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Started By
Message
re: Northwestern Mutual
Posted on 10/20/22 at 9:00 am to REB BEER
Posted on 10/20/22 at 9:00 am to REB BEER
quote:
I guarantee I'm not in that small percentage that it's a good product for. I'm just an average Joe.
Do you have an estate value high enough for your family to owe estate taxes when you die or do you have any special needs dependents? Those are two of the most common reasons a large whole life portfolio would make sense.
EDIT: I'm an idiot, I misread what you wrote but I'm keeping my post for those who are considering a large whole life policy to see. If you don't fall into either of the situations I described, the vast majority - if not all - of your life insurance should be term. I bought a couple small whole life policies for my children for a very specific reason that I'm preparing them for in the future should they need options but that's all.
This post was edited on 10/20/22 at 9:03 am
1
Posted on 10/20/22 at 10:10 am to TDsngumbo
I don't want to get sidetracked too far, but whole life is still too expensive for the 2 needs that you listed.
Whole life has a cash value component.
The 2 scenarios that you listed get no benefit from cash value. So why pay extra for something that provides no value?
There are permanent policies with no cash value that provide permanent protection for the same needs that you describe but are significantly less expensive.
The downside to those options is that if the insured decides to cancel them, they become the most expensive term life policies in history.
But if an insured buys the life insurance for the sake of life insurance (and not cash value) and has a confirmed permanent need that would exclude a future cancelation for any reason, whole life is still the wrong option. No cash value permanent life insurance exists for that reason.
Whole life has a cash value component.
The 2 scenarios that you listed get no benefit from cash value. So why pay extra for something that provides no value?
There are permanent policies with no cash value that provide permanent protection for the same needs that you describe but are significantly less expensive.
The downside to those options is that if the insured decides to cancel them, they become the most expensive term life policies in history.
But if an insured buys the life insurance for the sake of life insurance (and not cash value) and has a confirmed permanent need that would exclude a future cancelation for any reason, whole life is still the wrong option. No cash value permanent life insurance exists for that reason.
Posted on 10/20/22 at 10:31 am to meansonny
I totally get what you're saying but my point is that if you're in your 30's and have a special needs child, you know that regardless of when you die, you're going to need insurance so someone can continue to care for that special needs individual so if you purchase a whole life policy then, you lock in a decent rate (given your situation). If you get a 40 year term at age 30, you're going to be 70 years old still with a large need for life insurance but now you'll have to buy another very expensive policy at age 70.
You never buy a whole life policy because of the cash value component -- I wouldn't even consider the cash value component in any situation at all. I meant the permanency of the whole life policy is the benefit for those in that situation. Same goes for if you have a very large taxable estate -- your family will need a bunch of money to pay estate taxes upon your death regardless of whether you die tomorrow or 50 years from now, if they want to preserve the estate value.
I definitely understand your point, though. It goes both ways honestly but in my own opinion, special needs dependents and large taxable estates are two times when a whole life policy makes sense. You could theoretically make other strategies work instead, though. Buying term and investing like hell each month being one of those other strategies. That involves a bit more risk, though, and is of course not guaranteed to work since that money would be taxable while life insurance proceeds are not.
On the flip side of that argument, just for transparency, is the fact that most of the time when life insurance proceeds are put into a trust (which would be a common thing for those in the situations I described) then and only then would life insurance proceeds be taxable so you may still not avoid taxes. A sure way to avoid that would be to leave the proceeds to an individual instead of a trust, but you gotta trust that individual to use the proceeds in the manner that you'd like.
You never buy a whole life policy because of the cash value component -- I wouldn't even consider the cash value component in any situation at all. I meant the permanency of the whole life policy is the benefit for those in that situation. Same goes for if you have a very large taxable estate -- your family will need a bunch of money to pay estate taxes upon your death regardless of whether you die tomorrow or 50 years from now, if they want to preserve the estate value.
I definitely understand your point, though. It goes both ways honestly but in my own opinion, special needs dependents and large taxable estates are two times when a whole life policy makes sense. You could theoretically make other strategies work instead, though. Buying term and investing like hell each month being one of those other strategies. That involves a bit more risk, though, and is of course not guaranteed to work since that money would be taxable while life insurance proceeds are not.
On the flip side of that argument, just for transparency, is the fact that most of the time when life insurance proceeds are put into a trust (which would be a common thing for those in the situations I described) then and only then would life insurance proceeds be taxable so you may still not avoid taxes. A sure way to avoid that would be to leave the proceeds to an individual instead of a trust, but you gotta trust that individual to use the proceeds in the manner that you'd like.
This post was edited on 10/20/22 at 10:35 am
Posted on 10/20/22 at 11:47 am to TDsngumbo
I don't think you have ever seen a permanent life insurance plan without cash value.
It isn't a term policy. It is guaranteed permanent.
I have stated my opinion on whole life insurance in the past and I got blasted for it. It may be best saved for a different thread.
It isn't a term policy. It is guaranteed permanent.
I have stated my opinion on whole life insurance in the past and I got blasted for it. It may be best saved for a different thread.
Posted on 10/21/22 at 9:51 pm to TDsngumbo
quote:
Those suck arse for most people. Most people are much better off with term.
Why?
Posted on 10/23/22 at 10:27 am to TDsngumbo
quote:
when life insurance proceeds are put into a trust (which would be a common thing for those in the situations I described) then and only then would life insurance proceeds be taxable
Que?
Posted on 10/23/22 at 7:05 pm to TDsngumbo
quote:
s the fact that most of the time when life insurance proceeds are put into a trust (which would be a common thing for those in the situations I described) then and only then would life insurance proceeds be taxable so you may still not avoid taxes
If the trust is set up properly, and funded with after-tax dollars, and the insured died, proceedds are not subject to incomee tax.
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