Difference between, Whole, Term, Variable and Universal Life Insu

you're a peculiar fellow. why are all 4 of your posts about life insurance, and at ridiculous hours of the morning?

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Agent told me Whole is better, but how?

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Not "how"...."who", same letters, different order.

Whole life is better for the insurance agent selling the policy. He gets bigger commissions selling that type of policy than he does for a term policy.

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Whole life is better for the insurance agent selling the policy. He gets bigger commissions selling that type of policy than he does for a term policy.

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What he said. The only people in the financial world who think whole life insurance is the best are insurance salesmen.

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Difference between, Whole, Term, Variable and Universal Life Insu
I did a NPV/IRR calculation worksheet for a whole life policy for a project. The hypothetical policy returned a negative IRR/NPV for the last decade or so of the policy.

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Greatest and worse thing to ever happen to the LI industry: illustrations. I hate them and love them. They make an average, under educated agent dangerous and take a good, educated agent to the next level.

If a client or prospect shows me an illustration from a competitor and tells me they can "make more" with the competitor's product, I have a field day.

Why? 99.99939% of the time, the competitor neglected to educate the client/prospect exactly what an illustration is. It is not a promise of cash values. It is not even a decent projection. It is to show how the product can work over time.

I always tell clients the illustration will 100% change in just 3 years. It is nearly impossible to forecast together - interest rates, rates of returns on life insurance stock, bond, and real estate portfolios, company expenses, trading expenses, maintenance expenses for real estate(significant for most LI companies), overhead, mortality cost/projection, etc. timing and amounts of policy loans - pass 2-3 years. Too many variables to into an illustration. You might get 3-4 close but the others will be off. It all will change.

I remember John Camp at Premier Bank (LNB, BankOne, etc) tell us in Credit/Cashflow Analyst School that 5 year projections are shaky and 10 year projections are worthless. LNB/Premier had a good training program recognized through out the country. Remember an present day illustration is a 40 to 60 YEAR projection. That is an incredible time frame to project.

During the late 70s and early 80s, illustration software was new. Projections in them were rosy. I remember seeing a UL project with an interest rate of 11% projected out for 20 years! 11% for 20 years! Damn right the policy looked good, especially for the lower premium compared to a similar WL policy at the time. As reality set-in - declining I-rates from the 80s to the 90s, the same policies purchased in the 80s did not perform as well. Premiums were too low and I-rates declined so the cost of insurance ate into the remaining cash value. This lead to policies lapsing, usually at a very bad time. That led to a host of class action lawsuits in the 90s. There is much more to that story than I want to type (replacing WL with UL and such).

In the mid to late 90s, most LI companies changed how they illustrated whole life (UL and VL) policies. The numbers became MUCH more conservative. Rates of returns lowered and expected expenses higher (Example: A company put a cap on the I-rate for UL and VL. Company had to provide a mid-range projection and a zero interest rate/rate of return project with maximum costs). Of course, the illustrations did not look as good, but if an agent truly educated the client/prospect on exactly what those numerous pieces of paper were, it did not matter.

I would figure that today's illustration are very conservative, especially on the cash value side. Low interest rates have a huge impact on illustrations and it appears your projected confirmed that. I would very much like to read what you did.

I did a NPV/IRR calculation worksheet for a whole life policy for a project. The hypothetical policy returned a negative IRR/NPV for the last decade or so of the policy.

Unfortunately, that is all too common for whole life policies.

Term...put your money in, gives you temporary protection for a certain term, you get no money back (99% of term policies never pay out).

Whole...put your money in, gives you permanent protection that never goes away, you and your heirs are guaranteed to get a certain amount of money back at some point in the future.

Variable...Basically the same thing as whole life but invested in the market so the potential for growth is better.




And I love it when people (in these kinds of threads) think they're smart by claiming whole life is a waste of money, yet they recommend that you buy all term life. It's actually hilarious to me.

Everyone's insurance portfolio should include term and whole life. And anyone that tells you differently doesn't have a fricking clue what they are talking about. Term and whole life are for protection against different things, so saying one is "better" than the other is not only wrong, but foolish.

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Because earning a negative IRR over the course of 30 years is a good investment? Please GTFO with you holier than thou crap, the numbers speak for themselves.

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Insurance should never be used as an "investment", so I'm not sure what the IRR has to do with anything. It is not relevant in the discussion of protection. Have you done an IRR calculation on your auto insurance? Your home owner's insurance? Your health insurance?

Insurance is, and should be, used as protection. Term life should be used to protect against temporary expenses, and whole life should be used to protect against permanent expenses.

My point is ... there is a place for both whole life and term life in everyone's insurance portfolio, and anyone who claims differently is under-educated about the different types of life insurance and protection needs and is just regurgitating what they have heard from others. Whole life is not "better" than term life and term life is not "better" than whole life ... they are completely different animals covering completely different needs.

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If you're comfortable selling a product to people that guarantees them a negative rate of return over the course of the product, because you don't think its an "investment" and thus, the return does not matter, then more power to you.

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1. I don't sell life insurance.

2. Insurance is not an investment.

3. I'm not "advocating" for whole life insurance, so I'm not sure what your point is in regards to me. I'm just saying people make themselves look silly when they say term is "better" than whole life ... just as people make themselves look silly when they say whole is "better" than term. Neither one is better, as they are for different things.