 AM EST October 15, 2008

Posted by: A0110915r

'My problem with choosing term over whole life is this: I'm a 26 year old male. Say I get a 30 year policy with a locked in rate. Then I'm 56, and I decide to renew the policy.'
A lot depends on whether you have dependents. In most cases, you need a lot more insurance during those first 30 years than you do later because you probably have a family that depends on you and needs a lot of $ if you die prematurely.
'The problem is that I then have to pay the rate of a 56 year old man for 30 more years, which will be considerably more per month.'
You should have a base 'whole life' policy or good investments to cover your 'post 56' period, supplemented by a large term policy for the first 30.
'Doesn't it make more sense for me to pay a bit more for ownership of the policy instead of 'renting' it and getting hurt by it further down the road?'
If only it were that way! But it is MUCH more expensive to buy whole life than term, especially in your 20's.
Get quotes on tw...(Read more of this comment)

Posted 9:21 AM EST October 15, 2008

Posted by: A0110915r

Response to bryanmartin

'... Any ideas on what the best investment opportunities are for someone whose only experience is his Bank Of America 'Keep The Change' account? I need something that I can add to whenever I want too though.'

I suggest opening an IRA account at Vanguard or Fidelity and investing in a broad market, no load, low expense index fund such as the Wilshire 5000 or S&P 500. You might consider their lifestyle funds as well. If your income doesn't prohibit, do as much as you can within a Roth IRA. Ginnie Mae's are also a good bet (Vanguard Ginnie Mae fund, for example) if you want something conservative and safe with a decent return. You can have a companion, non-IRA account if you might exceed IRA contribution limits. In that case search for something where you only pay capital gains tax.
Note: Ginnie Mae (government guaranteed), not Fannie Mae or Freddie Mac!!! [Vanguard has slightly lower fees; Fidelity has a few brick and mortar offices, which...(Read more of this comment)

Posted 10:46 PM EST October 14, 2008

Posted by: pumbaleap

To Bryan M ...

There are 2 components you njeed to take care of ...
a) replacement of potential income over the next 30 - 40 years ... an 'EASY' way to do that at your age, IF you have a family is 20 times income ... without a family, about 10 to 15 times income ... to preserve insurability if as when you get married ...

b) then there is a component of permanent coverage that will be useful thruout your lifetime, providing YOU more benefits, income, risk aversion, flexibility and a HUGE LIVING Rate of Return ... more for YOU than anyone else will ever receive from the face amount ...

Here is how to start your process of covering BOTH a) and B) above ...
START with saving or building to save 15% of your income ... no more than a maximum of 3 to 5% of it to a qualified plan until you build cash reserves of equal to 6 to 9 months of income ...
then adjust that percentage according to match limits but no more for now ...
2nd - 1/3 of your savings ...(Read more of this comment)

Posted 9:19 PM EST October 14, 2008

Posted by: bryanmartin

Never mind. I think I get what's being said here. I was an agent several years ago, so I had it crammed down my throat every day that whole life is the greatest thing ever. But from a non-insurance standpoint, or an overall investment standpoint if you will, it does make more sense to save the difference and invest it month to month... Any ideas on what the best investment opportunities are for someone whose only experience is his Bank Of America 'Keep The Change' account? I need something that I can add to whenever I want too though.

Posted 9:12 PM EST October 14, 2008

Posted by: bryanmartin

My problem with choosing term over whole life is this: I'm a 26 year old male. Say I get a 30 year policy with a locked in rate. Then I'm 56, and I decide to renew the policy. The problem is that I then have to pay the rate of a 56 year old man for 30 more years, which will be considerably more per month. Say I live to be 86 (I do come from a healthy family). Then I'm uninsurable unless I turn around and completely overpay for a whole life policy for an 87 year old that I could have gotten for a decent price back when I was 26. Doesn't it make more sense for me to pay a bit more for ownership of the policy instead of 'renting' it and getting hurt by it further down the road? I understand that I could invest the difference, but even then it probably won't add up to the same amount of savings as what my life insurance coverage would come to.

Posted 11:18 PM EST October 11, 2008

Posted by: bel886

To bbick101: All too often the idea of buy term and invest the difference becomes buy term and spend ( or lose ) the difference. And then there is nothing to show for the term premiums.

Posted 3:16 PM EST October 08, 2008

Posted by: bbick001

NYL_F A
Guardian has a similar policy. Don't think I'm putting down NYL. I'm not. My thinking is right in line with theirs. But there are other good mutual companies that plan the same as you guys. Mass Mutual is good too, but a policy converted at 80 is almost as worthless as a term policy premium at 80. It's still ridiculously unaffordable. But at least it gives the insured an option and the company many years to show him/her what a great WL product with a great mutual company can do for them.
Anybody seen the market...I sure am glad I bought term and invested the difference!!!! WOOHOO!!!

Posted 2:58 PM EST October 07, 2008

Posted by: TimberMichele

YEAH I AM SO LOST ON THIS STOCK STUFF I HAVE TO DO IT FOR A CLASS AND IT IS BULL CRAP =/

Posted 11:04 AM EST October 07, 2008

Posted by: svartusa99

'Therefore, since brevity is the soul of wit, And tediousness the limbs and outward flourishes, I will be brief' William Shakespeare
Life Insurance=Protection
Term Life Protects at a very low cost, unfortunately for salespeople, the commissions are anemic, but for the consumer, it's great! MassMutual now has 5 year convertible term to age 80!
svartusa@hotmail.com

Posted 7:00 PM EST October 06, 2008

Posted by: NYL_Financial_Advisor

Whispers / BBick with regards to,

'NYL_Financial_Advisor:
Great product and probably a great fit for his situation, but NYL is not the only company that offers that. Although, averageguy has already made the wise decision to look at NYL. You have to be honest with all clients if you want to have a long lasting career, and almost every company I know of can offer this.

This being said, I know a lot about these policies and they are great policies. You pick the face about and exactly how long you want to pay for and it'll tell you the premium. Of you pick any two variables, pick face value and premium and it'll figure out how long you have to pay for, or pick premium and time frame and solve for face amount. I is a very nice policy because you design exactly what you want and that's what you get.'

I apologize if I'm wrong and maybe our main guy who heads product development needs to be updated since all advisors and agents of NYL / Eagles Strategies / Naut...(Read more of this comment)

Posted 5:20 PM EST October 06, 2008

Posted by: A0110915r

Well written in the sense that I mostly agree with the content, but to me it has a lot of complex concepts, jargon and acronyms that only an insurance agent or financial planner can understand. I doubt that my relatives who lack financial background would 'get' the message. That's one of my biggest gripes about this whole arena - the concepts are beyond the grasp of many and, worse, it is easy for biased, unethical, or ill informed individuals to give suboptimal (or even very bad) advice and hard for the layman to know whom to trust.

I very much agree with the point that life insurance needs are greatest when one is young, they decline with age (the formula given is a good rule of thumb, but you need to consider individual circumstances) and they level off when one is at retirement - precisely what the very original writer in this thread was trying to say and what several of us have been saying since.

If we can all agree that a certain amount of declining term (possi...(Read more of this comment)bly in addition to whole life) is needed in younger years when one typically has little money to spend on life insurance, but high insurability and potentially significant needs, then the fundamental debate seems to be whether one should have whole life insurance to cover one's needs at and after retirement (in any significant quantity) or whether one should, instead, spend the money on investments and have enough invested by retirement to not need it any more life insurance. This depends on many individual factors, such as risk aversion, tax issues, whether one wants to leave a lot of money to one's heirs, and so forth. And it is hard to get unbiased advice on these matters.

When I was in my mid-20's (in the late 1960's) and just getting married I approached three investment 'advisors' and three life insurance agents on this subject, giving them identical facts. You can guess the outcome - the life insurance agents all recommended large amounts of whole life (what I needed was well beyond what I could afford), and the investment advisors all recommended term plus investments (on which investments they would make substantial commissions - even the insurance agents admitted they make little commission on term). Each had hypothetical data that showed their approach to be superior. I also believe that each had been 'taught' to believe what they were saying by their employers - I don't think any of these people were unethical and all sincerely believed in their recommendations. I then consulted neutral advisory sources who were not trying to sell me anything and ended up with something in between - a basic, no-commission whole life policy from TIAA/CREF (for 4x my then annual salary); a lot (about 40x my then annual salary) of guaranteed renewable term to cover my high needs while young (this was very competitively priced and I spread it among three companies, just to be safe); and invested the rest (dollar cost averageing) in no-load, balanced investments from TIAA/CREF, Vanguard and Fidelity. I increased my investments every time my salary increased and I decreased the term amount every five years until I dropped it completely at age 60. This has worked out well for me, even including the current state of the stock market. The investments are worth far more than the life insurance projections from way back then and the term served me well when I needed it and I still have the whole life policy - as a cushion for death-related expenses. [Funny - that whole life policy looked pretty large when I was 25 but inflation has done its thing.] But I was a math major, had access to computers even back in the 1960's, and knew how to do a detailed financial analysis.

Some of the best advice I've seen in this thread is to use reputable firms and consider individual circumstances. But I also suggest finding multiple opinions on both sides of the fence, so to speak, and seeking out neutral ones - not to mention sticking with no-load investments. And for heaven's sake, do research. Read Consumer Reports. Watch Suze Orman and listen to Bob Brinker on the radio on the weekend. Read John Bogle on investing. (Show less of this comment)

Posted 4:26 PM EST October 06, 2008

Posted by: pumbaleap

Why Thank You, FP2008
(see I can be breif, lol)
Pum

Posted 4:22 PM EST October 06, 2008

Posted by: FinancialPlanner2008

Well written. Couldn't agree more.

Posted 4:03 PM EST October 06, 2008

Posted by: pumbaleap

svartusa99, et al ...sorry, started out as a short answer and fingers typed to much ... don't confuse technique and strategic necessity with required optimums ... two distinct and unrelated planning parts ... (following NOT spell checked) ...

Insurance is not ALL one or None ... its purchase, use and application is one of strategy not either or ... with the Face amount as key above all else ... The external RoR on the face in a macro sense (ie, NO cash values) is in excess of 10% to the insured first under any market conditions, even todays, let alone a mega return to family if post retirement strategies were built in balance and statistical mortality follows ...
There is and should be a disconnect between the type and amount of coverage, they are two different animals ... and PAST DECISIONS that accumulated assets should NOT be considered, ie, just because you have a $50k CD does NOT reduce the amount of coverage you should have to be optimized ...

Remember the ...(Read more of this comment)purpose of insurance:
Pre-retirement:
Replace NPV of future earned income (NOTE: EARNED, not earned and interest/dividend income): rule of thumnb, quick and dirty calc of amount = <35=15 to 20 times income; < 40=15 times income; <45=12-15 time income; <50=10-12 times income; <55=10times income; <retirement = 1 x estate to 10 times income ... AND the ideal 1 x Estate values would ideally be split 50-50 between spouses of significant others ... optimizing balance and use of accumulated resources at the highest levels ...

POST retirement on a linear scale:
Replace Value of assets enjoyed, gifted, redirected during retirement, thus creating a level, or zero-net Estate settlement values while increasing income, tax savings, inflation offset and eliminating much if not all exposure to market risk ... the latter creating a more enjoyable retirement all in itself.

Those things being said, the 2nd part of the equation is again math driven how much determines what kind ... ie, if one is saving 15% of their income to create a fail safe plan under any circumstances, and it is done at an early age, without a large debt load AND after emergency funds of 3 months gross income accumulated, then essentially the 15% is split into 1/3rds ... 1/3 to protection, 1/3 to savings (including 401k, etc by rule), and 1/3 to growth, long term, after tax.
Whatever the 1/3 to protection buys is it ... so usually a mix of term and perm is necessary.
AS the after tax savings and growth amounts build, a simple Gi-Gi strategy is adopted to convert any term, in balance, to perm over time .. (a Gi - Gi is guaranteed interest to Guaranteed interest, ie, sweep 3-4% (5 tops) of after tax earnings to a PLI ins product and you are moving from the left pocket 4% pile to the right pocket 4% pile, picking up tax savings, ins coverage, DI coverage, liability coverage, cash reserves, opportunity values, medical coverage without any net loss of growth on the original investment, while establishing the net post retirement optimization along the way ...
NOT an all or none strategy, but a systematic strategy ... one that would eat this current market up alive with its flexibility, OPM, and POM utility ...

OK, I'm am done, small minds rip away, larger ones draw it out on paper and model it for self verification ...
have a great day ...
Pum(Show less of this comment)

Posted 3:09 PM EST October 06, 2008

Posted by: svartusa99

With a powerhouse like AIG faltering, it makes the most sense, to buy term life for as long as possible with the option to convert. If someone cannot pay for the conversion when they are 65 or older, they can sell the existing coverage and most likely, yield a handsome profit (unlike any whole life investments tied to the stock market).

Posted 1:03 PM EST October 05, 2008

Posted by: bel886

At the end of the day, if you have the cash to pay the premiums, and if you hold the policy of more than 15 years, Whole Life is generally a better deal for the consumer. Cash values are usually substantial by that time, and the IRR is respectable. Also, why buy term when you may need the insurance protection just as your term period expires? Further, a responsible mutual company (NYL, Guardian, NWM, MM) will eagerly share investment and mortality experience with their Whole Life policyowners, and so old and Whole Life policyowners will enjoy the same type of pricing that new policyowners enjoy. This is in contrast to term, in which buyers do not share in experience.

Posted 8:43 AM EST October 05, 2008

Posted by: whispers76

NYL_Financial_Advisor:
Great product and probably a great fit for his situation, but NYL is not the only company that offers that. Although, averageguy has already made the wise decision to look at NYL. You have to be honest with all clients if you want to have a long lasting career, and almost every company I know of can offer this.

This being said, I know a lot about these policies and they are great policies. You pick the face about and exactly how long you want to pay for and it'll tell you the premium. Of you pick any two variables, pick face value and premium and it'll figure out how long you have to pay for, or pick premium and time frame and solve for face amount. I is a very nice policy because you design exactly what you want and that's what you get.

Posted 12:14 AM EST October 05, 2008

Posted by: bbick001

NYL_FinancialAdvisor,
You said 'We are the only company in the industry that has this product and it's a patented product of NYL.' I agree with everything you said except that NYL is the only company with a product like this. Almost all insurance companies offer this. Mass Mutual, Guardian, etc., as long as it's a mutual company...that's what mattters.

Posted 9:18 PM EST October 04, 2008

Posted by: NYL_Financial_Advisor

portexusa = aka FIDasstmgtgroup

Posted 9:05 PM EST October 04, 2008

Posted by: NYL_Financial_Advisor

Averageguy:
Quote, 'After reading both of your comments, I completely agree with this statement '20 pay whole life policy. The premiums are a little higher, but you only pay them for 20 years and then the policy is paid up for the rest of your life. When you are 58, presumably before retirement, you will be done paying premiums.'

Averageguy,
If you want true flexibility in deciding when you would like your whole life policy to be paid up GUARANTEED, I would seriously consider looking at New York Life's Custom Whole Life policy. You decide at exactly what age you want the policy paid up at, GUARANTEED as long as you do not lapse the policy, whether it is 10 years from now, 15 years from now, 20 years, etc.....you decide the exact year you want the policy paid up. We are the only company in the industry that has this product and it's a patented product of NYL.

By having more flexibility on how you want to spread premium deposits over certain amount of ...(Read more of this comment)

Posted 9:45 PM EST October 02, 2008

Posted by: bbick001

JD,
Make sure the whole life policy you purchase has the waiver of premium rider attached.

Posted 4:44 PM EST October 02, 2008

Posted by: A0110915r

'I seem to be surrounded by people peddling Equity Indexed Annuities with 15 year surrender periods and verbally promising rediculously high interest rates. I wrongfully assumed this is what you meant. If you are referring to ETFs such as QQQQ, DIA, and SPY then I will apoligize and agree they are good long term investments.'
Yes, those are examples of what I mean by index funds. I certainly do NOT endorse 'indexed annuities', 'variable annuities', or any such.

Posted 4:36 PM EST October 02, 2008

Posted by: whispers76

A0110915r,
I will apologize sir/ma'am. I seem to be surrounded by people peddling Equity Indexed Annuities with 15 year surrender periods and verbally promising rediculously high interest rates. I wrongfully assumed this is what you meant. If you are referring to ETFs such as QQQQ, DIA, and SPY then I will apoligize and agree they are good long term investments.

Posted 4:18 PM EST October 02, 2008

Posted by: pumbaleap

two things ...
percentages or numbers of Banks with problems v their counter part numbers of insurer's with problems ...

but the major this is who said it: Harry Reid ... I can't type my opinion of him as his ilk got us into this mess in the first place ...

Posted 4:13 PM EST October 02, 2008

Posted by: A0110915r

'Back to the subject of diversification. Index funds and broad mutual funds are not diversified in the least, they are all stock investments. Mutual funds in general are a bad investment.'
They are a fine investment when included in a balanced portfolio of investments and when invested for the long term. There are plenty of data to back this up. Over the long term, stocks beat other investments hands down and diversified mutual funds (such as total market index funds) beat over 75% of the focused or stock funds or individual stocks. The analogy to medicine is not at all appropriate. All you have to do is look at the 20 or 30 or 40 year history of the S&P 500 or the Wilshire 5000. Even now, those indexes are much higher than they were 20 years ago. But I've given up trying to convince anyone here - there's been too much life insurance company brainwashing. After all, the life insurance companies want to take your money, invest it, give you part of the return, and keep the rest for t...(Read more of this comment)

Posted 3:44 PM EST October 02, 2008

Posted by: whispers76

This is exactly why I only recommended stable companies who are also mutual companies and not publicly traded. They do what makes the most sense long term and don't have to worry about stock holders and public scrutiny. Companies like New York Life and Western-Southern will be around for a long time. They are very well diversified, which by the way does not mean owning stocks in several companies, it means different types of investments not just stocks.

On the AIG subject, it was AIG's holdings company that had problems and had to be bailed out. Their life insurance company was uneffected and actually growing. I do wonder how many AIG policy holders have changed companies or are thinking about doing so. That could hurt them and put them into financial problems.

Back to the subject of diversification. Index funds and broud mutual funds are not diversified in the least, they are all stock investments. Mutual funds in general are a bad investment. If you like this conc...(Read more of this comment)

Posted 3:21 PM EST October 02, 2008

Posted by: A0110915r

Much as been written here about how insurance companies are stable and reliable compared with other financial institutions, such as banks, and that insurance policies are safer than conventional investments. Notwithstanding the AIG bailout, writers have emphasized this safety issue. Thus I thought the following news article was interesting (just appeared):

==========================================================================
'NEW YORK (CNNMoney.com) -- Several big life insurance stocks fell sharply Thursday, dragged down by jitters about their role in the credit crisis and fears sparked by a comment from Senate Majority Leader Harry Reid, D-Nev., Wednesday about a potential bankruptcy in the industry.

