re: Everybody wants to sell me insurance...

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salary

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Salary is irrelevant. Expenses are relevant.

Well yea. Thus my question about the DB calculation.

I guess I'll add a question to the thread. I have a term through New York Life and got it 4 years ago back when I smoked. I quit smoking about 3 years ago and honestly haven't even thought about it so far as my rate that I pay could go down since I quit. The agent that set me up is no longer doing insurance anymore. For a term policy will my monthly rate I pay go down since I quit smoking or is that just for whole life that it goes down after you quit? I wasn't sure if anything could change like that on a term policy.

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windshieldman

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Yes, your rate will go down. Tobacco actually doesn't really effect whole life premiums for the most part. It effects the cash value performance more than anything as the insurance costs more, but the Premiums are usually the same as non-tobacco.

Most policies have a 3 year reconsideration period for tobacco (be tobacco free for 3 years and you can reconsider the rate). They will probably require a saliva test, but yes it will lower your rate.

I've recently become a big believer in life insurance-and getting it early.

Buy young to get lower premiums and more lenient underwriting and guarantee insurability.

Ideally you want everything in whole life, but it's much more expensive, so a combination of term and whole life is what suits most.

Quick tips: get as much liability coverage as you can on your home policy. Most agents try to sell $100k, but it's like $20/yr to bump up to $300k, and only a few bucks more to go to $500k.

Med Pay is a very good coverage to carry on auto policies and is inexpensive (with some carriers it's pretty high).

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How is half a mill not enough?

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I guess it depends what you want to accomplish with the insurance. I bought enough so if I die my family can live the same as they would have had I stayed around until my kids are adults. That's enough to replace my salary plus inflation for the next 20+ years.

I have term for myself

whole for my kids

No problem. Ramble away when you get a chance!

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I get really cheap term through my company. 2x salary which is roughly 150k. I pay for supplemental 4x salary which is very very cheap. So add another 300k. I've also got supplemental on my wife for 40k. The people I talked to did not give me a death benefit calc. I'm 27. Wife is 26. Have a 3 month old son. We're in a starter home @ 1k/month for mortgage and escrow. Be both have 401ks and Roth IRAs that we've maxed for 3 years and will continue to do so.

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Alright, first and foremost, if you meet with the Northwestern guys again, get them to do a death benefit calculation and budget with you. If it were me, I wouldn't have even mentioned WL to you yet in the process, as I would first need to know how much insurance you actually need and what you can afford. Those guys very well do that, and just have a different process than I, however I know enough agents out there that just push products (this stuff we can get to later).

On to whole life: Comparing it to term insurance is not really a fair comparison. Term is a protection against temporary liabilities, where as whole life is a protection against permanent liabilities. The other aspect I won't to clear out off the bat is that argument about spending significantly more money. This doesn't really work considering you are suppose to be investing the difference between the term premium and WL premium. So, in the long run, actual expenditures should be the same. I wanted to get that out of the way, so the conversation is on a level comparison going forward.

The pros of WL as Life Insurance: This is a life insurance policy that will pay a death benefit to your family WHEN you die, not IF you die. It can be a huge help with regards to estate taxes, supplementing retirement income late in life (especially if the surviving spouse is at risk of live a very long and healthy life and outliving savings), as well as help leaving a legacy behind for future generations. These are just the benefits that come from having the permanent death benefit. Furthermore, most policies will reach a point where the dividend can completely fund the policy, allowing you to have paid up insurance for the rest of your life. I"ll be more than happy to go further into this if needed.

Pros of WL as a part of your Portfolio: Whole Life, when designed properly, is an asset that is contractually guaranteed to grow over the long term. Think of it as a business. You will have some up front costs in the early years, but after that, it is guaranteed to be profitable for the rest of your life. Conceptually speaking, would that be an asset worth having? These policies generally have a floor return of 3-4% guaranteed, and allow your money to continuously positively compound. This is huge in how they work, and I will be more than happy to illustrate this further if needed. Because of this, your money is not vulnerable to any capital exposure, like it is in the market. So, let' say we are comparing the cash value growth to a side investment account. Historically the best WL policies have outperformed the market (looking at the past 30 years as a reference). I would also assume the side account would outperform the market as well, or you aren't doing your job. When comparing the AFTER TAX return over a 30-40 year period, they aren't that easily comparable. What if you do get 1-2% better return in the investment account? Is that increase worth having that entire account subject to capital exposure and market fluctuation? To some, yes, others would rather have their money guaranteed to never go backwards. Even that 1-2% difference isn't necessarily a true number has your investable base fluctuates up and down, whereas the WL is always increasing. There is a reason all the biggest banks int he country buy this stuff by the truckload for executive compensation planning, and it is not because it is a crap product that should never be bought.

Furthermore, it is a tax free growth, much like your Roth. Those are really the only two vehicles that allow for tax free withdrawals in retirement. Also, these policies can be used as collateral for loans down the road if needed, and banks see them as gold with regards to that.

Cons of WL: Now, there are obviously downsides to WL as well, that might not make it best for certain situations. It is not a quick return on your money vehicle. It is designed for long term investments. Secondly, and I say this on here a bunch, probably around 90% of WL products out there are complete junk. Agents don't know how to sell them properly, are uneducated about them, and push the product not the need. If I was buying a policy, I would look at Northwestern Mutual, New York Life, and Mass Mutual. They are the best equipped to have strong performing WL IMO. WL also isn't ever going to get you a astronomical return if the market is booming. It will be strong, but it won't get you a 20% return for a year, which is why having it as your only retirement vehicle is silly. It should be viewed as a piece of the portfolio

Now, with all that said, the best insurance policy is the one that pays out. If you pass away, your wife isn't going to give a crap if it is Term or WL, which is why I always start by saying it is the death benefit amount that matters most.


It is late, so I don't know how much sense that all makes


Please ask any questions, concerns, and what not, as I know i've probably skipped over some stuff and left points out.

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If you pass away, your wife isn't going to give a crap if it is Term or WL, which is why I always start by saying it is the death benefit amount that matters most.

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What are the tax implications of the surviving spouse receiving the investment portion of the policy if they were left in the policy until the one insured dies?

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I'm seriously considering WL through an external company though

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LINK

Useful information from a CFP not an insurance salesman.