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Message
re: Whole Life Insurance??
Posted on 12/21/09 at 12:52 pm to LeonPhelps
Posted on 12/21/09 at 12:52 pm to LeonPhelps
Also, you are talking about 3 and 4% returns. The market has killed that over time. Could you gaurantee to us on this board that that return is net of all the commissions and fees associated with a Whole Life policy?
Yes, I'll run some illustrations in a bit, to give you exact numbers but I believe it's 3.55% net return all your commissions and fees asscoicated with whole life take effect in the first 1-5 years of the policy (they are covered because you are getting 3.55% return instead of 4.2-4.55% in my opinion and because people surrender their policies before the mature).
It wasn't just last year people got killed int he market, and like I've said everyone agrees you can come out ahead in the market over a long term period, the question is do you want to put all your earnings at risk over that period of time?
If I've spent 5, 10, or 20 years in my career there is no reason I want to be 100% exposed to the market with my savings.
I don't suggest to my clients to plan their retirement based on life insurance, but the ones that can afford to get a return off of their life insurance needs rather, than losing 100% of their premiums to term it certainly serves it's purpose.
This post was edited on 12/21/09 at 12:54 pm
1
Posted on 12/21/09 at 1:15 pm to JB Bama
quote:
If I've spent 5, 10, or 20 years in my career there is no reason I want to be 100% exposed to the market with my savings.
If someone is dumb enough to be 100% exposed high risk stocks at retirement age I can hardly believe they were smart enough to accumulate said money.
Thanks for the illustrations when you run them!
This post was edited on 12/21/09 at 1:19 pm
Posted on 12/21/09 at 2:51 pm to LeonPhelps
Want a real life example of why not to buy whole life? I purchased a 250k whole life policy 7 years ago at 27 from mass mutual. Premiums are $199 per month and the current cash value is about $11000. Do the math it just doesn't compute. Fwiw, I have a 750k term policy now with NY life & the premium is $65 per month
Posted on 12/21/09 at 3:07 pm to DandyPimp
quote:
DandyPimp
you lost money on that "investment".
Posted on 12/21/09 at 3:10 pm to LeonPhelps
Got taken to the woodshed.
Posted on 12/21/09 at 3:18 pm to DandyPimp
quote:
Got taken to the woodshed.
Do you remember what the sales pitch was or the reason they sold you that product?
Posted on 12/21/09 at 3:53 pm to DandyPimp
quote:
Want a real life example of why not to buy whole life? I purchased a 250k whole life policy 7 years ago at 27 from mass mutual. Premiums are $199 per month and the current cash value is about $11000. Do the math it just doesn't compute. Fwiw, I have a 750k term policy now with NY life & the premium is $65 per month
You probably have a surrender charge that diminishes over time. Once you've had that policy for longer than 15 years, most companies will no longer have a penalty for cashing out your policy.
Let's discuss if you got "burned" or not on this deal. You will have paid (lost) $15,600 for a 20 year 750k Term at $65/mo., and your premiums will go up to around $600-700/mo after the term is up. You will most likely have more debt at age 55, and you will be wishing you still had access to that policy. Most people build brand new houses once their are at their peak money making potential (around 50).
But, that whole life policy, while it might not be "making you money" now... it will still cost $199/mo in 20 years. If it is anything like the company I work for, you would've paid around $45,000 by the time your term was up, but it is worth $68,000. Your death benefit would also be around 280,000 instead of 250,000.
Let's assume you still need life insurance at 55, which you probably will. Whether you believe it or not, you guys aren't as good as you think with savings, and you most likely won't be "self-insured". So, at 600-700 a month for the renewed term, you will catch up to the cost of the whole life policy, and still have zero cash value.
See where I am going with this?
Term is good. But, if you can afford the premiums, whole life is always better and if you have your whole life with a good company, you will NOT regret it in 20-30 years when it is worth twice as much as what you paid into it.