'We don't have a lot of leeway on time. One of the individuals in the caucus today talked about a major insurance company. A major insurance company -- one with a name that everyone knows that's on the verge of going bankrupt. That's what this is all about,' Rei...(Read more of this comment)

Posted 1:30 PM EST October 02, 2008

Posted by: pumbaleap

To Average Guy:

There is an optimum 'input' to each individual decision set ... ie, think of a rocket ... you use so much fuel getting it into space ... BUT if you ignite the same amount of fuel too fast, you do not get the desired result and in fact may get a negative one ...

planning is not nor should not be done one issue at a time but as a team context and taking into account asset reserves liquid and emergency first, then rule based retirement funding and term conversion and finally leading to an internal allocation model where NEW earned income input is discretionairy ... this is done methodically, systematically, and slowly ... just as term and invest is a losing strategy under most circumstances, so would overfunding an insurance or retirement product while ignoring balance ... like driving with safe auto limits when you have $200k in your checking account ... needs to be decision built in a fail safe, redundant mannet custome designed for your situation on a...(Read more of this comment)

Posted 1:18 PM EST October 02, 2008

Posted by: pumbaleap

TO Wispers76 ...

please note that JD is not an aka for myself ... I have no clue whom he is ...

also note:
within proper fiscal parameters, a process/program could be designed for JD in all likely hood that he could save his money and within a 10 year period establish a pure asset allocation decision model process where the funding of the pli would not be dependent on earned income and his usable resources and actual retirement income would be 10-30% greater ...

To JD:

Good luck, God Bless.
Pum

Posted 12:07 PM EST October 02, 2008

Posted by: jacobtho

There is a space before the ? and befer the - that need to be taken out to get to the right article.

Posted 11:59 AM EST October 02, 2008

Posted by: jacobtho

Article

http://ezinearticles.com/ ?Creating-Wealth-Through-Infinite-Banking, -Or-Becoming-Your-Own-Banker&id=1421556

I created spacing so it would show.

Posted 11:56 AM EST October 02, 2008

Posted by: jacobtho

Average guy,

I just have one suggestion. Keep with whole life, but do it a little different. The idea of paying it over a 20 year period is great, but if its good to accelerate it a little bit you should accelerate it a lot. When you speak with someone have them draw up a policy with the same premiums, but 'maximum accumulation' and see the difference. And for insurance purposes during your first 10-15 years you can always get a term rider.

Here is an article that explains these benefits.
http://ezinearticles.com/?How-to-Create-Wealth-With-No-Risk,-Growth,-Liquidity-and-Tax-Advantages&id=1358118

The second thing is this... Why are you deferring your taxes (401K), while simultaneously getting rid of all your tax deductions (Paying off home mortgage). Its kind of like applying the brakes and the gas at the same time, its ineffective. Keep your advantages until you can pay it off in one lump sum if that is your goal. I would suggest reading one of the greate...(Read more of this comment)

Posted 10:06 AM EST October 02, 2008

Posted by: averageguy

Again, I'd like to thank all of you for your invaluable input.

Very seldom do people offer their expertise for completely benevolent reasons and I both recognize and sincerely thank you.

My mother is retiring from a P&C company next year and she also suggested New York Life and Lincoln National (although see if not an expert on Life & Health).

New York Life and Lincoln National seem to keep being mentioned so I'll do some due diligence and contact them this afternoon.

If anyone ever needs some unbiased advice regarding tax law or corporate accounting please don't hesitate to ask me. I'll keep this thread in my favorites and continue to check on it.

Respectfully,
JD

Posted 9:43 AM EST October 02, 2008

Posted by: whispers76

AverageGuy,
First off, sorry for the identity confusion.

If your primary concern right now is the mortgage being paid off if something were to happen to you. I would definitely recommend meeting with an agent. I don't know the area you are in, so I can't recommend a particular agent. I work for Western-Southern because they are solid and will be around to pay claims on my policies and to pay my pension, so I have to recommend them. I am very familiar with Northwestern Mutual and they are a solid mutual company as well. New York Life also have a good reputation. Those are really the only three I would be comfortable recommending. The problem now lies with the agent. Those 3 companies can all provide you with a great, comprehensive, cost effective plan that will meet your needs, but you need an agent that knows what they are talking about and truly cares about helping you and not so much about his/her own pocketbook. If you happened to live in Northwest Ohio, Northeast Ind...(Read more of this comment)

Posted 9:26 AM EST October 02, 2008

Posted by: FinancialPlanner2008

I am a fee only planner and I typically refer people to a Northwestern Mutual rep. They have received the highest ratings from all four major rating agencies every year since the rating agencies have been rating insurance companies. Their dividend rate has been very strong historically (20 yr avg of about 9% although it is 7.5% currently) and the company's mutuality ensures that business decisions are made in the best interests of the policy holder and not Wall St. Other quality companies include New York Life, Mass Mutual, Lincoln and Berkshire Guardian.

Posted 9:01 AM EST October 02, 2008

Posted by: averageguy

Thank you A0110915r and whispers76 for your input. First, I really am not pumbaleap, his input on these boards just made sense to me when I read them.

Regarding life insurance, I think I've avoided purchasing it for so long for fear of buying the wrong type of policy.

After reading both of your comments, I completely agree with this statement '20 pay whole life policy. The premiums are a little higher, but you only pay them for 20 years and then the policy is paid up for the rest of your life. When you are 58, presumably before retirement, you will be done paying premiums.'

I don't mind paying a higher premium now if it means that the policy would pay for itself in my retirement.

In regards to A0110915r comments, I completely agree with his/her sentiments but I'm not certain they reflex my needs. My main concern is I would like to have my home paid off in full (remaining balance 165k), in the case of either of our untimely demise. My wife is a re...(Read more of this comment)

Posted 8:28 AM EST October 02, 2008

Posted by: A0110915r

Average guy wrote: 'I've a 38 year old father of three and would like to purchase life insurance for my wife and myself. ...
My preference is to stay away from term insurance. I don't like the fact that coverage stops when I'll must likely need it (55-80). I realize term is cheaper but I want the security of knowing that if I die my wife and children have a lump sum of money they can depend on.'

I will not try to deter you from whole life, but I beg you to consider your complete insurance needs. What happens if you die today? How will your wife and three children get through the next 20 years or so? If you 'run the numbers' you will probably figure out that the amount of money they would need for clothing, shelter, food, etc. (not to mention help with college expenses) over that long a period is very large - well over $1 million for many families, even assuming the spouse works. The amount needed for the children will drop over the years until, by the time the children are...(Read more of this comment)

Posted 7:28 AM EST October 02, 2008

Posted by: whispers76

JD (aka...pumbaleap)
Based solely on the information provided I would recommend WL through a older financially stable company. Let me explain what I mean, why, and a few companies. By the way, I am a 32 year old father is a similar situation, so here's what I would do personally.

I recommend WL to be the foundation of your coverage. Nothing against UL's or VUL's, but with today's economic climate and the importance of that protection to your family in case you or your wife were no longer in the picture, I believe a fixed guaranteed product is the best foundation. That being said, I would look at a 20 pay whole life policy. The premiums are a little higher, but you only pay them for 20 years and then the policy is paid up for the rest of your life. When you are 58, presumably before retirement, you will be done paying premiums, but still have the coverage when you need it. That is completely up to you obviously, I would just prefer to reduce any bill I can in retirement....(Read more of this comment)

Posted 12:59 AM EST October 02, 2008

Posted by: averageguy

pumbaleap,

I've read every comment posted here and your comments seem the most logical to me.

I would like to tap into your knowledge and ask the following:

I've a 38 year old father of three and would like to purchase life insurance for my wife and myself. We are just the average American family and make a little over 130k a year. We have no debt other than our mortgage which is very reasonable ($1,100 monthly). My wife and I are in perfect health.

My preference is to stay away from term insurance. I don't like the fact that coverage stops when I'll must likely need it (55-80). I realize term is cheaper but I want the security of knowing that if I die my wife and children have a lump sum of money they can depend on.

With that in mind, if it was your family, what type of insurance would you look into UL, WL VL and do you have a company preference. I'm an accountant so I normally breakdown numbers and sincerely dislike paying excessive comm...(Read more of this comment)

Posted 4:31 PM EST October 01, 2008

Posted by: NYL_Financial_Advisor

Good to see there's been some additional input here. Been busy. With all the uncertainty in the market, general public is being smarter with their money and looking to put assets with a firm with over 14 Billion in reserves, has the highest possible credit ratings across the board, and mutuality where our long term objectives do not cater to the short term greed of investors in stock-owned establishments. Having said that, let me get off the soap box......

Regarding BuyTerminv.. statement,
'Say what you will, WL, UL, VL ... when covered person dies, they get coverage, but what happens to the savings built up over the years? Who gets that?'

I can't speak for the rest of the industry, but New York Life offers permanent policies with payout options to our clients that include not only the death benefit, but also the cash value built up into the policy (less any withdrawals/loans from the policy) on top of that. Now what say you? Not all insurance companies are ...(Read more of this comment)

Posted 1:32 PM EST October 01, 2008

Posted by: dawson12

FinancialPlanner2008:
I see what you mean. Thanks for clarifying. It's good to see that there is someone else that gets how whole life works and the importance it can play in a person's overall financial plan.

Posted 7:37 PM EST September 30, 2008

Posted by: whispers76

Ok, I am reading the recent updates and there is something that I think we are missing. There are those on here trying to reason with unreasonable people. If people like BuyTerm are not reasonable and choose to ignore facts and logical reasoning, then leave them alone and let's stop wasting time. From his thinking and lack of education, I'm guessing he is a representative of Primerica or a similar 'company'.

Posted 4:44 PM EST September 30, 2008

Posted by: FinancialPlanner2008

Dawson:
I get that the beneficiary only receives the death benefit. My point, which was poorly communicated is that if the original death benefit is $100,000 when the policy is purchased and that death benefit grows to $400,000 at the time of death (because the dividends have purchased additional insurance) and the cash value happens to be $325,000 at the time of death, CONCEPTUALLY the beneficiary receives the original death benefit ($100,000) + the cash value ($325,000) - the cost of the insurance over the life of the policy ($25,000) = $400,000.

Posted 4:04 PM EST September 30, 2008

Posted by: dawson12

BuyTerm:
There are major differences between UL and Whole Life insurance contracts. You can't lump them together as they are not the same type of contract. A Whole Life policy is GUARANTEED never to lapse as long as the premium is paid. That premium is GUARANTEED never to increase. Using the dividend to pay the premium will NOT cause the policy to self destruct or eat away the cash value. In fact, a good Whole Life policy will eventually have a dividend that pays the premium and have an excess that will continually grow the death benefit and cash value.

This is not the same for a UL policy. They can self destruct, the premium can increase if the policy was not correctly written in the first place, and using the cash value to pay the premium can and usually will result in the policy lapsing or at least cause the owner to continue to pay premiums.

FinancialPlanner2008:
A whole life insurance policy will NOT pay the beneficiary the death benefit plus the cash val...(Read more of this comment)

Posted 4:07 PM EST September 29, 2008

Posted by: FinancialPlanner2008

A good permanent insurance plan will have a death benefit that increases annually as the cash value increases. With these types of plans, the beneficiary gets the original death benefit + the policy's cash value.

Posted 3:55 PM EST September 29, 2008

Posted by: BuyTermInvestDiff

pumbaleap

Face value, cash value, etc .... not paying the premiums after 20 years, enjoying the dividends .... lets face a few things here: dividends = overpayment to insurance company and refund to policyholder; those cash value permanent life policies may not be asking client to pay premium after 20 years, but where do you think money is coming from to fund them? That's right, the cash value side. That's why many self destruct later on because they've been eroding that 'savings' that was there for retirement. Say what you will, WL, UL, VL ... when covered person dies, they get coverage, but what happens to the savings built up over the years? Who gets that?

Posted 3:27 PM EST September 29, 2008

Posted by: FinancialPlanner2008

Make no mistake, there are plenty of commission hungry insurance agents and 'financial planners' out there that sell sub-par whole life insurance and under funded universal life insurance as a part of a long term savings plan. In addition, there are hundreds of insurance companies that offer permanent insurance AND NOT ALL CONTRACTS ARE CREATED EQUALLY! As a result, negative blanket statements are made about this type of insurance and many people that would benefit greatly from a QUALITY permanent insurance plan miss out on the opportunity to add this crucial component to their overall plan.

A QUALITY whole life policy issued by a QUALITY insurance company can serve a very valuable role in an individual's financial plan. RISK ADJUSTED, a quality whole life plan can not and should not be compared to any other investment vehicle. How can you compare a whole life plan that has the standard deviation less than a T-bill and a historical rate of return higher than a corporate bo...(Read more of this comment)

Posted 2:46 PM EST September 29, 2008

Posted by: pumbaleap

Dear Buyterm ...
To paraphrase Ronald Reagen, 'There you go again, being linear v macro'

I never ONCE mentioned cash values ... it is the FACE amount that is important in the later years. Term will be dropped sometime betwee 55-85 ... a permanent policy, especially WL, continues to increase in face amount even after premiums have stopped being paid say after 20 years ... you are the only person who said take out the cash values ... maybe, maybe use the deividends after age 75 or 80 ... maybe but there are much better things to do ... and in a PLI plan it IS THE CLIENT who spends the savings while living between 55 and 85 ... v hanging onto a pile of money, never spending the principal, trying to hang on, and then dying ...
Permanent Insurance = LIVING benefits; Term only works if you die early while you kept it in force ... the termite will NEVER be able to have BOTH - more income & level estate OR more income & a greater estate - unless they die early, period .......(Read more of this comment)

Posted 12:07 PM EST September 29, 2008

Posted by: BuyTermInvestDiff

Why don't any of you permanate coverage guys ever mention to the discussion group the other side of the coverage and how all of this savings has a lot of strings attached?!?!?!

For those who have this type of coverage and aren't producer licensed, I think you should carefully read your policy contract. There may well be a lot of stuff your friendly agent didn't highlight.

Posted 12:06 PM EST September 29, 2008

Posted by: BuyTermInvestDiff

pumbaleap

Great number-crunching and illustration on how permanent insurance can lead to 'retirement' savings down the road, but one thing missing here. Say the policyholder dies -- and they will eventually -- who gets that 'savings'?

Okay, that point made, remmeber, policyholder has all of this money built up in cash values, they start dipping into it. What happens to death benefit if that policyholder does not pay back that cash they took out of their savings. Many of the WL policies I replace have about an 8 percent interest 'charged' on withdrawls.

Bottom lime, client never wins with permanate coverage. They either get death benefit or the cash. If they have dipped into the cash, insurance company takes from death benefit to pay back the cash value taken out. That's a great deal, huh?

Why don't any of you permanate coverage guys ever mention to the discussion group the other side of the coverage and how all of this savings has a lot of strings at...(Read more of this comment)

Posted 11:59 AM EST September 29, 2008

Posted by: BuyTermInvestDiff

whispers76

You again are a bit wrong here ... you actually do need your securities license to do IRAs. Technically, you shouldn't be discussing any securities-related product in any detail without a license and you certainly cannot give someone a perspectus without proper licenses in place.

Posted 11:05 AM EST September 29, 2008

Posted by: pumbaleap

To all & wispers76:
As a shaking the head observer and very occassional commentator it was refreshing to 'see' wispers76 reply ... term is just that, good for the short term ... permanent coverage is there when death occurs, always, period. As such, it is one of the most important parts of a retirement plan, with the highest effective, global RoR. Since that eventuality is guaranteed, it creates opportunities to live a solid retirement, offsetting inflation and investment risk ... because I can use, int and prin, all of my accumultated retirement resources on an assured zero net estate basis. It is NOT just about piles of money, but the use and utility of that money for you, in retirement, while living. As a retirement enabler, the face amount alone generates an across the board RoR in excess of 10% net after tax. The Kool-aid termites will start typing after that sentence but it is unequivocably true ...Looking at it 3 ways we get - on a potential income and required incom...(Read more of this comment)

Posted 11:30 PM EST September 28, 2008

Posted by: whispers76

so true, so many opinions. Almost every opinion on here shares the same flaw. They are all assuming that one plan is best for everyone. The truth is life insurance has one purpose, a death benefit when the insured passes. If you are trying to cover a short term debt (i.e... mortgage, college loans,....) then term is perfect, In this case I actually prefer the slightly more expensive Return of Premium Term, because you get back every penny at the end of the term. The only real cost of insurance is the growth you could have made off that money if you had invested it.

There seems to be a huge misconception that whole life insurance is not needed if you have enough money and assets, this is a very uneducated view of this subject, but no one here cares about the facts. And again, it is not the right choice for everyone in every situation, nothing is.

Posted 5:07 PM EST September 28, 2008

Posted by: dmelling

bbick01,
I was being facetious. I wouldn't sell permanent insurance to the average Joe if my life depended on it. It's a shell game where the policy holder gets shafted 99 times out of 100.

Posted 2:00 AM EST September 28, 2008

Posted by: jacobtho

bbick001,

Everyone is just too caught up in what they think to be true...They will never understand and will continue to be affected by market conditions and painful losses until then. I'm sick of hearing about mutual funds, term and invest the difference, all of the above. Real wealth is not about risk. No retirement should ever be risked. True wealth is understanding money and making it work for you, then when you are sustained and comfortable, you can venture out and take on risk if that is what you would like, based off the fact that you think you can get good returns. But for the average american, you shouldn't be risking a penny to be able to retire. You should be using a whole life insurance policy as a banking solution (borrowing for your purchases- cars, boats, dental, anything), retirement solution, insurance solution, and a solution to safety, control, and liquidity. This is the base you need.

Posted 8:55 PM EST September 27, 2008

Posted by: whispers76

It seems to me there are a lot of people offering advise on here that don't know they are talking about. For the record I hold a life and health license, a series 6,series 63, and series 26. The only advice I am offering right now after reading some of the more recent posts, is to make absolutely no decisions based on information contained in this discussion. I do want to clarify a few things.

Commissions - Any life insurance or investment you decide on pays commission to someone for selling it. I can't speak for everyone but I earn more on mutual funds than any other product.

Roth IRAs - Contributions are after tax dollars. The principal and growth can be taken out tax-free after age 59-1/2 and assuming the account has been open 5 years. You do not need a securities license to sell or discuss IRAs, a L&H license allows you to sell fixed IRAs.

Life Insurance - Term is great for the use it is intended for, which is short term protection. WL is great for long...(Read more of this comment)

Posted 6:17 PM EST September 27, 2008

Posted by: BuyTermInvestDiff

(continued)

Another reason I am glad I have one (license), love to do 1035 exchanges from those WL, UL, VL policies I replace with term. You are not doing a client any justice if you are just putting coverage in place. You need to make sure they are diversified in their investments, on top of their taxation strategies and 'paying themselves' each month. ROTH IRAs are a vital piece of the financial gameplan for those who qualify to contribute to them and need to be maximized, especially based on the basis of avoiding taxes if they follow the rules!!!

