re: Term Life vs. Whole Life

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Whole Life is a complete rip-off for 99% of cases. In fact, most whole life insurers, upon signing their clients up for whole life policies, then take out term policies on those same whole life policies and pocket the difference.

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Show me this in a link(s) please. I gotta read this in print.

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The cash build up is complete BS. Most of the time you get between 2-4 percent interest (which is a joke considering the market's average returns, which you could invest in with your monthly savings from having term as opposed to whole). Also, you usually have to pay interest to the insurer if you borrow money out of your own cash build up portion of your policy

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Figure after tax or before tax returns and it gets a bit closer. Maybe not close enough for you but others are not risk-takers.

There are policies and companies with policies that net zero interest cost or even pay you a higher return than what they charge you within reason. The company has to earn something on the money borrowed to pay for the promise of level premiums.

Compared this to banks who actually charge you more interest on a loan that is collateralized by YOUR CD/savings in their bank. Imagine that, you get a better deal with an insurance company.

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Also, you usually have to pay interest to the insurer if you borrow money out of your own cash build up portion of your policy (so you pay interest to borrow your own money).

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Common misconception due to people not reading a policy, not researching what they are buying or a really crappy insurance agent.

It is not your money in the policy. Never has been. You pay premiums and the company will pay a death benefit if you die. The cash value in the policy is there to help keep premiums level for life so the cash value is part of the death benefit.

A whole life insurance contract usually gives you two right concerning cash values:

1] The right to use the cash value as collateral against a policy loan, usually to 80% to 90%. If you die before repayment, part of the death benefit is used to pay the loan. There is no loan repayment schedule. Interest is charged since the company no longer has use of the funds to guarantee level premiums for life. The rate charged goes up and down, usually with market rates.

The rate used to be fixed on contract until the 70s and early 80s. During that time, people would borrow from their WL contracts at low fixed rates (2-4%) and purchase CDs at 8%+ (I know one guy who borrowed at 4% and locked in a 15 yr CD at 14%....nice deal).

2] The right to cancel the policy and receive the cash value in exchange.



Back to the beginning quote, I can actually think of a few situations where an insurance company would do just that, especially on large policies in the first few years of the contract. But the part of most WL insurers doing it and for the devious reasons you imply, I would like to know more.

Ed u ma cate me.

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I left you out in the "standard whole/term thread" post. My bad.

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Not really, haven't been around much. Thanks for the thoughts.

However, I think my post is an attempt to clear up common misconceptions on the cash values inside a whole life policy, of which many LI agents have help shape. That only fuels the AL Williams types who use those myths as a basis for their sell pitch, which is laced with misconceptions and ideas. So what you get is a great big pile of crappola from both sides.

I love link floods. I used to do that to people all the time. Scoop should take notes, that is how this board works.

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I left you out in the "standard whole/term thread" post. My bad.

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Not really, haven't been around much. Thanks for the thoughts.

However, I think my post is an attempt to clear up common misconceptions on the cash values inside a whole life policy, of which many LI agents have help shape. That only fuels the AL Williams types who use those myths as a basis for their sell pitch, which is laced with misconceptions and ideas. So what you get is a great big pile of crappola from both sides.

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I'm certainly not going to buy whole life insurance to protect against my mortgage being left behind, and I'm certainly not going to buy term life to protect against my burial/funeral expenses left behind. Neither product is "better" or "worse" than the other.

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I have a term life policy. I see no need for a whole life policy in conjunction.

If I die tomorrow, the term life policy is enough for my wife to pay off my mortgage, educate my children and even <GASP> pay for my funeral.

I've never seen anyone other than you express any idea that there should be some sort of exclusivity of what the benefits of a whole and/or term life policy "should" be utilized for.

Who made this rule?

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I've never seen anyone other than you express any idea that there should be some sort of exclusivity of what the benefits of a whole and/or term life policy "should" be utilized for.

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No offense (because many people don't know what they're talking about when discussing term vs whole like they are competitors of some sort which they are not), but if this is the first you've heard of it, you haven't done much research on the different types of life insurance and moreso the basics of selecting the type of policy based on what your individual situation calls for. Life insurance is solely about protecting future financial needs of your heirs that you leave behind upon death, and those needs/expenses are typically usually very different in scope.

A 2-minute search brought me to this little outfit, MSN Money, basically repeating what I have already said regarding life insurance...

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LINKHow to choose
Start by assessing your life insurance needs with MSN Money's Life Insurance Needs Estimator.

Categorize your insurance needs by their use. If you need $60,000 for college and your youngest child will graduate in three years, you need $60,000 of term insurance as a short-term hedge against your death, thus insuring that your child can finish his or her education. Meanwhile, if your estate will owe $200,000 in taxes at your death, you probably need permanent insurance, because you're not likely to die in the next 20 years (you hope). You also may want to re-evaluate your estate plan, but that's a different issue.

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An analogy that can be made between term and permanent life insurance is like comparing leasing an apartment to purchasing a new home. Buying term insurance would be like leasing an apartment and purchasing permanent life insurance would be like buying a new home. Even though one may conclude that purchasing would be better than leasing, when it comes to life insurance there isn’t one that is better than the other. It all depends on your needs and plans for what you want the insurance to provide for. For many individuals having a combination of the two makes the most sense.

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Types of Term Life Insurance Policies
Term life insurance is the most affordable type of life insurance available. It is designed to meet temporary life insurance needs; providing protection for a specified period of time, the term. For example, a term of 10, 20 or 30 years. This type of life insurance makes sense if you have financial needs that will diminish over time, such as a home mortgage or a child's tuition.

Each year, a premium is paid to cover the risk of death during that year. Term life insurance has no cash value. The only way to collect anything is to die before the term life insurance expires. If death occurs, the life insurance beneficiary generally collects the death benefit of the life insurance policy, free of income tax.

Permanent Life Insurance
Permanent life insurance provides lifelong protection. This type of life insurance policy never ends as long as the premiums are paid. In addition, permanent life insurance provides a savings element that accumulates a cash value over a long period of time.


No one type of life insurance is better than another because the type of life insurance that suits your situation best depends on your personal and financial circumstances.

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Life Insurance 101 is categorizing your life insurance needs (insurable future expenses). These expenses are the sole reason that one gets life insurance (or should be unless they're just gambling on their life). These expenses/future needs are different, and have different timelines and expiration dates. A need that will expire in 15 years, obviously should be covered with a 15-year term policy. A need that will never expire until your actual death, such as funeral costs, should be covered with whole life. There are tons of needs/expenses out there, and most fall into either permanent or temporary expenses. Temporary expenses should be covered with temporary term insurance, permanent expenses should be covered with permanent whole life insurance. It is, therefore, no coincidence that the terminlogy is as it is: temporary needs should be covered with temporary term insurance, and permanent needs should be covered with permanent whole life insurance.

I don't disagree with your premise of matching your assets and liabilities in the slightest, but I don't buy the justification for using whole over term. You can accomplish the same thing with term, you don't need whole to do it, and given the various financial scenarios I've run on multiple different whole policies, I'm far from convinced its a worthwhile hedge.

I think they would be wise to just not be idiots and save for those expenses on their own. Whole is an expensive way of forcing yourself to do the same thing.

You are passing on term ?
I hope you are retired with no debt and plenty in your savings account.
Otherwise you are SCREWING your wife.

I was nervous you were 35 with debt and a family...