Posted on 12/21/09 at 3:58 pm to LSUgolf04
Christ this is a retarded analysis. You're completely missing the single most important point, which is that the point of life insuance is to protect your family if you die.
If the guy in your hypothet with term insurance croaks, his widow gets three times as much money as the guy with whole life. For the same amount of premiums.
You're operating from a base assumption that we're all going to live to be 80. In that case you might as well not buy life insurance at all.
If the guy in your hypothet with term insurance croaks, his widow gets three times as much money as the guy with whole life. For the same amount of premiums.
You're operating from a base assumption that we're all going to live to be 80. In that case you might as well not buy life insurance at all.
This post was edited on 12/21/09 at 3:59 pm
Posted on 12/21/09 at 4:09 pm to Cold Cous Cous
Insurance = hedge =/= investment.
Posted on 12/21/09 at 4:52 pm to Cold Cous Cous
The key point you missed in my "analysis" was that they have to be able to afford the whole life premiums. If not, it is best to have most of your life insurance in term, with a smaller percentage in permanent insurance.
Let's say the life insurance need is $1,000,000.
If you only have $100/mo that you are able to afford, then clearly, you need term only.
Some people might have more disposable income. Let's say we have another guy who wants to spend $350/mo. Why not buy permanent insurance so you have the options to keep the policy for however long he wants or get all of of his premiums he ever paid plus extra when he cashes the policy out?
It is the difference between renting a house versus buying a home. You are building equity in a house when you have a mortgage. Same thing with a life policy. That whole life, if you choose to keep it, will eventually pay for itself (if you get it with a good company).
Term, while cheaper upfront, is more expensive in the long run because your "rent" will go up as you get older, assuming you are even insurable at a later age.
When you buy term, you are buying into the concept that it is ok to rent as long as the need is taken care of, which is fine. Some people rent their whole lives (no pun intended), while others purchase their homes and pay them off eventually.
How is that concept hard to understand?
Let's say the life insurance need is $1,000,000.
If you only have $100/mo that you are able to afford, then clearly, you need term only.
Some people might have more disposable income. Let's say we have another guy who wants to spend $350/mo. Why not buy permanent insurance so you have the options to keep the policy for however long he wants or get all of of his premiums he ever paid plus extra when he cashes the policy out?
It is the difference between renting a house versus buying a home. You are building equity in a house when you have a mortgage. Same thing with a life policy. That whole life, if you choose to keep it, will eventually pay for itself (if you get it with a good company).
Term, while cheaper upfront, is more expensive in the long run because your "rent" will go up as you get older, assuming you are even insurable at a later age.
When you buy term, you are buying into the concept that it is ok to rent as long as the need is taken care of, which is fine. Some people rent their whole lives (no pun intended), while others purchase their homes and pay them off eventually.
How is that concept hard to understand?
Posted on 12/21/09 at 4:56 pm to kfizzle85
Term is only way too go. You are a fool if you bite off on Whole Life. You should be self insured by the time you would most likely pass. The term will cover you in the event of an unexpected death. Better value as long as you are planning for future. WHOLE IS A RIPOFF
You are better (as stated in thread)investing the excess premiums of whole into a mutual fund. The long term of doing so will exceed any whole policy amount. Look at the history of the market it has always bounced back with time even after major collapses. It is a marathon not a sprint.
You are better (as stated in thread)investing the excess premiums of whole into a mutual fund. The long term of doing so will exceed any whole policy amount. Look at the history of the market it has always bounced back with time even after major collapses. It is a marathon not a sprint.
Posted on 12/21/09 at 5:06 pm to BirdDawg
So is whole life insurance even insurance or just a savings account?
Posted on 12/21/09 at 5:08 pm to Ringeaux
quote:
AVOID Variable Life at all cost.
AVOID Non-Guaranteed Universal Life at all cost.
Both products are huge money makers for agents and insurance companies. I spend half my time working with people who can't understand why thier policies are blowing up. Fees are rediculous in one and the other is far too interest rate sensitive. As an insurance agent I can honestly say that those policies are junk and should be removed from the marketplace.