Posted 6:14 PM EST September 27, 2008

Posted by: BuyTermInvestDiff

bbick001:

I think you are a bit confused about ROTH IRAs. First of all, I hope you have your FINRA licenses if you are talking about any securities-related products. ROTH IRAs can only be taxed if any of the growth is taken out prior to the age of 59.5 and if the account hasn't been opened for at least five (5) years. Anything taken out growthwise after the owner has reached 59.5 and has had the account opened for (5) five years is TAX FREE. Anything put into a ROTH can be taken out without penalty since tax has already been paid on it. All money going into a Roth is after-tax, BUT the key here is that there ARE NO TAXES on any of the growth if the owner takes it out after age 59.5 and the account has been opened for five years. bbick001 you should know this. That's ROTH basics, but again, many people working in the life insurance arena do not have any securities licenses. Another reason I am glad I have one, love to do 1035 exchanges from those WL, UL, VL policies I replace w...(Read more of this comment)

Posted 12:16 AM EST September 27, 2008

Posted by: bbick001

Dmelling,
It's not just buying the WL that makes it a great product. It's the future doors that it opens. It's the permission slip that it creates. You are probably a great salesperson of WL. But a real advocate or fiduciary would not speak the way you do about insurance paying your high salary and buying your expensive lifestyle. You are a salesman, not an advisor. You are the problem. You sell a product. You don't offer solutions.
A0110915r,
Did you realize that the growth in that ROTH is taxable. It's only the monies that you put in that aren't and that's because you have already paid taxes on that money. Also, how are those returns in your index funds doing this year? You can discuss how the market has performed in the past, but it is definately not a gaurantee for the future. This Wall St problem we have now is far from over and telling people to put money in a vehicle that is highly unstable is very irresponsible.
Jake,
Some people just don't g...(Read more of this comment)

Posted 2:26 PM EST September 26, 2008

Posted by: dmelling

Are you kidding me. Permanent (whole, universal, EIUL, etc) life insurance has provided for my family in a plethera of ways. It will fully fund my retirement, has put all 3 kids thru college, and allowed my wife and I to travel the globe extensively. The piece of mind I get because of cash value life insurance is amazing. It's the best stuff ever..........by the way....did I mention I sell it; I don't buy it.

(one of my earlier posts. I understand the advantages of whole life!!)

Posted 12:50 PM EST September 26, 2008

Posted by: jacobtho

You see, its people like you who bother most of us. The only argument you have is that what we claim about it doesn't work. You know that if it is as described, its better than anything out there, but all you can say is that its a scam, because you don't think that it really has the advantages it does. You say its a scam because its 'too good to be true.' Just because its really good, doesn't mean its not true. That's why you will never get it, because you don't take the time to learn about it and realize that it really does work, you just assume it doesn't because that's how you see everyone else do it.

Well then maybe you can explain to me why banks have 25-40% of their reserves in WHOLE LIFE INSURANCE!! You see, those who understand money will use it the right way.

2 quick examples:
Bank of America: 13,883,173,000 Cash Value Life Insurance
Wachovia Bank: 12,874,000,000 Cash Value Life Insurance

They must know something you don't...

Posted 12:36 PM EST September 26, 2008

Posted by: A0110915r

'Those who truly understand wealth and insurance buy whole life the RIGHT way.'
There are definite advantages for the very rich, primarily tax related, as indicated in the original article. But I've never heard of a scheme that works for most of the rest of us. (Although I've heard plenty of scams that purport to work for the rest of us.)

'2)I have a tax advantaged system in which all the money I ever place in there will never see taxes again.'
Aha. I knew there was a scheme in here somewhere.

I've sent the details of your system to some financial experts on whom I rely. I'll let you know what they have to say about it. I'm not saying it won't work for us 'normal folks' but from what I can see, putting my money in an index fund within a Roth IRA gives me plenty of tax advantages without the burden (and lower returns) of an insurance policy.

Posted 11:39 AM EST September 26, 2008

Posted by: jacobtho

I don't even know how to express my feelings, but most of you DO NOT understand wealth, and DO NOT understand whole life insurance.

Someone on here wrote something along these lines as I've been following this for some time, that those who know nothing about insurance buy whole life, those who understand a little bit about insurance buy term and invest the difference, and those who truly understand wealth and insurance buy whole life the RIGHT way. I don't care who you are, there is probably 1% of the population that shouldn't buy whole life. The rest should.

Why?
Because its the best place for wealth to reside. Why do you not tell your clients to take money out of savings? Why not keep it all under the bed? Because you want it to grow a little while you are not using it. The only difference is this...

1)Insurance is 1,000 times safer than any bank in the world has ever been, please read 'Pirates of Manhattan' and you'll understand.
2)I have a tax ad...(Read more of this comment)vantaged system in which all the money I ever place in there will never see taxes again.
3)I will always receive growth on my money even if I use it for a different purpose, such as buying a car, down payment, and another investment (See number 4), so I basically will be leveraging my money and getting an additional return even when my money is being used elsewhere.
4)INVESTMENTS- when I borrow from my policy I will get to make the same investments you all claim will get 12% or more (Not likely in today's economy, or you'll probably have lost it by the end of the day), and I will get to write off the interest I pay MYSELF, which means my investment did better than anyone else who invested directly, and I get the additional return of my policy on the same money I had borrowed and used elsewhere(between 4 and 6 percent usually)

This is about wealth creation, and creating a solid base that will enhance everything you do, the best place for wealth to reside.

Oh ya...almost forgot...
5)I have a death benefit on the side that is always growing, that I get no matter what, that costs me nothing, that will be delivered to my kids TAX FREE that they will put into new policies, that will grow exponentially in generations to come.

The only 'downfall' that someone could argue is that it takes you 5 years to build this banking system, meaning if you put in 10,000 a year for 5 years you would have to wait 5 years to have 50,000 in cash value. So in essence no return on your money for 5 years, just break even. But this is no argument. You put money away into retirement plans you can't touch til you retire. This is better than any retirement account, and you get access to it now. Plus, if all it takes me is 5 years of no growth to get a guaranteed death benefit that cost me essentially nothing, its worth it to me.

If you think you have an argument call me and I will teach you how this works, then maybe you can write something intelligent on here.

Jake
www.BecomingYourOwnBank.com(Show less of this comment)

Posted 9:49 AM EST September 26, 2008

Posted by: A0110915r

'A Variable Universal Life policy number one is not an investment product. If you have grown the cash value in the policy to twice the premiums paid in 15 years that great. The difference between this policy and the mutual fund spoken of is not the commission, it is called a life insurance premium?'
What I wrote was that if you bought TERM (as recommended by the original author of this comment sequence) and invested the DIFFERENCE you would have three times the amount paid. So the difference is, indeed, largely the commission. Variable Life is a bad bet - it's a term policy combined with a mutual fund with exceptionally high fees - which pay the commission and the life insurance company's profit.

Posted 9:42 AM EST September 26, 2008

Posted by: A0110915r

'The flip side of the situation is what does the 60 year old do now that he is loosing [losing] his term policy he purchased 20 years ago?? He still needs the coverage to cover current debt and burial expenses, and now he has a heart condition and can not buy new coverage.?'
You've described a financially irresponsible 60 year old. If he had INVESTED even a small part of the difference between his term and whole life policies, he would have plenty of money for the above. See nurseboy's first August 6 response for a specific example.
'How can you say few will. 'If you are 60 or older you should no longer need life insurance of any kind.' You should no longer need it? That's exactly when people do need it! Hmmm????? '...if you haven't saved/invested enough for retirement and your spouse by then you have been foolish.' So if the market doesn't perform in this gauranteed plan the people are foolish hmmm???'
There is no 20 year period in history where the market has not beat oth...(Read more of this comment)

Posted 7:37 AM EST September 26, 2008

Posted by: whispers76

Through the discussion on here, I think their is one very important thing to make sure of. If you are a consumer on here and you decide to meet with a planner, advisor, or insurance agent. You need to make sure the person you meet with is looking out for you individually and not using a cookie cutter plan that they use for everyone. If you would be interested I can provide you with a market watch article listing things to watch out for, or a video off 60 minutes showing some of the same things. Here's a few things to look at:

1. A good advisor that's truly watching out for you needs to know as much as possible about your current financial situation and your goals. If they aren't asking you to see your 1040 and other financial documents before they make recommendations, kick them out of your home immediately or run out of their office.

2. If they mention an equity indexed fund, you can get the details but it's usually best to run. I've had numerous clients t...(Read more of this comment)

Posted 10:44 PM EST September 25, 2008

Posted by: bbick001

A0110915
I really hope you are not in the financial planning business. This one plan fits all mentality is exactly the reason I am so busy. You stated the words that make this plan fail 100% of the time. 'Most term insurance carries a conversion to whole life option if you really needed it, although few will.' How can you say few will. 'If you are 60 or older you should no longer need life insurance of any kind.' You should no longer need it? That's exactly when people do need it! Hmmm????? '...if you haven't saved/invested enough for retirement and your spouse by then you have been foolish.' So if the market doesn't perform in this gauranteed plan the people are foolish hmmm??? And index funds...please! Those are the worst possible funds to use. You are either a Stock/mutual fund one sided broker or one of those people that thinks you can learn everything about financials in a day off the internet. Which is it?

Posted 1:00 PM EST September 25, 2008

Posted by: whispers76

Why do people comment on these subject with no knowledge and no thought? A Variable Universal Life policy number one is not an investment product. If you have grown the cash value in the policy to twice the premiums paid in 15 years that great. The difference between this policy and the mutual fund spoken of is not the commission, it is called a life insurance premium? Life Insurance has one use, a death benefit paid upon your death. It is not an investment product. In my opinion VUL's should not exist, because the purpose of life insurance is too important to be gambled with in a variable product. The fact is to insure your life from late teens until retirement, it is more cost effective to take out a whole life policy when you are young and cash it in when you reach retirement if you truly do not need it.

Posted 11:56 AM EST September 25, 2008

Posted by: A0110915

'I have a Variable Universal Policy that I've had for 15 years. If I cashed it in today I would get a check for over double the total of my premiums paid over the last 15 years. '
Another specious argument, probably from an insurance salesperson.
If you had bought term insurance and invested the rest in a total market index fund you would have three times the total of your premiums paid. How come the Universal Policy would pay less? Because the difference is the salesperson's commission!
And what if the stock market crashed for 15 years? The universal life insurance would guarantee a return, right? Only if the insurance company survived. If the stock market crashed for 15 years, the insurance company would probably be bankrupt and you would have nothing. After all, the insurance company gets their money by investing your money in the stock market, real estate, etc.
Bottom line: the fewer people who get commissions and fees from your money the more ends up going to you.

Posted 11:49 AM EST September 25, 2008

Posted by: A0110915

Someone wrote:
'Here's the problem I see all too often, people get this advice and buy term and invest the rest, then one of two things happens. During the 20-30 years they are investing they become severely ill and cannot get insurance, or at best they are now 60 instead of 30.'
This is a silly argument. 1) If you become ill before 60 you have your term insurance, which is probably enough to cover your family because you could afford enough - term is cheap. 2) Most term insurance carries a conversion to whole life option if you really needed it, although few will. 3) If you are 60 or older you should no longer need life insurance of any kind. Your children will be grown and if you haven't saved/invested enough for retirement and your spouse by then you have been foolish. 'Whole Life' insurance is very profitable for insurance agents, which is why they push it so hard. Ditto for variable annuities and other concoctions that are consumer ripoffs disguised as investments. Get te...(Read more of this comment)

Posted 7:06 AM EST September 23, 2008

Posted by: whispers76

One additional thought on this article. Don't mistake cheap with long term cost effectiveness. If you do go the term route, buy term ROP. This way you will get the premiums paid back at the end of the term. No interest, but still worth it.

Posted 7:03 AM EST September 23, 2008

Posted by: whispers76

Term or Whole Life - I agree with some of the story. When you are young, term makes sense because it is affordable. Here's the problem I see all too often, people get this advise and buy term and invest the rest, then one of two things happens. During the 20-30 years they are investing they become severely ill and cannot get insurance, or at best they are not 60 instead of 30. That 100,000 whole life policy they could have gotten at 30 for 1200-1300 annualized premium would now cost them 5000 or more. They could have gotten a 20 pay life policy for under 2000 annually and been done paying at age 50 and had coverage the rest of their lives.

The primary use of any life insurance is death benefit paid to the benficiary when you die, that is the only way I sell it. However, I have a Variable Universal Policy that I've had for 15 years. If I cashed it in today I would get a check for over double the total of my premiums paid over the last 15 years. It can be a good retirement supp...(Read more of this comment)

Posted 9:32 AM EST September 19, 2008

Posted by: Stinger542

OK, maybejust one more entry. Reading the above blogs and hoping that most of these are not professionals, (!!!) I just want to tell you that holding all the licenses available does not make an ETHICAL sales person. Captive, Broker,CFP, independent IA, Series 6 and 63, Series 7 and 66, makes no difference. Most of the clients needing life insurance can't tell the difference among the designations. If you're selling life insurance....sell LIFE insurance!!! Don't try to play the 'money' game with most of the population.....it is what it is. If they want investments.....don't sell them life insurance!

Posted 9:51 PM EST September 18, 2008

Posted by: portexusa

All insurance sales people are really just a bunch of used car salesmen. The truth has been discovered.

Posted 5:34 PM EST September 18, 2008

Posted by: NYL_Financial_Advisor

'Achieve Excellence in insurance' such as you have?! How, by pushing whole life and/or VUL's that implode?! For someone that seems to have a such a grudge against the insurance industry, I even wonder how exactly you have achieved such high marks amongst your colleagues?

Oh wait, I figured it out. Since you don't care about your client's best interest, you just feed them everything under the sun. How many of those Index Annuities did you happen to sell to unsuspecting senior citizens on your way to stardom?

Posted 5:12 PM EST September 18, 2008

Posted by: NYL_Financial_Advisor

Temper tantrum? haha wow. I'm not the one resorting to name calling to justify my stances.

Just what I thought, no 66 license and no care for your clients' best interests. Move along.

BTW, my daddy is stronger than yours ROFL!

Posted 5:05 PM EST September 18, 2008

Posted by: NYL_Financial_Advisor

I may sound like a politician because unlike yourself, I actually know how to debate and don't need the scrIpts from a professional writer to aid in my delivery. Just be lucky we're not at a live debating hall because you wouldn't last the first minute.

Now, back to the point. You still fail to address if you're even a Series 66 license holder. Seeing you have side-stepped this simple question every single time I have asked, the red flag has been thrown and know it's become very apparent for someone who argues about POP's on an illustration and how you were apparently screwed over, you are no better than your 'trusted' buddy who sold you that policy because you choose not to take fiduciary duty to your clients to look out for their best interests. If you're so concerned about the moral integrity behind the recommendations of a solution, try looking in the mirror first.

Point 2, you complain and whine about your apparent illustration as if NYL is th...(Read more of this comment)

Posted 4:14 PM EST September 18, 2008

Posted by: FidAssetMgtGroup

Seem to have you flustered NYL!!!! That is typical of NYL agents when you attack the symantics of whole life and disclose your secret pension program. Take it from someone who learned from one of your greatest agents, Ben Feldman who happened to sell the heck out of whole life. If you don't learn to properly address these two little objections without sounding like an infant that's throwing a temper tantrum, you'll never acheive excellence in insurance as I have. Good luck, you have alot to learn about this business.

Posted 2:28 PM EST September 18, 2008

Posted by: pumbaleap

WOW WOW back (or 'double wow' to those in rio linda) ... you must have HAD a lot of time on your hands to study for all those designations and STILL not understand the macro economic ramifications of the real world nor have developed the ability to know that every product can work if you have a strategy and those who seek answers in a product are doomed to fail ... everyone plays on the same 64 squares with the same pieces, it is applied strategy that leads to triumph ... must be one of those there good test takers ... at least you kept your 'friggins' to yourself that time, thanks ... other than the CSA and CEP (not sure on that one will look it up) I have those same passing scores on tests, as well as a 65, 24, clp and a couple others I do not use anymore among my alphabet soup folder ... in fact I really don't use any of them because passing exams may make one knowledgeable but does not make one smart ... and the fact you got a settlement check ... those are easy to come by, easier ...(Read more of this comment)

Posted 1:23 PM EST September 18, 2008

Posted by: FidAssetMgtGroup

WOW, you must have alot of time on your hands to write that kind of hogwash. Take it from a TOP OF THE TABLE AGENT which I have been for the last twenty years with my seriers 6, 63, 7, Life, Health and variable annuity licenses. This goes along with my CLU, CHFC, CEP, CSA . You are deliving the same company line that the typical new agent has to learn before going out on their first appointment. I stand by my comments regarding NYL's misleading illustrations in regards to the POP and only you and I know what we're talking about regarding NYLIC and Senior NYLIC in this discussion so lets not try and bullXXXX everyone hear into thinking you and every other NYL crony isn't taught to push WL because it benefits you guys better for retirement regardless of what the client needs. Now lets see what path you seem to take and attack me on rather than the two issues which you lost your battle on. If I still had the class action paperwork in my file I'd post it but I threw it away after I go...(Read more of this comment)

Posted 12:58 PM EST September 18, 2008

Posted by: pumbaleap

Dear FidAssetMgtGroup ...
I'm trying to keep quiet but you make me chuckle out loud sometimes ...
quick question before my comment ... (and please you can keep your friggins to yourself because, as Al Gore would tell you, you are not the smartest person in the room) ... with the 10-30% reduction in your clients prtfolios did you reduce your asset management fee from 1% +/- to 0.7% +/- ...
You again, do not know the pricing and crediting dynamics of insurance ... WL is the least favorable for an insurance company to make a profit off of ... very low profit percentage and it takes a number of years to generate under the law of large numbers, etc ... where as term is # 1 or 2 followed by VUL followed by UL varations ... WL trails all of these ... and with any linear projection (ins ledger or your projected retirement fund values going 20 years into the future) there is only 1 (one) number that is guaranteed to be wrong ... and that is the projected values ... and only 1 (one) ...(Read more of this comment)

Posted 12:23 PM EST September 18, 2008

Posted by: NYL_Financial_Advisor

I may sound like a politician because unlike yourself, I actually know how to debate and don't need the scrIpts from a professional writer to aid in my delivery. Just be lucky we're not at a live debating hall because you wouldn't last the first minute.

Now, back to the point. You still fail to address if you're even a Series 66 license holder. Seeing you have side-stepped this simple question every single time I have asked, the red flag has been thrown and know it's become very apparent for someone who argues about POP's on an illustration and how you were apparently screwed over, you are no better than your 'trusted' buddy who sold you that policy because you choose not to take fiduciary duty to your clients to look out for their best interests. If you're so concerned about the moral integrity behind the recommendations of a solution, try looking in the mirror first.

Point 2, you complain and whine about your apparent illustration as if NYL is th...(Read more of this comment)

Posted 9:19 PM EST September 17, 2008

Posted by: FidAssetMgtGroup

You sound just like a politician NYL. Way to cloud the facts and confuse the laymen. You fail to address the POP illustration that is based on a dividend history that hasn't come true. 20 years ago there wasn't legislation mandating disclosing the guaranteed minimums, therefore millions got screwed. I am sure since there have been oodles and oodles of class actions regarding this blatant misleading sales tactic, it is now on your illustrations but it wann't whne I bought mine. Second, for all those sales people that sold many products, I'm sure their pensions didn't just kick in when they sold one product and failed to compensate for all the others unlike NYL. How many people do you think would sell a car if the only thing their pension would pay for is if they sold a car with 4 wheel drive. Everyone would be selling cars with 4 wheel drive. Ah ha, that's why everyone at NYL pushes ONLY WHOLE LIFE because that's the only product the NYLIC pension pays anything for. Address the...(Read more of this comment)

Posted 6:52 PM EST September 17, 2008

Posted by: NYL_Financial_Advisor

FID..'It's not a bad pension plan considering you don't have to contribite a dime, just sell the heck out of whole life and you are set.'

I suppose money just falls from the sky to help pay for my office, utility bills, the cost of gas to visit clients, the cost of plane tickets to visit clients out of state, and not to mention the amount of time put into marketing events, seminars, making 50-100 phones calls a day, putting newsletters together, having clients cancel meetings or pushing things out, attending chamber meetings, paying chamber dues, treating centers-of-influence out to lunches, time spent to follow-up with referrals, time spent working with networking groups, & volunteering within the community with no guarantee that you'll have a new client at the end of the day, week, or month.

Time is money and my colleagues that are true to themselves have put a million times more than your 'dime's' worth into having a successful financial practice.

Posted 6:22 PM EST September 17, 2008

Posted by: NYL_Financial_Advisor

And yet you can't even answer my question on whether you currently have fiduciary duty to your clients as a Series 66 Investment Advisor?

Here you go whining about a so called 'trusted' buddy who put you into a whole life product that took you what, apparently 10-30 years to begin questioning that a dividend scale was off? Assuming you even own the policy, who's the idiot who decided to keep it all those years if it is in fact waaaay off? Maybe your 'trusted' buddy held a shotgun to your head as he handed over the pen so you could sign the receipt and has a set of negatives on hand to blackmail you into keeping the policy for that long. Wow.

For someone that's supposed to be in Asset Mgmt and I'm assuming you at some point have dealt with individual securities, you mean to tell me you would ride the price of a falling stock over a 10-30 year period without once even thinking about selling, cutting your loss, and buying back on an upswing of another stock? Wow....(Read more of this comment)

Posted 5:29 PM EST September 16, 2008

Posted by: FidAssetMgtGroup

NYL, this has nothing to do about who I work for. This has nothing to do about Term vs Whole Life. I strickly made a comment that you cannot rebuf regarding NYL whole Life policies and all the people that were sold whole life under the POP assumption which NEVER happens as illustrated. ALSO, you cannot rebuf the comment I made about the NYLIC pension plan that rewards you based on the amount of whole life you sell. I assume you participate in it if you are worth anything of an agent. I'm not saying Whole Life is bad, but under the assumpion I was sold and bought the product, it was! AND I know for a fact how you are compensated for pushing whole life for your entire life. It's not a bad pension plan considering you don't have to contribite a dime, just sell the heck out of whole life and you are set.

Posted 5:00 PM EST September 16, 2008

Posted by: NYL_Financial_Advisor

FID.....as in Fidelity Asset Management Group?

Ok, now it all makes sense let alone the fact I just completed 6 different 401(K) roll-overs from Fidelity employer sponsored plans in the last 3 days and can't count how many times I've heard about the lack of service from the Fidelity Rep.

Typical stances taken from the big name investment brokers of the world in their quest to fight and overcome Life Insurance companies growth in the retirement markets. I know, I've worked both sides of the fence.

Face it, there are some things a whole life policy, lifetime income annuity, and variable annuity can offer to the general public that a money manager only wishes they could match.

Posted 4:21 PM EST September 16, 2008

Posted by: NYL_Financial_Advisor

FID...

...and that's why I also make it a point to tell each of my clients the difference between a regular Sales Agent versus someone like myself, who holds a Series 7 and 66 Registered Investment Advisor license.

Like I mentioned before, there are many companies with individuals who do not have to look out for a clients best interest. Their only criteria is suitability for the client.

Unlike the majority who only hold a 6 and 63 license, I take pride in the fact that I took the extra time to learn & pass the 7 & 66 exams. I look out for my client's best interest. More liability, yes but in the end, I know I'm doing the right thing for my client and am not quick to drink any company's kool-aid.

You shouldn't be too quick on the draw. There are actually still a few working in the industry that care about the people they are servicing. Now having said that, are you a 7 & 66 license holder?

Posted 4:13 PM EST September 16, 2008

Posted by: NYL_Financial_Advisor

Markets got you ruffled Fid? Why all fiesty names?

It's ok. Just breathe...relax. Think of a happy place......

Now, if you've worked with NYL before, then just come out and say it. Between the 3 mutual companies mentioned, there is nothing wrong with their respective basic whole life offering. Now if you had a management / personnel issue then that is a different matter. Regardless of what company you work for, what industry you work in, there will most likely be a time when you and a Managing Principal or co-worker don't see eye-to-eye. If that's the case, then don't let your own personal handlings/mis-handlings cloud the judgement of a person that is looking for solid financial products from companies they can expect to be around for the long term.

Posted 4:07 PM EST September 16, 2008

Posted by: FidAssetMgtGroup

NYL_Financial_Advisor, back when these policies were written, one could customize the columns and esentially illustrate whatever they wanted to. When your young and nieve you tend to beleive the person representing the product and if the illustration shows POP in 11 years, you trust the person and company that is representing it. There have been many a class action suit paid because of this type of thing. I stand by my original assessments of your input.

Posted 3:59 PM EST September 16, 2008

Posted by: FidAssetMgtGroup

Hello pumbaleap! You're a friggin idiot like your friend at NYL. He knows exactly what I'm talking about regarding NYL and it's misleading POP illustrations and dividend history. Furthermore, you know nothing about NYL's NYLIC pension plan which pays an agent and his family HANDSOMELY based on the amount of WHOLE LIFE INSURANCE an agent sells DURING DIFFERENT INCREMENTS OF EMPLOYMENT AND RETIRMENT. This is in addition to a modest commission making it the highest paying product in NYL's arsenol assuming the agent makes it five years or longer and is vested. NOT UL, NOT VUL and NOT TERM. Don't chime in unless you have a clue what you are talking about!!!!

Posted 3:57 PM EST September 16, 2008

Posted by: NYL_Financial_Advisor

FidAsst....

Please, save your banter for the agents, regardless of the company represented, who pitched VUL's as whole life products and sold them for all the wrong reasons and leaving a nation of 50 somethings with policies that were supposed to pop, no cash values, will likely implode, and leave their clients with their pants down because there is no way they can afford the premiums for a new policy 15 years later. Unless the individual is a business owner or has more wealth than they know what to do with, I have and will never offer a VUL.

If the NYL policy YOU apparently have is soooo bad, why not 1035 exchange it?

I have many members in my family that have had NYL policies for 50+ years prior to me ever joining the company and they haven't had any issues.

Anybody who has the eyes to take a 5 minute look at an illustration will see there are 3 primary sectors to look at. Guaranteed cash values, projected values based on current dividend rate...(Read more of this comment)

Posted 3:34 PM EST September 16, 2008

Posted by: pumbaleap

Dear FidAMGroupie: I do not mean to be negative but you have a LOT to learn and please get into an 'institutional deprograming group' ... I copy your first two sentences for reference:

'Hey NYL_Financial_Advisor, I and millions of others have a NYL policy that was supposed to POP more than ten years ago and we are still paying our premiums unlike the illustration that promised us to stop after only 11 years. Please don't try and tell us about the living benefits of whole life because the only person that benefits from when you sell whole life at NYL is your NYLIC pension plan.'

1st: it is clear you have little, if any, grasp on how long term financial products comput their crediting rates: hint - blended (blend - ed) [think 6 car roller coaster]{or have you no vision}
2nd: have interest rates gone down or up past 10 years? duh.
3rd: look at crediting rate inside policy and even today it is probably higher than the going fixed interest rates ... enough on that...(Read more of this comment)

Posted 1:41 PM EST September 16, 2008

Posted by: dmelling

I favor sales with full disclosure. I have nothing to hide. Not the cost of the product I sell, the compensation I earn.....nothing. I hope all those people who own AIG whole life policies are hangin' on to their wallets. Will the agents who sold that crap be there to pick up the pieces. I doubt it.

Posted 1:03 PM EST September 16, 2008

Posted by: FidAssetMgtGroup

Hey NYL_Financial_Advisor, I and millions of others have a NYL policy that was supposed to POP more than ten years ago and we are still paying our premiums unlike the illustration that promised us to stop after only 11 years. Please don't try and tell us about the living benefits of whole life because the only person that benefits from when you sell whole life at NYL is your NYLIC pension plan. The only advantage to touting being the oldest and highest rated, is that it gives you a license to steal. Northwestern Mutual at least meets their projections that they illustrate. NYL may have paid a dividend to your policy-holders for the last 160 years but you fail to leave out how the dividend has been reduced for the last 30 years so you are unable to meet projections that you sell with your policies. What does that mean to the consumer? It means no peace of mind or trust in the oldest and highest rated insurer, New York Life, The Company You DON'T Keep.

Posted 12:38 PM EST September 16, 2008

Posted by: NYL_Financial_Advisor

dMelling

....and CFP's aren't sales people either? Please.....everything in life revolves around sales. If you aren't selling a thought to someone, then somebody's selling you.

Posted 12:34 PM EST September 16, 2008

Posted by: NYL_Financial_Advisor

Also, if a client likes the 'living' benefits of having a Whole life policy but currently have budget constraints, there is nothing wrong with doing a blended portfolio of Term and Whole Life insurance. In addition, you can always purchase 100% Term and once that particular client is making more income, there are options to convert that term policy to a whole life policy based on original age or attained age. Can't speak for the rest of the industry, but NYL offers these conversion options on term life products.

Posted 12:18 PM EST September 16, 2008

Posted by: NYL_Financial_Advisor

It all depends on what you want. You get term insurance strictly for the protection / death benefit that you would want your beneficiaries to receive should something happen to you.

Suze Orman suggests an old school train of thought where you buy term & invest the difference. There's nothing wrong with that as long as you are confident you can make 4-5% after-tax doing investments. Keep in mind, the last 10 years, stock market has averaged returns of 4%. Take out taxes and that return isn't looking as nice. Unless that person can really say to themselves that you're investment savvy, 'term and invest the difference' probably isn't the best option for most people out there. If that's the case, then that person always has the option of working with an Investment Advisor and having that 'difference' professionally managed. Nothing wrong with that, but then again the problem with today's society is they think they can Google a few pages on investing, do it themselves, onl...(Read more of this comment)y to end up losing that 'difference.'

Now with whole life, you get it if you think you're going to live a long life and want the 'living' benefits that a whole life policy can give you. I'm not talking UL/VUL policies. I'm talking strictly permanent WHOLE life insurance. The cash value accumulation will be affected by which company you buy the policy from since not all WHOLE life policies are the same and also how much you plan on saving per month for your policy.

Now you could save the amount in a savings account, yes. But you will be paying taxes on any interest gains compared to tax-deferred growth you can receive in a whole life policy. In addition, in today's market, interest rates on CD's and money market accounts are laughable. Now I'm not saying sock your whole retirement savings into a Whole life policy, but a Whole life policy can serve as a SUPPLEMENT to an individual's retirement income. The benefit being tax-deferred growth and tax-free withdrawals at any time as long as the policy does not lapse.

If you get a whole life policy from a company such as Northwestern Mutual, TIAA-CREF, or New York Life, you can expect after-tax returns on average of 4-6%. These 3 companies have the highest possible credit ratings an insurance company can receive out of the 1200+ companies that are out there and because of our financial strength for example, NYL (the largest, oldest, & strongest mutual/private company) has paid a dividend to our policy-holders for the last 160 years. What does that mean to the consumer? It means the peace of mind and increased likelihood of getting an average after-tax interest return of 4-6% compared to some of these other insurance companies that are bleeding massively (AIG?) that may not be around long enough to fulfill their promises to their policy holders.

NYL
Financial Professional
Series 7 & 66 Registered Investment Advisor

Final Note: Beware of 'advisors' that have a 63 series license compared to a 66. 63 licensed agents have no fiduciary duty to their clients and do not have to look out for your best interests. Not saying they wouldn't, but keep in mind they don't have to.(Show less of this comment)

Posted 11:49 PM EST September 14, 2008

Posted by: Stinger542

I have one last comment to add since this looks like it's turning into something far from the pertinent content. After reading the article placed on SmartMoney I'm very disappointed in this site. That article seems to be steering people to term insurance and making WL sound too complicated to think about. Not a very balanced look at life insurance. I just hope most realize there's no 'magic' in putting together a life insurance plan for most people and hopefully they won't find themselves outliving their term policies. Thanks for the discussions.

Posted 9:56 PM EST September 14, 2008

Posted by: bbick001

Full disclosure yes...but the commission made by the planner has nothing to do with how well a certain product works. You are way off base. You obviously can't win the term vs WL debate because all your arguments have been proven wrong. You are now reaching for straws. Get back to the facts or leave the discussion like the rest.

Posted 9:22 PM EST September 14, 2008

Posted by: FidAssetMgtGroup

dmelling you are an idiot with you're disclosure push. No one asks what anyone else makes so why is this any different. You're so analytical that you probaly couldn't pull the trigger and buy somethink knowing someone had to make a living and made a dime on your watch. Full disclosure has nothing to do with this discussion other than you bringing it up. In insurance,commissions paid have to do with what product is best. It doesn't really affect the bottom line for the consumer because the companies build in their commissions into the premium. If anyone's screwing the client, it's the insurance companies that don't pay the claim or try to squeeze out through the incontestability period.

Posted 9:03 PM EST September 14, 2008

Posted by: dmelling

So the answer is no, you dont favor full disclosure. What a surprise.

Posted 8:52 PM EST September 14, 2008

Posted by: bbick001

stinger,
I couldn't have said it better myself...and what does commissions paid have to do with what product is best. This discussion has completely got off base. Why would they want to go to someone and pay $100-$200 per hour to find out what policy works best. Ridiculous!!! Just go to a few different planners and use the information they give you to make an informed decision.

Posted 7:56 PM EST September 14, 2008

Posted by: Stinger542

Most people compare company prices and value. Isn't that some of what we're discussing here. If the companies pay different commission schedules among companies, it doesn't really affect the bottom line for the consumer. The companies build in their commission schedule into the premium and it is rare that the continuing service commissions stay at much more than 1-2%. The point to me is...should we make everyone in this country post their salaries or commissions? Why not car sales or grocery stores or retail stores or physicians or dentists? Would you go to the cheapest doctor or lawyer? Fee for service agents are pretty costly for the average consumer and may make a lot more than a regular producer on a policy. Again, I speak mainly to middle Americans, not the privileged few who need large estate planning. If financial service and insurance producers (captive or brokers) don't take care of their clients they quickly find themselves without clients. For the most part I don't t...(Read more of this comment)

Posted 11:21 AM EST September 14, 2008

Posted by: dmelling

Balliva,

I have the solution. Hire a Fee Only financial planner(I am not one) to evaluate your policy. For a flat or hourly fee (in other words, no commissions) they will give you advice free from conflict. Try to find one that is a CFP (I am not one). They have expertise in all areas of financial planning, including insurance and investments. I would avoid those with designations that are insurance based. They tend to be insurance salesmen.

Best to you,

Dave

Posted 11:16 AM EST September 14, 2008

Posted by: dmelling

My point on disclosure is not what is required today. Today's requirements for disclosure border on the idiotic. There are no disclosure requirements today for compensation and total cost. The fact that you give what is required today is a far cry from my question. Do you favor FULL disclosure of cost and compensation?

Posted 12:50 PM EST September 13, 2008

Posted by: bbick001

Agreed. The thing is, you can get information on the internet about anything. That doesn't mean it's accurate or whole. Thus the confusion we have here. That's it exactly. Some people think they can cut out the expert and become one themselves in a matter of days vs years in a practice. This is when mistakes happen.

Posted 12:00 PM EST September 13, 2008

Posted by: Stinger542

bbick,

I agree that there is a segment of the population that can benefit from quite a few of the options WL, UL, and VUL's can provide but that segment will usually buy from a reputable representative. (I sure hope so anyway!) I am a big proponent for WL and term combination for the majority of the population. I believe the mass marketing of insurance products online and even in the media has served mainly to confuse the majority of the clients and possibly do them a disservice by not discussing ALL the pertinent personal information with a professional who can tailor their plan. As in mutual funds and stock investments, people may be taking into their own hands their financial futures. Why did we and do we continue to educate ourselves to assist others with these decisions if they can become 'experts' online!

Posted 11:45 AM EST September 13, 2008

Posted by: bbick001

Fidassetmgtgroup,
I believe they really need to speak with someone that they can look in the eye. Also, they may need to interview a few different planners...and be careful of the ones that have an instant solution. There are alot of variables in their life that haven't been put in the equation yet.
Stinger,
I agree with almost everything you stated. Life insurance, in the respect that most are discussing here, should really be called death insurance. The client buys it and their family benefits. Term is exactly that. WL is something completely different. The doors that it opens are wide. You can use the death benefit while you are alive. Term should only be used when WL cannot be afforded.

Posted 11:30 AM EST September 13, 2008

Posted by: bbick001

dmelling,
My answer to your question is this. In my practice, I take out all opinions in my planning. We look at the individual's entire financial situation and create a short and long term plan to make sure their lifestyle doesn't change in retirement, spousal death, or any other devastation. We use the human life value approach to life insurance. There is no one all, be all solution to everyone's problems with life ins. WE PUT TERM AND WHOLE LIFE SOLUTIONS ON THE TABLE, TO INCLUDE ALL DISCLOSURES FOR BOTH, AND THE CLIENT CHOOSES WHAT THEY WANT TO DO. I am a 90-95% user of WL vs term because the client wants it, not because I sell it to them.

Posted 10:39 AM EST September 13, 2008

Posted by: dmelling

Wow. The only response to my disclosure question at this point has been (paraphrased) it doesn't matter because nobody reads that stuff. It's like a car salesman. Holy smokes. I guess I'll take that as people who sell permanent insurance are the next best thing to car salesmen.

Posted 10:13 AM EST September 13, 2008

Posted by: FidAssetMgtGroup

BBick, you should get your licence in whatever state this person is from and do this yourself before someone else screws them. It's amazing listening to all of this crazy advice. It's people like this that give our industry a bad name. This has nothing to do with commissions. Do you need to know how much the car guy is making from you when you buy a car. It is what it is and it's the toughest occupation on earth. Maybe the best advice is to just buy from someone who has been in the business for at least ten years because if they suck, they wouldn't have made it that far. And on another note about regualting and disclosing commissions. That wouldn't make a bit of difference to someone like me. When someone is signing 50 documents, they don't read what they're signing anyway and that goes for all the negative disclosure stuff that if anyone really read they wouldn't buy anyway.

Posted 9:15 AM EST September 13, 2008

Posted by: Stinger542

I enjoy discussions regarding product choice but it really is frustrating when professionals make a broad statement endorsing one product for consumers. Not a great fiduciary move! Without knowing the client or consumer's situation...NO ONE and I mean NO ONE should make a blanket statement that term is the one you want! Consumers should trust their agent to fully inform them of options and long term effects of all policies. They had better understand that term policies do 'die' off at some period of time. If they could answer the questions of 'How much insurance will you need when you die? and exactly when would that be?' our job would be a lot easier. All life insurance should be is buying discounted money for the survivor or beneficiary. 90 percent of consumers do not understand nor should most life policies be sold on the premise of 'investment'. It is what it is....LIFE INSURANCE. Buying money. Our industry has tried to put all kind of bells and whistles on these policie...(Read more of this comment)

Posted 12:17 AM EST September 13, 2008

Posted by: bbick001

The argument...