There are two variable life products on the market with extremely low fees that uses a true 20 year term rates for the Cost of Insurance. They don't pay commissions in a traditional method. Instead, they pay the registered representative an asset based fee on the cash value of the policy. In addition, the insurance company uses good fund companies to manage to separate accounts.
The above features make variable universal life extremely competitive with most insurance cash value products and many buy term/invest the difference. Of course, you have to consider the risk profile of the client. (Just to add, many buy term/invest the difference people use expensive term policies with mutual funds that have bloated expense ratios, sales fees, and hidden trading cost. ALL of these programs needs to be analyzed before engaging in one. Don't buy from some glossy chart or a PowerPoint program. Put pen to paper, shop the term rates and look at the mutual funds.)
I expect to see a similar product for UL soon, with true market rates on the cost of insurance in the policy, instead of the loaded rates most companies used now.
Posted on 12/21/09 at 5:17 pm to BirdDawg
quote:
You are better (as stated in thread)investing the excess premiums of whole into a mutual fund. The long term of doing so will exceed any whole policy amount. Look at the history of the market it has always bounced back with time even after major collapses. It is a marathon not a sprint.
It depends on the risk tolerance of the client. Life insurance is not an investment. But, if you can afford it and you already are investing money into the market, why wouldn't you want to have the option of either keeping the policy permanently or cashing it out for much more than you invested?
Posted on 12/21/09 at 5:20 pm to LSUgolf04
What happens if I want to cash out after 3 years?
Posted on 12/21/09 at 5:29 pm to LSUgolf04
quote:
It depends on the risk tolerance of the client. Life insurance is not an investment. But, if you can afford it and you already are investing money into the market, why wouldn't you want to have the option of either keeping the policy permanently or cashing it out for much more than you invested?
Why not invest MORE into the market than dump it into a whole life insurance. U should be seeing a 9-12% return on a mutual fund. Or why not get your house paid off quicker by taking excess and putting that towards house. You could refinance your house from 30 yr to 15 and the "excess" would prob cover monthly mortgage difference
Just because I can "afford" something doesn't mean it is a wise investment. Be smart and you can afford ALOT more in the future
This post was edited on 12/21/09 at 5:37 pm
Posted on 12/21/09 at 5:52 pm to LSUgolf04
quote:
cashing it out for much more than you invested?
Your above example was only a 50% gain in 20 - 30 years. I don't think this is much more than invested, fwiw.
Posted on 12/21/09 at 5:58 pm to LeonPhelps
Last time someone brought this up, someone mentioned that it takes ~15 years before it becomes a net positive investment. That's a pretty ridiculous [read: absurd] liquidity premium for ~3% a year.
Posted on 12/21/09 at 10:38 pm to kfizzle85
My last comment for this thread will be this:
There are a lot of HORRIBLE permanent policies, but there are some very solid policies that are worth the extra premium. If you are serious about getting more information, I suggest to look for the companies with the best financial ratings and those that are highly regarded in the industry.
Suitability is the number one determining factor in a lot of these discussions, when is comes to who should get what. No broad statements are going to sum up someone's financial needs. Please meet with a LICENSED rep from a good company before taking exactly what is said by random people on a message board as fact. I wish you all good luck.
There are a lot of HORRIBLE permanent policies, but there are some very solid policies that are worth the extra premium. If you are serious about getting more information, I suggest to look for the companies with the best financial ratings and those that are highly regarded in the industry.
Suitability is the number one determining factor in a lot of these discussions, when is comes to who should get what. No broad statements are going to sum up someone's financial needs. Please meet with a LICENSED rep from a good company before taking exactly what is said by random people on a message board as fact. I wish you all good luck.
Posted on 12/21/09 at 11:32 pm to LSUgolf04
Let me guess. We have yet to have a non-insurance salesman that has had something good to say about whole life.
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