Yes, you should 1035. It only makes sense. This allows you too keep your basis and tax free status.
Yes, before you do anything with your current policy, you do need to be approved for a better policy.
No, the company DOES NOT keep the cash values. If the cash values are put into paid up additional insurance inside the policy you will have even more death benefit...and you can still use the cash inside the policy.
How can you tell these people to put there money into a variable annuity! Yes, it does have a death benefit...but instead of $147,500, it would be $17,109.05. Also, the fees on that variable annuity that you can't take your money out of for 7-10yrs or lose those market gaurantees is a great idea, if you want to pay someone an 8-10% commission and still have those surrender charges like the Universal life policy.
Please find someone that will show you a true whole life, not universal life policy that does not have surren...(Read more of this comment)

Posted 11:40 PM EST September 12, 2008

Posted by: bbick001

You know it's funny. No, actually it's sad. I have had about 30 emails in my inbox, since posting my address, from people from different walks of life, all with the same problem. A Term insurance salesman has sold them a term policy 15-20 years ago with the promise of an 'invest the difference' pot of money. The plan was to not need insurance now, right? Some owe on mortgages, most have no retirement. What are they supposed to do now TERMINVESTDIFF? What will you tell the wife when the husband has passed and there was no insurance, because they were not supposed to need it now. Very sad.

Posted 11:26 PM EST September 12, 2008

Posted by: bbick001

From TERMINVESTFDIF
THE RIGHT
'Granted, you need to really figure out what your coverage needs are before doing anything. You also need to verify that you can qualify for coverage before cancelling or doing anything with your current program.'

The WRONG
'why would you even consider putting that exchange into a whole life policy? Bottom line, you would get the coverage that is put into place, but should the insured person die -- and they eventually will -- what happens to the cash values? Think about it for a minute, again, people forget completely where that money goes. It is kept by the insurance company.Lets not forget, when you get whole life, there you are going to have that death benefit or the cash values ... if you opt for both, you are going to pay through the nose.'

Posted 10:38 PM EST September 12, 2008

Posted by: BuyTermInvestDiff

policy. Beware, the reality of whole life ... poor returns over time, the fact that the insurance company keeps your cash value when the covered person dies in 99 percent of the time, but even worse, the insane premiums you pay for this stuff. It's not mentioned that many whole life policies will ultimately self destruct as the cash values are used to pay the premiums. Why is it that home owners and auto insurance doesn't have a cash value or savings feature attached to it if it was such a great thing? If people carefully read their contracts during that 10-day 'free look' period, methinks many would realize they were being had. Balliva, whatever you do, read the fine print, understand what you are getting into. Feel free to send any questions, my e-mail: gkgato@aol.com

Posted 10:26 PM EST September 12, 2008

Posted by: BuyTermInvestDiff

Great question Demelling ... love to see what the replies will be there.

Balliva ... I completely agree with the 1035 exchange suggested earlier, but here is where I am a bit miffed .. why would you even consider putting that exchange into a whole life policy? Bottom line, you would get the coverage that is put into place, but should the insured person die -- and they eventually will -- what happens to the cash values? Think about it for a minute, again, people forget completely where that money goes. It is kept by the insurance company. I am concerned that no one has mentioned doing a 1035 exchange into a variable annunity. Now, granted there are many VA's out there, but the ones I work with have 1) death benefit; 2) ability to protect investment; and 3) 'step up' features. Granted, you need to really figure out what your coverage needs are before doing anything. You also need to verify that you can qualify for coverage before cancelling or doing anything with your current pr...(Read more of this comment)

Posted 9:51 PM EST September 12, 2008

Posted by: dmelling

Let's find out what everyone is made of. How many of you who sell permanent insurance advocate full disclosure (in writing) to clients showing ALL costs of the policy, as well as full disclosure (in dollars) of compensation paid to the agent? The insurance industry is against this disclosure. My guess is you're also against it.

Posted 4:54 PM EST September 12, 2008

Posted by: bbick001

Balliva,
I wouldn't say cash in. I would probably 1035 it into a true Whole Life policy with a mutual, non-stock, company. I would suggest trying to find a person that you can look in the eye to work with. I personally wouldn't work with someone over the internet about something as important as this. If done right, you can pay for this policy for around ten years then stop and still have cash value (with no surrender charge) and a growing death benefit. If you will email me, I will show you what I am talking about. Then you can decide for yourself. bbick001@aol.com

Posted 12:32 PM EST September 12, 2008

Posted by: Balliva

In regard to your response to my email a few days ago, bbick. Are you suggesting that we should cash-in our policy and start fresh? This is only coverage for my husband???? I am so confused. Thank you!

Policy Number
Product Name BONUS PLAN
Policy Status Active
Product Type Universal Life
Policy Date 12-21-1993

As of 09-11-2008
Net Death Benefit $147,500.00
Accumulation Value $18,322.74
Surrender Charge $1,132.69
Outstanding Loan Balance $0.00
Surrender Value $17,190.05
Current year crediting rate 5.50%
Weighted average interest rate 5.50%
ABR Lien Amount $0.00

Writing Company ReliaStar Life Insurance Company

Your comment:

Posted By: bbick001 on September 10, 2008 at 6:50 PM
Balliva,
I just checked through the Guardian and based on a standard rate at 52(didn't know your husband's specific age or...(Read more of this comment)

Posted 6:22 PM EST September 11, 2008

Posted by: DoctorInsurance

avocation

Posted 6:21 PM EST September 11, 2008

Posted by: DoctorInsurance

FIDAssetMgt:

I disagreed with you because you clearly did NOT read my orignal text! Read it and you'd discover I'm a huge permanent coverage writer-term's a facade. I'm off to write another $10MM joint life app tomorrow -Friday for $172k of annual premium. And I'll bet you $10,000 that my combined life business income along with my $142MM under management with an annual advisor fee of 1.25% exceeds your best year ever. And why do I still work? I don't even consider it work...it's an advocation at this point, my clients love me and trust me and I won't walk away-like you evidently did.

Posted 5:53 PM EST September 11, 2008

Posted by: FidAssetMgtGroup

Agreed, but some people are just are too high on their horse

Posted 5:47 PM EST September 11, 2008

Posted by: bbick001

Come on guys. No need to throw eggs at each other. It sounds like we all have the same ideas. We all want to take care of our clients first and foremost. We know what doesn't work and what does. We know Term and Invest never works and the permission slip in WL far exceeds the higher premiums. Any person with just a little bit of common sense and an open mind will see it. Just show the facts and take all of the opinions out.

Posted 5:30 PM EST September 11, 2008

Posted by: FidAssetMgtGroup

If you're such a big shot, then I would know you from all of the Top of The Table conferences or do you not beleive in that either? I was only 17 in 1977 but I would wager my house that I have written more face amount and made more money than you, since I entered the business in 1984. As a matter of fact, I wrote so much business, I retired in 2000. Why are you still working Mr. term and invest the difference?????????????????

Posted 5:17 PM EST September 11, 2008

Posted by: DoctorInsurance

FidDelAssetMgt: Did you actually read the entire text of my message, or merely scan the first 1-2 sentences? You would be well served to carefully read the entire text. I can assure you that I have placed far more individual life premium in the past thirty+ years, then you can contemplate. ($1.4MM of individual & joint life annual ongoing premium YTD). Along with over $1 billion of total life coverage written since 1977.

Posted 5:11 PM EST September 11, 2008

Posted by: DoctorInsurance

Buy Term & Invest The Difference? In truth, most people buy term and simply spend the difference. The Market?-through 07/2008, the Vanguard S&P 500 Index Fund has a TEN YEAR trailing total return of 2.88%. Term? Yes, it when you're young with limited financial resources and purchase too much-acquire more than you think you need-because you will grow into it. Buy large policy-rule of thunb-10-15x income. Lock in and protect your insurability and it's also imperative to buy ONLY from a top rated MUTUAL company-beholden only to it's policyholders-check the one headquartered in Milwaukee (not a stock insurance beholden to stockholder's). Make certain you also have a guaranteed CONVERSION option on your term life policy-such that you can convert it into a permanent lifetime coverage policy (an asset) when you grow in your career and have more discretionary income. When you convert inside the conversion window or time period-you never have to prove your health or be underwritten-your ...(Read more of this comment)

Posted 5:04 PM EST September 11, 2008

Posted by: FidAssetMgtGroup

Well DoctorInsurance, if all my thousands of clients used your advice and bought term, their families would be broke because of the estate tax consequence that you obviously know nothing about. There is a place for all insurance and you sound just like all the ex AL Williams folks that still trying to collect on their food stamps. Wake up! It's people like you and the one that wrote this article that give insurance a bad name!!!!!!!!!!!!!!

Posted 4:55 PM EST September 11, 2008

Posted by: DoctorInsurance

People who know nothing about insurance buy permanent whole life insurance. People who know something aout insurance-buy term insurance. And people who know a lot about insurance-buy whole life insurance. Term? People are seduced by cheap premiums (not inexpensive) and the term policy is cheap because it's designed to rarely-if ever- pay a death benefit to a beneficiary. It's designed to die before you do. The best kind of insurance to have in force is the kind of policy that's in-force when you die! What a novel idea...Ne? my monthly life premiums are about $5k and my cash value rate of return-with no Market risk-is about 6.5% tax deferred-and once it accrues-it's impervious to the Market-can't ever decrease. Additional interest on top of this 6.5% pays for the cost of the life insurance protection element-yet I never have to declare and pay income taxes on this tax free interest paying for my permanent (lifetime asset) coverage. And it gets better. Because a portion of my annu...(Read more of this comment)

Posted 4:48 PM EST September 11, 2008

Posted by: pumbaleap

Know your purpose ...
The misinformation on life insurance is SO overwhelming ...
there are 2 functions: 1) Full replacement of potential income to be earned between now and retirement ... 2) Strategic replacement of assets used during retirement ... it is the latter phase where PERMANENT insurance provide MORE LIVING value to the insured than anyone, ie, anyone, will EVER get after the insured dies ...
only 1 in 1000+ term policies is ever paid ... it is 100% pure profit for the ins companies ... as far as premiums and any coimissions go, a properly structured ins portfolio will comprise of 3, may 4 different types ... the permanent part will have a return comensurate with bonds, hence they can replace the bond portion of a 'fully diversified' portfolio hence greater risk can be taken on growth assets ...
term and invest the difference is a losing strategy for the insured/invester, a money maker for the ins company and the investment broker and even etrade ... by havin...(Read more of this comment)

Posted 4:19 PM EST September 11, 2008

Posted by: bbick001

Jacobtho,
That's the problem, too many Suzie Orman & Dave Ramsey wannabe's. That's the reason people think what they do about WL. They hear it from the media, such as this story, and from so called professionals that aren't even licensed. And Fid, you're absolutely right about the commissions.

Posted 4:12 PM EST September 11, 2008

Posted by: jacobtho

Sorry, that was addressed to bbick001...

(I was too excited someone actually gets this stuff and has read Pirates of Manhattan)

Posted 4:10 PM EST September 11, 2008

Posted by: jacobtho

Dmelling,

Thank you, finally someone who gets it. Some just won't ever get because they won't open there eyes to it.

'Its not what they don't know, its what they think they know that just aint so'

-R Nelson Nash

Posted 3:45 PM EST September 11, 2008

Posted by: FidAssetMgtGroup

Whoever wrote this story doesn't know much about insurance. I have been an insurance agent for 20+ years and have sold Whole Life, Universal Life, Variable Life and Term Life. Commissions for Whole Life pay the lowest commission by percent unlike what this author has written. Commissions average approximately 55% for Whole Life. Universal Life pays on average 80% commission and finally term life, which pays the highest percentage which typically averages 100% commission. Whole Life is appropriate for young professionals who want permanent insurance and are not on a tight budget. Universal Life is for everyone but does not offer the guarantees that whole life does and Term Life is inexpensive TEMPORARY insurance.

Posted 3:37 PM EST September 11, 2008

Posted by: bbick001

P.S. There is a place for Term policies in the world. In my practice I use WL, Term, and some UL with gaurantees. Also, MF, annuities, stocks, bonds, and any other securities products. But all of my highly successful clients use WL ins to create wealth. It is a tier 1 asset that is easily better than any other, as long as it is with the correct(mutual only) company.

Posted 3:29 PM EST September 11, 2008

Posted by: bbick001

dmelling,
Now, I need you to pay attention this time. That isn't what I said at all. I was speaking of the agent that sold the policy with the better coverage being an advocate or someone that is doing the right thing for the client. Not allowing this person to make a decision that could be detrimental later in life. For example, buying a 20 or 30 year term only policy with some hope of creating a large sum of money in a non-gauranteed stock market.
Do me favor. Google Walt Disney and how he paid for Disneyland. Google BOLI and COLI. Why do all of the largest companies in the world own WL ins? Maybe they know something that you don't? I'm talking about the same companies that sell term only policies to consumers. And lastly, read 'The Pirates of Manhattan', and then get back to me. Next.

Posted 10:17 AM EST September 11, 2008

Posted by: dmelling

bbick001,

Horrid analogy. The P&C agent in your example has offered a different amount of commodity to the prospective buyer. Your example should be that both agents offered the same 250/500/100 policy, only one charged 10 times more premium. Logically, that's how it works. Nice try though. Next.

Posted 10:59 PM EST September 10, 2008

Posted by: bbick001

dmelling,
You are right. Permanent life insurance is always sold and never bought. Just like the responsible property and casualty agent that sells a 250,000/500,000/100,000 auto policy instead of letting the uninformed purchaser buy a 10/20/10 policy and make a possible financially devastating mistake. Thanks for pointing that out.

Posted 9:55 PM EST September 10, 2008

Posted by: dmelling

The basic problem with this discussion is that people who sell only life insurance can't make a decent living selling term. Money is a commodity. 250k is 250k if it comes from a term policy or a permanent policy. Everything else is white noise. Buying a term policy is like buying gas from the old Full Service lane. Pay more for gas that's exactly the same. It's almost never better to pay more for a commodity than necessary. The bottom line is this: Permanent life insurance is always sold; never bought.

Posted 7:44 PM EST September 10, 2008

Posted by: RonMartine

I am new to the Life insurance sales biz so I don't know everything. One thing I do know that if any of you salespersons, or others involved enough to make some type of educated comment cannot make blank statements without a comprehensive needs analysis by a salesperson that is more interested in getting great referrals then making great commissions from one person. I read one 23-year-old guy now regrets his purchase. That's a shame. A new guy like me can only prospect in his own back yard. I tell everyone (now that happens to be people I know personally) that buys a policy from me to let me figure out what is best for you. I give them a few different choices both term and perm. I let them know what the contracted guarantees are. Then I instruct them to make sure they feel they made the right decision. I don't want anyone to buy any type of policy that doesn't make the owner of the policy feel like they made the right choice for themselves and their family. Lets all remember Life Insur...(Read more of this comment)

Posted 5:08 PM EST September 10, 2008

Posted by: bbick001

Balliva,
I just checked through the Guardian and based on a standard rate at 52(didn't know your husband's specific age or health), you can get a blended true whole life policy that you will pay $150 per month for the next 12 years and then stop. This policy will have over $84,000 in cash with no surrender charge ever! Also, the death benefit will never go away and the premiums never increase. Now, if that doesn't work for you, you can fine tune it from there.

Posted 4:59 PM EST September 10, 2008

Posted by: bbick001

Balliva,
Your whole Life policy is not true whole life at all. A true whole life policy will never have a surrender charge on it. This one does. A true whole life policy's premium never increases. You said yours does. Based on what you have shown, I would try to contact an advisor through a large MUTUAL life insurance company like Mass Mutual or Guardian. A 'mutual' company is one that does not have stockholders. This allows your dividends to be higher than other policies. Usually 6-7% vs 4-5%. Ask this person about a 1035 exchange of your policy into a new policy keeping the basis for tax purposes. Also, your health will be a factor if it has changed at all. You should be able to get the same or better death benefit with the same or better premium depending on a few variables. If you have specific questions about this feel free to email me. BBICK001@aol.com

Posted 4:58 PM EST September 10, 2008

Posted by: JDPolo

That is a terrible misunderstanding of Life insurance as a whole. First of all, it's a pretty good bet you'll die. Second, if anyone cares about estate planning, you're not betting against death, or the insurance company. In fact, Term is the only one where you're betting against a mortality table. And you lost all of that money. Both life insurance companies AND policy holders win when people life longer holding permanent policies.

Posted 4:28 PM EST September 10, 2008

Posted by: PapaToU

Life insurance is an oxymoron. It doesn't insure life, but rather insures death, paying off only when you die. It's also a sucker's bet. You're laying out a hunk of cash betting that you die, and the insurance company is giving you odds, betting that you won't. The best bet, for you, is the term life, since you get much better odds. However, insurance (home, car, life) is the only bets that you'll make in your life that you hope you'll lose.

Posted 4:01 PM EST September 10, 2008

Posted by: jacobtho

Sorry, Correction:

'So its like a return on your money even when its not used.'

Its like getting a return while you are borrowing your money.

Posted 3:57 PM EST September 10, 2008

Posted by: jacobtho

Thank you JonasMcJohns,

Now speed that up with a paid up additions rider and you will have the same outcome in five years, death benefit through the roof in the future, and you can borrow and pay yourself back, no longer making payments to banks. Then you will get your return, and on top of that....you guessed it, the dividend. The dividend will come either way. So its like a return on your money even when its not used. You guys, if you just take a second to take a look at whole life insurance in a different way it will open your eyes to incredible things. Also, if you feel you want to invest in something that will get you a better return thats great, BORROW it from your policy, charge yourself a high interest rate, and guess what...additional tax write off. Everything you do this way will get better, guaranteed.

Don't get me wrong, I was one of those buy term invest the difference guys, til this opened my eyes. I'm not saying buy whole life like it is traditionally ...(Read more of this comment)

Posted 3:41 PM EST September 10, 2008

Posted by: AIGWins

This conversation is pointless. I look at permanent life to provide a return through benefit. You look at it as a waste of money. You look at the bottom line cost of term and not the benefit it doesnt provide. How many of your clients have received a life insurance benefit and thanked you for the help it provided their family? I am guessing not very many. Permanent life can provide income protection at retirement, cover final expenses including probate and inheritance taxes. If set up properly, it is the only sure investment because everyone dies. Usually it doesnt happen in your term period though. Term is dirt cheap because it makes the insurance company money from not paying out benefits.

Posted 3:39 PM EST September 10, 2008

Posted by: JDPolo

Woah! At least there are less names being thrown about. As far as the disclosure reqs, they're sufficient. I personally find the insurance processes more cumbersome than with securities. However, the sales practices may not be adequately enforced. Permanent policies are exception for the deferred comp, especially in 412is, for the few that are eligible. But it extends beyond that. I see a lot of valid objections to permanent policies that are terribly short-sighted. There are a lot of people in the wrong policy. The best tool, strategy, investment, insurance policy, for the wrong person isn't a good tool at all. Of all of the objections I see listed, when true, are perfectly valid. An over expensive policy benefits no one but the selling agent: True. But overlooking permanent policies in general is a significant mistake. Whole Life in particular needs to be better taken advantage of. In comparison, hedge funds certainly sound attractive, but are only suitable for a few peo...(Read more of this comment)

Posted 3:13 PM EST September 10, 2008

Posted by: dmelling

AIG, allow me to quote you: 'Cash Value life insurance is about the death benefit only'. Allow me to quote you again: 'Permanent life does much more than that'. Which one is it? By the way, it's easy to dismiss the 6% penalty when you don't have to pay it. Permanent life is a rip-off (with a few exceptions: buy-sell, non-qualified deferred comp, key-person). You know it; I know it; thank God for those of you who sell it, the buying public doesn't know it. If you had one-tenth the disclosure rules of the securities industry, no one would buy it.

Posted 3:01 PM EST September 10, 2008

Posted by: AIGWins

Its not about a 6% PENALTY. Permanent life does much more than that. The commissions paid are not taken out of their cash values. God forbid an agent gets paid a commission and helps people with their financial security.

Posted 2:51 PM EST September 10, 2008

Posted by: dmelling

AIG, your facts are wrong. 1 in 33 policies have a claim against them. That's a far cry from 1 in 33 people ever make the claim. That's because mortality ages are climbing and it becomes less expensive to replace old term policies with newer policies for longer terms at lower premiums. It is unfortunate that people like Balliva are stuck with policies that are 15 years old, using mortality tables that are antiquated, and ultimately paying too much for the basic life coverage. That doesn't even include the egregious 6% penalty that still exists after a decade and a half. I'm sure that penalty is there to cover the 100% commission paid to the agent to sell that trash. Keep drinkin' the Kool-Aid your GA is giving you though. (Notice how I haven't called anyone names?)

Posted 2:43 PM EST September 10, 2008

Posted by: AIGWins

Dmelling, you are an idiot. Who gave you a license? 1 in 33 people who buy a term policy ever receive a death benefit. Why would you buy term? Maybe when you are young to cover a large need, but even then you should have a blend of term and permanent. www.qualityoflifeinsurance.com

Posted 2:43 PM EST September 10, 2008

Posted by: dmelling

O.K., enough of this. Who agrees that Gov. Palin is better lookin' than Sen. Biden?

Posted 2:40 PM EST September 10, 2008

Posted by: dmelling

Hello AIG,

If life insurance is about the death benefit, why buy anything but term? It seems you can't have it both ways.

Posted 2:36 PM EST September 10, 2008

Posted by: AIGWins

You people have wasted my time. Cash Value life insurance is about the death benefit only. How can you say it is a joke for the insurance company to keep your cash value if they pay you a benefit? How would the insurance company stay in business? If your cash value is thirty thousand at death and the policy face is $100K and the insurance company keeps your 30K investment, how do you lose as a client? Cash Value life insurance is also not about the loans because it shouldnt be sold on the loan basis. If you need money out of your life policy, then someone sold you too much and crippled your budget. It has to be a high premium UL in order to make withdrawals and that has to be communicated to the client up front. You can take withdrawals from a UL with a loan.

Posted 2:33 PM EST September 10, 2008

Posted by: dmelling

Mr. Dawson,

Surely one who calls another an idiot has the intellectual ability to spot sarcasm when presented. I became LAH licensed in 1989 and have never, repeat, NEVER sold a cash value policy. Agents love them because they make a ton of money; life companies push them because they're profitable; in my book, that leaves only the POLICYOWNER to pay for the piece of garbage. Try again.

Posted 2:32 PM EST September 10, 2008

Posted by: Balliva

In reading responses, I accessed our policy. Just from a preliminary look, should be cash this out, or hold on to it? It keeps going-up. Plus, this plicy is only on my husband. Thanks for any advice.

BONUS PLAN
Policy Status Active
Product Type Universal Life
Policy Date 12-21-1993
Writing Company ReliaStar Life Insurance Company

As of 09-09-2008
Net Death Benefit $147,500.00
Accumulation Value $18,317.37
Surrender Charge $1,132.69
Outstanding Loan Balance $0.00
Surrender Value $17,184.68
Current year crediting rate 5.50%
Weighted average interest rate 5.50%
ABR Lien Amount $0.00

Posted 2:29 PM EST September 10, 2008

Posted by: dawson12

dmelling. It's idiots like you that give all life insurance agents a bad rap. Selling a product purely for the commission is outright fraud. I'm sure your clients would agree.

Posted 2:29 PM EST September 10, 2008

Posted by: JDPolo

To answer previous posts about what to do with their current WL policies: In short, I can't give you an answer, because I don't know either of your comprehensive situations, or the ins and outs of the policies you hold. Permanent coverage tends to be complicated. As far as the classic debate of 'Buy term, invest the difference' it doesn't ring true. I agree with AIGWins, in that you have to have investments and insurance, putting everything into a WL policy would be a terrible decision, just like putting everything into any one vehicle. A great WL policy is a solid tax sheltered conservative investment that serves other purposes. The advice is not 'ignore the stock market', it's do both. Over the long term, 6% tax free is great for the conservative portion of someone's portfolio. The reality is that there is no one right answer, it always depends on someone's unique scenario. Also: dividends indeed are 'returns of excess premium', that's how they earn their tax exempt status. ...(Read more of this comment)

Posted 2:24 PM EST September 10, 2008

Posted by: dmelling

Thanks. My wife always says the funniest things in life have an element of truth.

Posted 2:20 PM EST September 10, 2008

Posted by: BuyTermInvestDiff

dmelling:

That was damned beautiful .... couldn't sum it up any better and I should apologize to everyone, there are SOME very good things about the cash value products -- COMISSIONS. I've never sold the stuff, I am satisfied making less on term and getting investment trails. Great stuff Dmelling!!!!

Posted 2:18 PM EST September 10, 2008

Posted by: BuyTermInvestDiff

Thank you everyone for some good discussion. I think what makes the most sense is for people to go out and ask questions, ask agents to explain fully how their products work and get a real idea of what they actually need coverage for. I am not going to lead anyone in any direction, people have to make their own decisions. But there are things to think about: consider how many life insurance companies have closed their doors over the last 10-15 years. I think the average age of a cash value sales person is in the mid-50s. There is a reason why more and more term is being sold. Facts is facts. I just urge people to read the contracts, fully understand what their policies entail. I replace cash value all of the time and have had experiences with agent confrentations at clients houses where the cash value guy has stormed out. Time to head out to work. Best to you all.

Posted 2:17 PM EST September 10, 2008

Posted by: dmelling

Are you kidding me. Permanent (whole, universal, EIUL, etc) life insurance has provided for my family in a plethera of ways. It will fully fund my retirement, has put all 3 kids thru college, and allowed my wife and I to travel the globe extensively. The piece of mind I get because of cash value life insurance is amazing. It's the best stuff ever..........by the way....did I mention I sell it; I don't buy it.

Posted 2:11 PM EST September 10, 2008

Posted by: BuyTermInvestDiff

I know plenty of whole life agents who have term coverage because they know it is the best value. The last thing I am going to do is insult anyone here, this is a great forum for open discussion, but people have to understand how policies work. If an insurance company gives the face value to the beneficiaries, yet keeps the cash value when someone dies, I would have a hard time owning a policy like that. I would also have a hard time paying interest to 'borrow' my OWN money.

Posted 2:10 PM EST September 10, 2008

Posted by: ricpernell

To the Uneasybuyer, I also sell EIUL and have series 6,63 and 26 security licenses along with my Life license. I was Branch Office Manager for a top 10 security firm until I decided to work for myself.I find the EIUL to be a great plan for life insurance and also for future savings. There are things you should know about the plan you have as they are not all equal, or the same. There are questions about participation rates, minimum guarantees, caps and etc.
When the plan is properly structured, there is really nothing to compare with it. I have many clients who are very happy with their plan and give referrals. I would like to hear your concerns and provide you with information to ask your agent. I am not looking for your business, but are more than willing to help you understand what you have and make sure it is the proper plan for you and your family.
Please e-mail me at: ricpernell@aol.com.
Thanks,
Rick Pernell

Posted 2:09 PM EST September 10, 2008

Posted by: UneasyBuyer

See, our 'agent' had said that the 'loans' were interest-free, but when I read the illustration he provided us, it said that loans had an interest rate of 2.5% or something like that. When I questioned him, he said that was for loans taken against the actual policy amount, and not the excess cash value. Is he full of it?

Posted 2:09 PM EST September 10, 2008

Posted by: BuyTermInvestDiff

AIGWins:

Of course a needs-based assessment is called for .. no matter who is getting coverage. That is where people make all the mistakes of not getting proper coverage. You need to design a program to fit the associated needs and that is exactly what we do. It's not just about 'selling' life insurance, that's like having a used car sales person come by the house. I specialize in seven specific financial areas, income protection is the foundation. Your average insurnce agent isn't going to work with you on investment strategies (short- medium- and long-term), debt-elimination strategies or taxation strategies. So, instead of slinging insults and calling people morons, think about it on a case by case situation. I know plenty of whole life agents who have term coverage because they know it is the best value. The last thing I am going to do is insult anyone here, this is a great forum for open discussion, but people have to understand how policies work. If an insurance company ...(Read more of this comment)

Posted 2:06 PM EST September 10, 2008

Posted by: dawson12

BuyTerm. You are right about the loans not being interest free. The interest rate is 5.5% though, not 8%. And yes, if the loans are not repaid it would impact the cash value of the policy.

The policies are designed to be paid up at 65. The cash value and death benefit will continue to grow. I am very familiar with these policies as I am the one that wrote them. There is no tax exposure unless you pull out more than you paid in.

If a policyholder dies there is no 'either or'. The policy pays the death benefit, that's it.

Posted 2:04 PM EST September 10, 2008

Posted by: AIGWins

Buyterminvstrest;

If you think you are educating people, you are leading them in completely the wrong direction.

Posted 2:02 PM EST September 10, 2008

Posted by: AIGWins

These industry experts are normally just some dot.com or tv personality and dont know s!*t about what they are talking about. What do they know? They don't look at real life situations that I see everyday.

Posted 2:02 PM EST September 10, 2008

Posted by: BuyTermInvestDiff

UneasyBuyer:

If you don't feel good about something from the start, then something probably isn't right. Thankfully, you should have a 10-day 'free look' with whatever policy you decide on. Our group actually has a 20-day free look. If an agent does not have his securities licenses, he cannot work with VL or anything related to investments. I am sorry line was busy. My mobile is 860-402-9177. Happy to talk to you and answer questions. At a young age, there are many things to focus on. Do you have financial responsibilities now, do you own a house, do you have children, are there medical issues or histories. All things that should be figure out. Most people pay too much for not enough coverage and don't understand the product. Again, I am not trying to sell you anything, I am an educator first and foremost, making sure people understand what they are doing, not just the portion the agent is telling them about to sell them.

Posted 1:59 PM EST September 10, 2008

Posted by: AIGWins

Uneasybuyer, this guy is a moron. If you dont buy permanent coverage now, you may as well look for a big problem down the road. This guy doesnt have a clue what he is talking about. You need to buy permanent insurance and invest your money. You need both. That is the problem with these buy term invest the rest people. They want all your money and they dont tell you why to do anything. You have to get a needs based assessment otherwise they are just selling you something. You dont even know why you bought it in the first place.

Posted 1:56 PM EST September 10, 2008

Posted by: BuyTermInvestDiff

There are VERY rare situations where cash value coverage makes sense, but is there a reason why the industry experts -- NOT AGENTS -- but those who cover the industry say term is the way to go? It's not a passing fancy. Even today, wire reports saying that there was a 2- or 3-percent reduction in UL/VL coverage purchased last year. I wouldn't fret about the market, historically it has always come back around. Granted, it's off 20 percent in the last year, but look how it has historically rebounded. Wouldn't you like to buy low and sell high?

Posted 1:56 PM EST September 10, 2008

Posted by: BuyTermInvestDiff

dawson12:

Valid questions. First of all, you need to understand that a dividend is simply an overpayment refund to a policyholder by an insurance company. The company has basically been making money on your money and is giving you it back -- interest free. I gave you a break down on term vs whole life costs for a a 30-year old. Thirty-five year term would take that person to typical retirement age. If that person worked with a person who showed them how to properly invest and become debt free, you don't need coverage. Our group gurantees insurability until the age of 95 if a person's policy is still in force at the end of the term. That is why we put proper coverage and proper length of coverage on to start with and address other areas. Any way you cut it, it is the most financially responsible route to take. Investments are separate. Whole life, bottom line is that you will pay more, and have and option 1 or 2 or option A or B. Understand how it works. There are VERY rare sit...(Read more of this comment)

Posted 1:54 PM EST September 10, 2008

Posted by: UneasyBuyer

BuyTermInvestDiff, I would love to call and briefly discuss something with you. My husband and I are in the process (i.e. have already signed most of the paperwork, etc.) of having two EIUL (Equity Indexed Universal Life) policies. However, I have been wary of it from the get-go for many reasons. It was difficult to say anything because the person selling us the insurance is my husband's coworker. I have doubts about their company (not the actual insurance company) and now doubts about the investment/insurance itself after reading many articles. It seems to me that he likely only has a license to sell life insurance and not other retirement options, which is why he said this was 'perfect' for us. Let me mention that I am 20, and my husband is 23. I attempted to call earlier, but the line was busy. Will try again - thank you in advance, if I get ahold of you for an opinion!

Posted 1:51 PM EST September 10, 2008

Posted by: AIGWins

This is ridiculous. You are a moron Jonas. The idea behind life insurance is providing financial security to families, not an investment. And if you want to call it an investment, whole life insurance is the best one you can make. A thirty year old buys $100000 in whole life at $750 premium per year. If he dies at age 70, his beneficiary will receive $100,000 tax free. He would have invested premiums totaling $30,000. What kind of mutual fund is going to do that? Right now he would probably lose money on the market the way it is going. Especially with a financial advisor like you who only cares about padding your own pocket and not the well being of the client.

Posted 1:42 PM EST September 10, 2008

Posted by: dawson12

BuyTermInvestDiff. Read the post from JonasMcJohns a little closer. He gave the annual dividend, not the current cash value or the current death benefit of his policy. Once the annual dividend exceeds the annual premium the policy will sustain itself and continue to increase in death benefit and cash value without you every having to pay another penny for it.

You're assuming the need for life insurance comes to an end at a certain age. What happens if your term coverage ends, yet you still have a need for life insurance? What if your health has deteriorated? You're investments have tanked?

Posted 1:41 PM EST September 10, 2008

Posted by: BuyTermInvestDiff

Again, read the policy. If you are getting huge returns like that, great to look about getting term coverage and doing a 1035 exchange to avoid the tax exposure on that savings in the cash value.

Posted 1:40 PM EST September 10, 2008

Posted by: BuyTermInvestDiff

dawson12:

Tax free loans, certainly ... but NOT interest-free. Whole Life policies typically have a 4.5 percent annual return on them, yet, if you 'borrow' money -- remember, it's YOUR money -- they usually charge you 8 percent interest. Dawson, you might want to really check the scheduled returns on those policies your kids have. They're going to pay for themselves by gnawing away at your cash values and should one of those policy holders die, it will most likely be an 'either or' situation of beneficiaries getting the face value of the policy or the cash values. And remember, if you have taken a 'loan' of your own money and not paid it back, the insurance company will take that off of the face value, PLUS interest. If you had that money in a separate investment, say a Roth or traditional IRA, the beneficiary would get both the coverage and the investment. How would you feel about 'saving' all that money in your cash value and then NOT getting it in the end? Again, read the p...(Read more of this comment)

Posted 1:27 PM EST September 10, 2008

Posted by: BuyTermInvestDiff

If it was non-tobacco rating on the 35-year term, you would get $962,000 of coverage for the same price. What makes the most sense???? Buy term, invest the difference. Again, that was just on a 30 year old, could figure any age, but for the sake of comparison. If it was a 25 year old, savings would be greater as would coverage. There's no contest.

Jonas ... sadly, there's no comparison.

Posted 1:26 PM EST September 10, 2008

Posted by: BuyTermInvestDiff

JonasMcJohns:

Read the small print Jonas ... the company is using your cash values to pay for your policy. You have had the policy for 27 years and you only have that much in your cash values? Heck, even with the market bouncing around, you would have made far more. I just did a quick calculation, with my group, a 30-year-old at preferred or non-tobacco term rating for 100,000 of coverage for 35 years it is only $26.60 a month. That would give that person $116.05 in savings from your whole life policy to 'invest the difference'. What do you think that would break down as is just straight savings: 116.05 a month, X 12 months = $1,392.60 a year, X 27 years = $37,600.02 and that ISN'T EVEN INVESTED.

But lets see if we took that $142.50 a month premium and put it on preferred term coverage with us, you would get $1.27 million in coverage on 35-year term for $142.26. If it was non-tobacco rating on the 35-year term, you would get $962,000 of coverage for the same price. Wh...(Read more of this comment)

Posted 1:24 PM EST September 10, 2008

Posted by: dawson12

JonasMcJohns. I agree with you 100%. Whole life policies from a solid company will pay for themselves down the road. Tax deferred growth, access to tax free loans or withdrawls, tax free wealth transfer. Those that say they are garbage should do some homework. Can you make a higher return in the market, possibly, but what is the guarantee? There isn't one. Especially in the market we have today.

As far as life insurance on kids goes, it is one of the best things a parent can do. Both my sons have $100,000 Whole Life policies which will be paid up at age 65. At that time the death benefit on each policy will be $800,000 and they will have about $440,000 of cash value built up. Annual premium on each one is $585. That's a nice asset to have for a total investment of $38,000 over 65 years.

Posted 1:14 PM EST September 10, 2008

Posted by: AIGWins

I am a life insurance agent and I sell universal life to most of my clients. You should do your homework better before spouting off this ridiculous article. Permanent Life Insurance should not be seen as an investment for the cash value. The cash value may be available in an emergency and that is how it should be presented. Permanent Life Insurance satisfies a number of situations after your working years are over. Many people are limited to income from social security and small IRA's at retirement. Assume a couple retires with social security incomes of $1000 each a month. They also draw interest off an IRA that brings in $500 a month in additional income. If one person dies, this family will lose over 40% of the income coming in. We consider there is now only one mouth to feed and one car to drive, but the remaining spouse still has all the same bills and with inflation the way it is today they can't afford to lose that extra money. Not to mention the pension trap. Many fa...(Read more of this comment)

Posted 1:02 PM EST September 10, 2008

Posted by: dawson12

Term insurance has it's place as does Whole Life. Universal Life policies are also a good option in certain cases, however I would not sell one to anyone under 50. Like the earlier post said, they are Term policies with a cash value wraparound. The cost of insurance goes up as you get older. I've spent the last year trying to save UL policies that were sold back in the 80's by agents that didn't understand them and didn't explain how they worked to their clients.

If you're young and have debts to cover, buy term. You can usually convert it to permanent insurance along way without any additional underwriting if it is set up the right way.

If your older and want to leave money to your kids, church, charity or whatever there is no better way to do it than Life insurance. The beneficiary receives the money income tax free. No probate. Compare a Single Premium whole life policy to a bank CD or mutual fund and the SPWL is the obvious choice if you want that money to go to s...(Read more of this comment)

Posted 1:00 PM EST September 10, 2008

Posted by: JonasMcJohns

I totally disagree with the term buy term and invest the difference instead of buyimg Whole Life Insurance. There are exceptions when you should not buy Whole Life and buy term insurance. I did not listen to my friend and buy term in 1981 and bought a $100,000 Whole Life Policy. $142.65 per month. Now, most of you experts are laughing and saying what a foolish and unwise person. Please do not feel sorry for me because I am the one laughing.
The agent said I would have to pay for the policy for 10-15 years and the the policy would paid for itself. Well, in Nov. of 1991 I paid my last payment. The policy has paid for itself since.The Dec. 2007 statement my dividend was $4250 and the premuin for that year was $1540 which leaves a difference of $2710. The Insurance Company is paying me to keep the Policy. My calculations on the dividends in the policy is I was paid 6.81 per cent. Now which one of you experts made a perentage like that at your investing the difference. Yes, you who need...(Read more of this comment)

Posted 12:56 PM EST September 10, 2008

Posted by: BuyTermInvestDiff

initial coverage with our group if they wanted to continue their coverage. A $25,000 coverage on a young child would be upped to $125,000. Again, it's doing the right thing for the client. If they have one child already on their pollicy and then have another child, that second child is automatically put on 15 days after birth. If that child dies and wasn't on the policy, the company would still pay the death benefit.

Posted 12:54 PM EST September 10, 2008

Posted by: BuyTermInvestDiff

RonMartine:

You bring up a really important point about coverage on children. It is vital that kids are covered, not so much with those big-money coverages, but enough to take care of final expenses, $10,000-$20,000. Afterall, you are not replacing any income by covering a child. People think it is morbid to even consider putting coverage on a child, but lets face it, kids sometimes die and most families don't have the money to afford funerals -- more debt in many cases. The group I work with adds a child rider to a spouse's policy. The family can have one kiddo or 20, it doesn't matter, but they only pay for one. We can put as much as $25,000 on a child, but the key to what we do is that when that child turns 25, if the parent's policy is still in force, that child is guaranteed five times the coverage, no questions asked and no matter any medical conditions. Therefore, even if they were technically uninsurable, the would still be guranteed five times that initial coverage wi...(Read more of this comment)

Posted 12:42 PM EST September 10, 2008

Posted by: BuyTermInvestDiff

you might be getting screwed, take a look at the mortgages that many people have that they have refinanced a handful of times, yet still have 25-plus years to pay on it. Or their accountants who keep getting them big refunds thinking that is a good thing. Bottom line, people need to learn how money actually works in every facet from protection, to investments, to debt elimination and taxation strategies.

Posted 12:41 PM EST September 10, 2008

Posted by: BuyTermInvestDiff

Balliva:

Obviously something is amiss of an agent acts like that. Isn't your situation and well-being the most important thing?!?!? You are going to request a copy of your policy, be prepared, they are probably going to charge you something like $25-plus for that copy. Again, it comes down to understanding what you are 'buying' and taking 'ownership' of when you get it. The reality hits when these policies take on a life of their own and start getting funky. Amazing how some will have cash values that go backwards decades down the road and how others will start 'eating themselves'. I really like when people get dividends from their insurance -- this is just you overpaying on your policy and the company giving you your money back. Bad stuff. Balliva, happy to discuss in more depth with you or anyone else. Nothing for sale here, just information and a place to get questions answered from a licenced person. 1-866-831-4028. If you really want to learn other ways that you might be ...(Read more of this comment)

Posted 12:22 PM EST September 10, 2008

Posted by: Balliva

Hello BuyTermInvestDiff. Wow, I feel a bit ill. Our agent was always so persistent.I never have trusted him. Now, with on child in college and the second to follow next year, my husband and I are struggling financially. I am trying my hardest to get all of our ducks in a row. When I called our agent and asked him about the cost hike and possible cashing-in, you would think I committed a crime. He ended-up lambasting ING and vehemently discouraged us. $166.00 a month? Ridiculous. I so appreciate your advice and that of others. I have much research to do, and I won't do anything rash. I need to request an in-depth copy of our policy. Only have the ING docs??? Thank you

Posted 12:09 PM EST September 10, 2008

Posted by: BuyTermInvestDiff

Balliva:

Did you ever wonder why your agent didn't follow up with you more often? People's coverage needs change. I do annual reviews with my clients and make sure their coverage is where it should be (if they have additional children, have change in financial responsibilities, etc), at the same time, making sure they are allocated in their investments properly. Ever wonder why that agent didn't want you to cash in that coverage? They continue to get paid many times and the insurance companies are raking in the cash on those policies. Read the contracts. Remember, if you are changing coverage, NEVER cancel your current policy before your new one is in force. Also, for those with cash values, learn about 1035 exchanges, ways to avoid immediate taxation impacts. Again, the average insurance agent isn't going to discuss these factors with you.

Posted 11:59 AM EST September 10, 2008

Posted by: BuyTermInvestDiff

The next big rip-off that is being pushed now is the 'return of premium' term. All I can say is learn the facts about this stuff, read the small print and understand how it all works. I've seen so many 'toxic' cash value policies out there where people are underinsured and overcharged.

Posted 11:58 AM EST September 10, 2008

Posted by: BuyTermInvestDiff

if you have one. Option 1 or Option 2 (or Option A or B) ... it's grand theft. You wouldn't do business with a bank if you took money out of your own savings account and had to pay it back with interest would you? Common sense. Think of it this way, your auto and homeowners or even renter's insurance doesn't have a savings feature or investment feature attached to it, does it? Why should your life? I'm not trying to sell anything to anyone, but being licensed in the industry and in securities, I know how these things work. When you are talking about any cash value-related policy, the client in most cases has no clue what they've got, and in many cases, the agent will come back and sell them another policy or 'churn' them into another policy. I have had clients with more than 10 policies and never mind some really dodgy annunities as well ... it's a money maker for the insurance agents who could be selling term, but take advantage of the large commissions. The next big rip-off that is ...(Read more of this comment)

Posted 11:57 AM EST September 10, 2008

Posted by: BuyTermInvestDiff

Folks ... love the spirited exchanges, but think about it .. the renting vs. owning story is one of the oldest cash value stories in the world .. bottom line, you don't need insurance for your whole life .. you need it when you have financial responsibilities, to provide coverage in order to replace income in the event of death. At the same time, you set up your investments apart of your coverage. The focus is to grow your investments for retirement, etc. When you are older, your financial responsibilities should be taken care of (mortgage, debt paid off, kids out of the house). Your investments have grown -- remember, the market has returned double digits on average over the past 20-30 years. You will have savings for retirement and therefore, be self insured. There is a reason why financial industry experts, third party sources and others state that term is nearly always the way to go. Again, read the contracts on these whole life, UL, VL, and related cash value policies if you have ...(Read more of this comment)

Posted 11:56 AM EST September 10, 2008

Posted by: Balliva

Hello people. Wow, so much information and advice! Awesome. However, I am even more confused. The fact that our WLI has gone-up, disturbs me in reading some of your comments. Some of you suggested to try to find a reputable/honest financial advisor. How? Gosh, I am so confused, but I have a bad feeling about this policy going up in price. When I called the agent, he said, 'no, no, when you are older, you have WL insurance. He totally discouraged us from cashing-in and purchasing Term) Bottom line, I appreciate the discussion and will continue to read all of your comments. PS I have to request details on our policy too as I haven't received anything in a few years?????

Posted 11:50 AM EST September 10, 2008

Posted by: RonMartine

Life insurance is a very important investment for everyone. The investment is not necessarily for you it's for your loved ones. I agree that one type is great for one person but bad for another. Some people can't save money, but a good policy can have a savings plan that is better then none. A permanent policy will cover someone even if they are not insurable after their term policy expires. Some say insuring an infant or child is a bad idea, but the money a small permanent policy costs for a child has very big return. The reasons why? It guarantees their insurability when they get older. God forbid something happens to them, as a minor that could make them uninsurable would be catastrophic. Life insurance and types of insurance cannot be just said good or bad. The majority of the population does not save anything at all ever! A permanent policy if kept in enforce, forces people to pay monthly for a policy (which has some type of return over time) where money would be used otherwise to...(Read more of this comment)

Posted 11:36 AM EST September 10, 2008

Posted by: bbick001

rramirez26,
I can show you letter after letter from insurance companies to my clients stating that if they don't overfund their Universal or variable life policy that they will lose it. This usually happens between 60 and 70 years of age. Here is what they don't tell you about UL. It is a term insurance policy with a cash account wraparound. The term is Yearly Renewable, meaning that the actual insurance cost increases every year. It's cheap at first, but eventually the insurance cost eats away the investment account. It can't keep up. You end up losing the policy and the cash built inside. Have your agent or planner run an illustration for you and look at the cost @ 50, 60, 70. 75% of my new clients involve repairing this mistake made by them years earlier. By this time it costs them much more than to do it right the first time.

Posted 11:29 AM EST September 10, 2008

Posted by: rramirez26

P.S. I earn 10% interest on the policy

Posted 11:26 AM EST September 10, 2008

Posted by: sanzuoni

Since when is renting better than owning? Sure, term is cheaper than permanent life insurance, but that's because it rarely pays off!! Over 95% of term polices are never collected on. And by the way, whole life is a thing of the past Index life and variable life own the market place now. Sure, for families that cannot afford permanent coverage, term is the way to go; just like renting an apt. until you save enough to own a home. And oh by the way, term insurance does pay very large commisions, in many cases more than permanent does.

Posted 11:25 AM EST September 10, 2008

Posted by: rramirez26

If any one could offer some insight on my current situation I would appreciate it. I purchased whole life two years ago at age 23, thinking i was doing the right thing, but now that i read your comments, i regret I made a poorer decision.

'Universal Life

This is a flexible-premium type of life insurance coverage with an adjustable death benefit. The policy owner may increase or decrease scheduled premiums, skip premiums, or make additional premium payments. Insurance coverage may be increased or decreased subject to policy requirements and limitations. These unique features enable the policy owner to adjust the policy to meet changing insurance needs.

Death Benefit Options Available:

Option 1 provides a level death benefit equal to the amount of life insurance chosen. Option 2 provides a death benefit that varies with the Policy Account Value. The death benefit is the amount of life insurance plus the Policy Account Value.

Regulations m...(Read more of this comment)

Posted 10:55 AM EST September 10, 2008

Posted by: bbick001

Consumers!!! Notice everyone on this forum giving you their phone numbers. Trash talking specific products. They obviously want to sell you their miracle product. There is a place for all types of LI. Like I said before, everyones situation is different. Don't jump into anything without actual factual research. I'm not talking about what some supposed expert says or an internet article reads. Anyone can have letters behind their name for the right price. Take out all the opinions and just look at the facts. The only LI I will purposely say that there is no use for is non-guaranteed universal and variable life. These are not WL policies and always, 100% of the time, never work. These are the ones with a surrender charge, usually 8-10yrs. Traditional WL policies don't have a surrender charge.

Posted 10:07 AM EST September 10, 2008

Posted by: LifeWholesaler

I've been wholesaling Life Insurance for 10 years (about 300 cases a month). I think the article is very limited. As some other posters have said, each persons scenario is different. Just some thoughts that may help some of you with questions.

Term - Cheap, effective, limited,

Whole Life - Garbage all the way around. There are products today that have the lifetime benefit feature at a much lower cost. Building cash in a policy just doenst make sense using this product.

Guarenteed Universal life - Less expensive then Whole and will carry forever. No cash build up.

Variable Life - Good for young people trying to supplement thier 401k or for the investor savvy

Happy to answer any direct questions at zaxli743@aol.com

Posted 10:01 AM EST September 10, 2008

Posted by: bntroberts

InsuredVT,

Does VT stand for Vermont? If so I'm in your area and can offer you a lot of advice on your options, but there's a few additional things I need to know. Send me an e-mail at bntroberts@gmail.com and I'll give you a phone number to contact me at.

Posted 9:42 AM EST September 10, 2008

Posted by: val4info

People, do not be fooled by the 'buy only term, invest the rest' rhetoric. BOTH types of life insurance are valuable depending on what stage of life and what the needs would be of those you leave behind. I agree that whole life should NEVER be sold as an investment. That's not it's purpose. WL is a source to pay final expenses. Premium and benefit locked in. Cash value or 'investment' portion provides some ability to borrow against or cash-in, in future. TL is inexpensive and pays higher death benefit and should be owned by those, especially younger people with responisibilities of mortgage payments for spouse and college for children. TL's price increases beyond a person's ability to afford eventually, with age. Both types should be owned in an overlap during the time of most financial responsibility for best coverage.

Posted 9:21 AM EST September 10, 2008

Posted by: bbick001

Did you know that only about 3-5% of Term policies pay out. How many WL policies pay? Anyone? Try this. Take what you pay for that Term only policy a year and multiply by how many years you will have it(10, 20, 30yrs) compounding a realistic average rate of return. Something that everyone can get. Let's say 8%. Now whatever number that is, there is a 95-97% chance that you just gave that freely to that great term insurance policy. InsuredVT, Balliva, and Zag look for a professional in your area to help you and be careful of the sharks. There are alot of variables in your situations so you may need to get more than one opinion.

Posted 9:09 AM EST September 10, 2008

Posted by: bbick001

Hi all,
A question. What rates of return are you term and invest the difference guys getting this year? I have read 10, 11, and 14%. I invest IRA's, annuities, mutual funds, and many other vehicles for my clients. Averages for my accounts have been as high as 30% in certain funds. It is definately not happening this year. Telling the people on this forum who need professional assistance that term is the only way to go is wrong. Every situation is completely different. You are saying that IF you put the difference in an account, and IF you did this for 20-30 years, and IF you made 10-14% return you would create a certain amount of money. That is alot of BIG IF's!

Posted 8:53 AM EST September 10, 2008

Posted by: nurseboy

ballivia a 20 year term at your age assumeing you dont smoke and are in ok health will cost about 250 bucks a month. useing quotes from www.zander.com

Posted 8:48 AM EST September 10, 2008

Posted by: nurseboy

shermandt go to zander insurance (www.zander.com) they will search a lot of the term policies for you and get everything going (no i don't work for any insurance sales people so this is not my company i am pitching who i used :)) not knowing what state you lived in i used florida but for a 30 year old non smoker for 30 year term 1 million dollar policy is 60 bucks a month. not being able to find any place to figure price of whole life online without giving them all the info and getting a call back lets assume it will cost you 225 a month for same policy. that is supposedly 165 a month you will be 'saving' problem is you lose the first two years or 3940. (probably more since you have to pay for the plan to. if you take the difference and invest it in growth funds at 10% (amount from the story) at the end of 30 years you will have saved 358,267.98. if you use a whole life policy and get that great 6% rate.... you will have a whopping 143,826.80 (when calcutlating dont forget to ta...(Read more of this comment)

Posted 8:47 AM EST September 10, 2008

Posted by: ricpernell

To: Shermant,InsuresVT and Zag3, please contact me, ricpernell@aol.com and I may be able to share some information with you to help you with your questions.

Thanks,
Rick Pernell
Financial Strategust

Posted 8:31 AM EST September 10, 2008

Posted by: nurseboy

first why would you settle for a 6% return when invested in good mutual funds you can get12-14% returns. the reason why whole life insurance first year is misunderstood is called profits. do the math people. even at 10% saving from mutual funds and what not you can get alot more money. you are not paying the high amounts of profits associated with whole life. my friend, who sells whole life said they get a ridiculous amount. something like 5% of the monthly price. buy term policy for 20 or 30 years when the time is up if you invest the difference you wont need life insurance, you will then have alot more money overall. and saving more monthly payments on a whole life thus saving more.

Posted 8:27 AM EST September 10, 2008

Posted by: shermant

I have a quick question about buying life insurance. I am a 30 year old male and I would like to have life insurance to make sure if anything happens to me, my wife is not left paying for the house on her own. I have gone to a few 'agents' and they offer so many idfferent policies its confusing. I dont want to admit that I don;t understand for the fear of looking dumb but at the same time I would like to know at my age as a non smoker what policy is the best? Any thoughts? Anyone?

Posted 8:23 AM EST September 10, 2008

Posted by: InsuredVT

Would love someone to reply to my post and put in message that it is for me..I still don't know what we should do..see earlier post dated Sept 8 - Thanks InsuredVT!!!

Posted 7:29 AM EST September 10, 2008

Posted by: zag3

I am 43 years old and have a whole life policy that my parents set up for me when I was little, it had a cash value of $3,300.00, I had a high credit card and borrowed $2,300.00 from it. Any advice on if that was a good idea or if I should just cancel the policy so I don't have that debt, (I don't necessarily have to pay it back but will have to pay at least the interest every year). I do already have a term policy and have a insurance policy with my job. I have three children and a husband.

Posted 7:24 AM EST September 10, 2008

Posted by: ricpernell

Financial Strategist:The article mentions only Term Life & Whole Life as types of insurance.There are others.While Term is definetly inexpensive, the type of life insurance should be determined by your needs.My clients like to put their invesments and insurance into one plan..Equity Indexed Universal Life Contract. Why EIUL?.According to Warren Buffet, the S&P500 has out performed hedge funds without the management fees and expenses of the investment funds. The cost of the Investment Grade, Maximum Funded EIUL contract can be as low as 1 to 1.5%. The cash value in the contract is safe(never lose your principal),liquid,(money is available without 10%penalty), and has a rate of return between 1% & 15% depending on the performance of the S&P500.Add to this, a big death benefit comes along for the ride. If you want more information on the Warren Buffet Articles and information on this type of insurance plan you can reach me at: ricpernell@aol.com.

Posted 1:56 AM EST September 10, 2008

Posted by: KirstenB

Balliva:
Hi, when you say worth...are you referring to the cash value that has built up or the face amount? I ran a quick quote for you...since you said you were in your early 50's, I assumed the highest and ran it at age 54 with 20,000 face value with a term of 20 yrs and it's $47/mo premium. So the 'agent' that said 'you will lose thousands and thousands of dollars on term. It will go up incredibly' is not correct. And if he's going to say that you will not have insurance if you live past 20 years, let me point out that if you invest the difference ($120/mo) into a mutual fund earning 10% you'd have $92,000 in 20 years. Now tell me, if you have $92,000 invested, would you still need the 20k in life insurance? To do a full analysis though, I would need more info, for example face value, cash value accrued, the cash out value, etc. I really hope that helps.

Posted 6:03 PM EST September 09, 2008

Posted by: jacobtho

Sorry, Yes, I was commenting on your post. I am not sure exactly what the all circumstances are, but at this point you will lose thousands and thousands of dollars on term. It will go up incredibly. Like I said feel free to give me a call, there are few more things i'd like to ask you, but the simple answer is your whole life premiums shouldn't go up, and term policies will dramatically go up. There might be a few other options too.

Posted 5:43 PM EST September 09, 2008

Posted by: Balliva

Hi Jacob,

I am not sure if you are commenting to my post, but if you are...thank you! You don't think that $166.00 is outrageous? I thought the payment with Whole Life was supposed to go down as time goes on? We have had our policy for about 26 years. (not sure) I appreciate your advice. :)

Posted 5:40 PM EST September 09, 2008

Posted by: jacobtho

I personally think you should stick with the whole life policy, term will be so expensive for you, and will go up dramatically. If you want a second opinion feel free to call me. My number is on my site. www.becomingyourownbank.com

Posted 5:35 PM EST September 09, 2008

Posted by: Balliva

Hello all.

I am still confused as to what my husband and I should do with our life insurance policy. We are in our early 50's and have whole life. (worth about $20,000) It has gone-up (not down) in price to $166.00 a month. Yes, we can cash it in for dividends, but my main concern is how the price keeps going up rather than down. Should we cash-out and buy term? Please, any advice would be appreciated. I am not sure about the advice our insurance guy gives?

Posted 10:54 AM EST September 08, 2008

Posted by: InsuredVT

HI!! We have a Whole Life Policy, with KOC which costs $75.00, per month for 60K coverage. We have had since 5/24/1994. Anniversary cash value as of 09/18/2005 was 6395.40 PUA cash value was 2177.00 and paid up Adds 7024.00 Effective date was 1994 with exp date of 05/24/2060. DW & DI is 60K. Annualiazed Premium of 900 less current dividend of 425.70 less Increase in cash value of 815.40 Equals Net +/- for year of 341.10 it says net cost $9633.18. This is a policy strictly for my husband with me, his wife, as the beneficiary..what to do??? I have no idea if THIS whole life policy is a good deal or not, and if we did cash it in, and get term, what amount of cash would we expect. I did look of KOC and they have a AAA rating (whew)...Is there more I should know, should we look at other insurance?? My husband now has sleep apnea and the lowest rate for 150K is West Coast Life with only an A+ rating and cost of $957 year. 25 Year Return of Premium Term Life with A+ by AIG is 4731 to ...(Read more of this comment)

Posted 4:32 PM EST August 29, 2008

Posted by: JDPolo

To answer nurseboy's criticism: That first year loss is misunderstood. That 6% return is aggregate, not just what's happening in year 17. A policy owner does not see the returns immediately--correct, Whole Life is ONLY for long term money. That 6% includes the first few years. Once again, IRA's are subject to taxes (significant) and market risk (significant). And what commonly held mutual fund has done 14% net over the last 30 years? Further, if depending only on market vehicles, retiring in a down year has severe consequences. I'm not suggesting WL as replacement to an IRA, but rather a great tool used in conjunction with one. Definitely better than maxing out a 401k.

Posted 4:26 PM EST August 29, 2008

Posted by: JDPolo

Yes, Whole Life is expensive, but so is a mortgage. Odd thing, most people seem to like owning their own homes. The truth is that Whole is a tremendously powerful wealth tool, but it HAS to be done correctly. It has to be the proper product for the right person, with a great company. When I say that, I mean it has to be one of the top four. Period. When I read criticisms of Whole Life, or permanent insurance in general, they're often shortsighted. For example, you have to contribute 1099 income to a SEP IRA. That 47k that you can put in there is great, but, untouchable till retirement age and TAXABLE. High net worth individuals have been dumping money into Whole Life policies for decades. WL is also tax free growth. Most criticisms claim that it's 1%-3% yield. Who would ever buy a 3% vehicle? Again, when done properly, it's 6%. Which, would be above 9% for someone in a high tax bracket. Is that IRA doing 14% this year? Whole Life is not simple, and unfortunately is often...(Read more of this comment)

Posted 10:18 AM EST August 26, 2008

abilityphl

32 Comments

you are = you're
it is = it's

Posted 9:27 PM EST August 20, 2008

Posted by: nurseboy

here is the thing. with the 200+ dollars a month you save you can drop your life insurance policy after 20 years and have a measly million or two in the bank to live off of. you would have no were near that in a whole life policy. sorry to hear you got scammed 6 times. but hey shame me once shame on you shame me twice... or 6 times....
and no its completely useless stuff.
you can open up 5 iras that can give on a low average of 10-14% how much intrest does your whole policy give a whopping 6 or 8%?
if you have alot of money get a sep ira can only deposit a meres 125k a year that way.

Posted 9:11 PM EST August 20, 2008

Posted by: jacobtho

Here is the problem, you see 50 dollars now, verses 250. I say build cash values and make it self sustaining, because in 30 years when I am still paying 250, you are paying 800 to 1,000. Thats just from a pure insurance standpoint. I would use the policy even without the death benefit because I see the power of it as a banking solution. The advantages are just too powerful to pass up. We have 6 policies in my family that we are using to build cash values. Its great stuff.

www.becomingyourownbank.com

Posted 8:55 PM EST August 20, 2008

Posted by: nurseboy

I would suggest looking at whole life with a different perspective. Instead of focusing on high death benefits and low premium, we concentrate on high premium and high cash value. You will have a self sustaining policy in about 5 years, and you can now use it as a financing solution, and it will grow dramatically.

your right. whole life doesnt have high death benefits and low premiums. it has low death benefits and high premiums. tell me how a 30 year term for say 50 dollars a month for a 1 million dollar poilcy is better then say the 250 or 300 it would cost a whole life person. think of this. save the money that the person selling the whole life would get for selling you the crap. take that money invest it in an ira and you will have a self investing account a few minutes after you open it. the only person who benefits from whole life is the person selling it. it takes two years or more of you paying into your 'savings account' that they offer before you start to mak...(Read more of this comment)

Posted 5:32 PM EST August 20, 2008

Posted by: jacobtho

I would suggest looking at whole life with a different perspective. Instead of focusing on high death benefits and low premium, we concentrate on high premium and high cash value. You will have a self sustaining policy in about 5 years, and you can now use it as a financing solution, and it will grow dramatically.

http://www.becomingyourownbank.com

Posted 10:15 AM EST August 06, 2008

Posted by: nurseboy

what a person would have at the age of 60 when his term policy would end(assuming he had a 30 year term that he got at 30 years old), using the same numbers from above would be a measly 479,500.08 (2650x 10%x 30 years) the only person that thinks whole life is good is the person selling it. there are extremely high commissions and a great 6% savings plan, that sure beats a 12-14% ira/mutual funds plan. plus dont forget the first 2 years of the whole policy you save next to nothing. that means two years of compounded interest that you are losing and the company is gaining.

Posted 3:03 PM EST July 30, 2008

Posted by: KirstenB

To finklew's comment....many term life policies are guaranteed renewable and the customer should check if this option is available before purchasing. Also if a term life agent is doing a complete plan for the client they should have set them up with a plan to pay off debt and save for retirement before the client reached the age when the term would run out anyways, thus the client is self-insured. These are services that Primerica Financial Services provides to their clients if you need further information...www.primerica.com

Posted 8:27 AM EST July 25, 2008

Posted by: finklew

The flip side of the situation is what does the 60 year old do now that he is loosing his term policy he purchased 20 years ago?? He still needs the coverage to cover current debt and burial expenses, and now he has a heart condition and can not buy new coverage.? The price to convert? his current policy? is out of his price range thus he should of purchased some whole life and the rest term life 20 years ago.? A company that is found to give you ?straight answers? about your future needs for life insurance is www.TermLifeAmerica.com.

Posted 5:43 PM EST June 06, 2008

Posted by: TermLifeInsurancePopStar

And a great place to compare term life insurance quotes online is <a href='www.wholesaleinsurance.net' title='Term Life Insurance' alt='Term Life Insurance'>Wholesale Insurance</a>. From their site you can compare rates and quotes from all of the different life insurance companies all in one place. It's an excellent service.

Posted 5:41 PM EST June 06, 2008

Posted by: TermLifeInsurancePopStar

I definitely agree that term life insurance is almost always the better choice for most people. It's cheaper, and it fulfills the needs for most younger individuals. Whole life insurance is generally used to accumulate cash that can be borrowed against, or for other purposes. Term life, while not fancy or super complicated, offers the protection that most people are looking for.

posted 9:32 PM EST August 18, 2009

Posted by: Cheap Pennsylvania Insurance on Cash Money Life

I think that patch is the best one for sure and it’s only one that i can buy as well. Good value for the money

posted 6:02 PM EST August 7, 2009

Posted by: My Journey on Cash Money Life

Miss J, Lot to digest but I feel you deserve some insight: 1) Life insurance is income tax free. As opposed to what most finaicial planners tell you – it is 90% of the time included in your estate for estate tax purposes (there are advanced ways to get it out of your estate). So, if you had assets totalling $500,000 and you had a $1,000,000 policy. You would pay 0 in federal estate tax (because you can leave up to $3.5 Mil to a non-spousal US bene) but you might hit a State Estate Tax if you live in one of 18 states which are decoupled. 2) Second your end number is $1.67mil or something doesn’t into account future growth of that money. If you are trying to get how much you need that way (e.g. Income Replacement) you need to do the present value of that number given a specific growth rate (I would use something really low because the kid is going to have to be conservtive so like a 2.5% NET to 3.5% NET). 3) In terms of the mortgage you should build an excel sp...(Read more of this comment)

posted 5:36 PM EST August 7, 2009

Posted by: Miss J on Cash Money Life

Hey there. Insurance shopping. We have one child, 3 months old. Anyways…Are life insurance benefits taxed? Becasue my before tax and after tax incomes are VERY different and that makes quite a difference in how I calculate the “rule of thumb”. Our son needs 21 years of “income replacement”. I make $78,000 a year (pre-tax) so I would need $1,638,000 in life insurance!? That seems like an awful lot… If I calculate it post tax then it’s still about 1.2 million which still seems like a lot…but maybe I’m just being naive about the whole situation… Also, providing that if I were to die, my husband could take a lump sum of cash and pay off our 30 year mortgage we would save an INCREDIBLE amount on interest…so doesn’t that reduce the amount of life insurance we need? For instance our $235,000 mortgage comes out to about $1,600 a month of which a whopping $1,100 goes to interest right now. I know that as time goes o...(Read more of this comment)

posted 11:22 PM EST July 15, 2009

Posted by: Dez on Cash Money Life

Humm, I take you IF I don’t have dependents but I have a sizeable estate, I don’t need insurance to pay taxes for the beneficary? IF I’m poor I don’t need insurance to pay for a funeral? If over 65 and I am married, my kids are grown, my spouse wouldn’t need to replace the lost income from my soical security nor would my spouse need to live after I’m gone? I’ve never seen such a crazy statement.

posted 4:16 AM EST June 26, 2009

Posted by: Bret on Cash Money Life

I recently started an internship with a mutual company and am on the (never ending I assume) path to learn everything about each concept (whole vs. term) and each product so I can best serve my clients and have a lucrative career that allows me to sleep at night. I’ve read that the average person will make additions to their original commitment 5-7 times over their lifetime. From a purely financial standpoint, I would much rather see the first year commissions from all 5-7 purchases, even if it’s term, by best serving my clients needs and situations then to push a whole life policy in order to get more cash. And that’s purely a financial move, not to mention ethical. Every negative thing I’ve read about products, rates of return, and sales tactics make me feel more and more secure about my position with this company and the standards which they teach and promote. Granted, not every agent will follow those and act in the best interest of the client, but that̵...(Read more of this comment)

posted 10:25 PM EST June 24, 2009

Posted by: Melissa on Blueprint for Financial Prosperity

Thanks, Shock!

posted 3:32 AM EST June 24, 2009

Posted by: Shock on Blueprint for Financial Prosperity

Yes, you can pay annually. It’s the cheapest way to pay. I pay annually for my 30 term life insurance. Paying quarterly or monthly costs more at the end of the year. I’m like Jim, I didn’t need life insurance when I was single because no one is counting on my income if I die. Now that I’m married and have a kid on the way, It was time for life insurance. My financial advisor found the best coverage for the money. We had the medical exams at our home on our schedule. The process was painless (pun intended).

posted 12:32 AM EST June 21, 2009

Posted by: Melissa on Blueprint for Financial Prosperity

I have a question – say the term life policy is $30.00 a month. Do most companies have you pay monthly, or just pay one large sum at the beginning of the year?

posted 5:03 PM EST June 13, 2009

Posted by: Pete on Blueprint for Financial Prosperity

Even if it is portable, it will more than likely be at a rating of “Standard” or higher. The reason for this is because the insurance was guaranteed issue, the company knows that a percentage of those people accepting the offer to buy additional insurance will be high risk, or be medically unable to qualify for a privately owned policy. These additional costs to the insurance company are absorbed by the healthy clients paying the high premiums. Some policies offered on a group basis (through an employer) are portable, but they HAVE to be converted to one of those horrible, nasty, “nobody ever wants it” Cash Value policies. Check all of the portability clauses on group insurance before deciding that this is the only insurance you plan on carrying for your family. One of the reasons I recommend that people talk with a local INDEPENDENT agent or financial planner about insurance. Aside from being greedy scumbags concerned only with commission, they also kno...(Read more of this comment)

posted 2:28 PM EST June 11, 2009

Posted by: hgv insurance on Cash Money Life

Determining everything before buying insurance make cheaper your insurance. btw useful article.

posted 6:06 PM EST June 9, 2009

Posted by: Dough Roller on Cash Money Life

Great article. It hit home for me because like the author, life insurance helped me get through college, too.

posted 1:42 PM EST May 29, 2009

Posted by: Todd on Blueprint for Financial Prosperity

Just a quick comment on life insurance: look into fraternal insurance organizations like the Knights of Columbus, Modern Woodmen of America, etc. Some have membership requirements (”be a Catholic in good standing” for KOC) or are open to the general publi. Often these are rated at the top of the industry, rates are good, and returns are a bit higher. They tend to be more conservative in outlook, and don’t offer a lot of gimmicky products. They are like the “credit unions” of the life insurance industry. They are only accountable to their memberships, not outside investors. Dividends that they offer can be used to pay down premiums, often after just a couple of years. One upside of more expensive “whole life” style policies with fraternal insurance companies is that the dividends soon outweight the premiums, and can shift your insurance cost to $0 for a growing asset.

posted 12:51 AM EST May 28, 2009

Posted by: DDFD at DivorcedDadFrugalDad on Blueprint for Financial Prosperity

@Ian Not geared entirely to you, I have read others saying the same thing. Two things to consider: 1) You mention that you don’t “need” life insurance– you’re right you don’t need it– your family does. If you didn’t come home alive tonight– could your family use say $250,000 tax free if you aren’t alive? 2) Are you a gambling man? You are assuming that you will remain insurable a few years from now? What if you are not insurable in a few years?

posted 3:36 PM EST May 27, 2009

Posted by: ian on Blueprint for Financial Prosperity

DDFD said: “The best time to buy is today” I don’t need the benefits of life insurance coverage for several years (read ~5). Does it make sense to pay for it now anyway? What do you do when the policy ends earlier (because you bought early) and you are still alive, do you purchase again at an even higher rate? I am in the same boat as Jim (28, married, no kids) and not planning on buying life insurance yet. Does it make any sense at all to wait? Converting this to a math problem: The cost over the next 5 years of insurance i don’t need (~$3k) vs. the additional cost if i buy a policy 5 years from now ($??)

posted 2:51 PM EST May 27, 2009

Posted by: Jim on Blueprint for Financial Prosperity

Yes you can lose money in your investments and that would make ROP policies a better safe investment. There aren’t any guaranteed 8% returns and it seems unlikely there will be in the near future, unless we start seeing runaway inflation, in which case 8% won’t be that great anyway. But you need to know these numbers so you can make decisions. I don’t think 8% annualized growth over 30 years is unreasonable, especially when you believe the market is in a depressed state right now. If the numbers said you needed 20% annualized growth over 30 years to breakeven, then you know clearly what the right answer is. 8% isn’t outlandish, but 20% probably is.

posted 2:35 PM EST May 27, 2009

Posted by: TJ Shah on Blueprint for Financial Prosperity

Jim, I tend to disagree with your quotes “While appealing, would I be better served taking the $34 difference in premiums a month ($76 - $42, TransAmerica) and investing it? After 30 years, assuming 8% annual growth and $408 in annual contributions, the investment would yield over $46,200. Cut away 25% for Uncle Sam, and you end up with $34,650, which puts you ahead of the premium life insurance plan and you retain control of your money.” Although theoretically if your investment earns 8% annual growth you would come out ahead but you can also make losses with your investment and not see the money at all. wouldn’t ROP policies a better safe investement. Besides where do you get a guaranteed 8% returns these days. I would like to know if there is such an investment. TJ Shah

posted 1:14 PM EST May 27, 2009

Posted by: labelcd6 on Blueprint for Financial Prosperity

Nice article. I’m pretty much in that same boat that you are as far as not needing life insurance at the moment. I’m 99.9% sure that I’ll be getting $500,000, 30 year, term life insurance when the time comes.

posted 1:01 PM EST May 27, 2009

Posted by: Steve on Blueprint for Financial Prosperity

I had term life for 4 years, then I recently converted to whole life. It’s nice to know that I could use that investment money later on down the line as collateral and my premiums are fixed for life. It’s a small plan of $150k and I think it’s a good start. I like the idea of whole life insurance. If I saved $XX on my monthly premium by having term, could I invest the rest (like many people say)? Sure I ‘could’ but I won’t… just like most people. This thought did come to mind though when I converted to whole life, so I immediately setup an automatic savings plan with Capital One Direct while it was fresh on my mind.

posted 12:53 PM EST May 27, 2009

Posted by: Jim on Blueprint for Financial Prosperity

I’ve decided not to get life insurance for now, so no application process planned.

posted 9:18 PM EST May 26, 2009

Posted by: That One Caveman on Blueprint for Financial Prosperity

We recently got life insurance and I’m happy we did. I feel more comfortable now that I know my family will be taken care of. As I generally recommend (in a non-professional, disclaimer-ridden way), get enough Whole Life to cover the “fixed” end-of-life expenses such as the funeral and get Term Life to cover what your heirs will need for that period of their life. What your family will need over 30 years is different if you’re starting the clock at 28 vs 38.

posted 8:10 PM EST May 26, 2009

Posted by: thomas on Blueprint for Financial Prosperity

I really like how you broke down the premium insurance policy concept. Getting @10% sounds absurd given the current state of affairs, but it’s not impossible. However, you’d have to operate that personal account and manage the portfolio to accurately reflect your risk. Similar to what happened to those recently who didn’t plan for retirement, you could lose all those savings come maturity time. On the other hand, the premium account (I’m assuming) is guaranteed since you didn’t die.

posted 7:15 PM EST May 26, 2009

Posted by: Jim on Blueprint for Financial Prosperity

It makes sense in that it’s cheap when you’re 24 and will seem very cheap if you compare it to how much it would cost later on, as for whether it’s a “good deal,” who knows… it’s insurance. If you live past 54, it’s not a good deal but you’re alive. If you don’t, well it’s a good deal and you’re dead… in which case it doesn’t matter.

posted 7:13 PM EST May 26, 2009

Posted by: Jim on Blueprint for Financial Prosperity

They were for $500,000 30 year policies, I must have accidentally removed that in editing.

posted 7:12 PM EST May 26, 2009

Posted by: Jim on Blueprint for Financial Prosperity

That’s very true and usually one of there reasons why people recommend against getting insurance linked to your employment. Even if you don’t get laid off and instead want to work somewhere else, it makes the move a little harder.

posted 6:56 PM EST May 26, 2009

Posted by: Matt on Blueprint for Financial Prosperity

I’ve subjected myself to insurance medical exams twice. Once to get Universal Whole Life insurance (thanks a lot, “financial advisor”) and a second time (when I came to my senses) to get a term policy with better coverage for a lot less. Both exams were non-events. A nurse came by, took a health history, blood pressure, urine, height, weight and blood. In both cases, I was in the lowest risk category. I believe the risk categories are quite prescrIptive - typically based on health data (such as cholesterol, HDL/LDL ratio, height, weight, etc) instead of the opinion of a specific doctor. My wife and I have two children under 3 years of age, and my wife stays at home. As such, I signed up for as much term coverage as I could (12-14x annual salary is typical max). Being in the super preferred category, I got a $1MM 30-yr term policy for about $55/mo. My strategy was to get as much coverage as I could so my wife would have time to raise the kids and get them...(Read more of this comment)

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