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re: Whole Life Insurance - Did I Do Something Wrong?
Posted on 11/2/22 at 2:16 pm to LSUFanHouston
Posted on 11/2/22 at 2:16 pm to LSUFanHouston
quote:
Nothing gets the reply count up like a thread about life insurance...
Before you cancel, ask for an updated illustration, and compare the grwoth in the cash value to what you think you can get in the market assuming you replace with a term and invest the difference.
The key is... you have to be disciplined enough to actually invest the difference.
Whole life makes some sense if...
1) You are alreaady maxing out all tax-deferred savings options
2) You think you will have a health issue in the future
3) You are terriboe at saving / investing money
Already max out 401k and invest a substantial sum monthly that goes to the advisor where it's max aggressive.
Don't foresee a health issue but who does.
I think make your payments re further investments on autodraft and then you don't worry about it.
This post was edited on 11/2/22 at 2:17 pm
1
Posted on 11/2/22 at 2:28 pm to Hou_Lawyer
quote:Kind of yes, Whole Life is a pretty shitty investment. Your financial advisor probably made a nice commission off of it as that type of investment pays the financial guy more than traditional investments.
Am I an idiot for agreeing to this?
I'd take my $430/mo and buy a half million term policy for ~$50/mo and invest the rest into the market.
Posted on 11/2/22 at 2:30 pm to REB BEER
quote:Oh and definitely this. If any financial advisor steers you to a whole life policy as an investment, never speak with them again.
After these things are done, fire your financial advisor. He is either stupid or does not have your best interest at heart.
Posted on 11/2/22 at 2:52 pm to jfw3535
quote:
The only person that benefits from whole life insurance policies is the salesman who sold it to you.
Not true. The families of people who were too short-sighted/selfish/poor/etc to afford to pre-pay for their own funeral benefit from their loved ones having a whole life policy.
Posted on 11/2/22 at 4:03 pm to Hou_Lawyer
quote:
Already max out 401k and invest a substantial sum monthly that goes to the advisor where it's max aggressive.
If you are already doing this, then there could absolutely be some benefits to the WL as part of your overall plan, but depending on your situation and goals it could also be a bad idea. Do you know which company the policy is with? Also, is this your only form of life insurance?
I wouldn't use this thread to make decisions off of, as nobody here knows anything about your situation. If we are speaking in generalities, most people it is not a great fit for, but there are plenty out there that it is a very powerful asset for.
ETA: If you want a valid second opinion on this, sit down with a different advisor and let him analyze your entire portfolio. There isn't a single person here that will be able to tell you if what your current guy is doing is a good plan for your situation or not.
This post was edited on 11/2/22 at 4:15 pm
Posted on 11/2/22 at 4:06 pm to REB BEER
quote:
After these things are done, fire your financial advisor. He is either stupid or does not have your best interest at heart.
These type posts always make me laugh.
Posted on 11/2/22 at 4:27 pm to GoCrazyAuburn
quote:
If you are already doing this, then there could absolutely be some benefits to the WL as part of your overall plan, but depending on your situation and goals it could also be a bad idea. Do you know which company the policy is with? Also, is this your only form of life insurance?
I wouldn't use this thread to make decisions off of, as nobody here knows anything about your situation. If we are speaking in generalities, most people it is not a great fit for, but there are plenty out there that it is a very powerful asset for.
ETA: If you want a valid second opinion on this, sit down with a different advisor and let him analyze your entire portfolio. There isn't a single person here that will be able to tell you if what your current guy is doing is a good plan for your situation or not.
Guardian is the company. No, my firm was LI but the amount isn't enough where I'm comfortable if I croak.
Posted on 11/2/22 at 4:33 pm to Hou_Lawyer
quote:
Guardian is the company. No, my firm was LI but the amount isn't enough where I'm comfortable if I croak.
Guardian is a solid company. I think there are a few better out there for WL, but it isn't worth nitpicking over.
As to the insurance with the firm, what gives me the most pause is that you've had this advisor for i'm assuming some time if you've been investing heavily with him, and he never made sure your LI benefit was adequate. The term vs whole is a debate to be had, but one of the first things the advisor should have done when you became a client was made sure your risk values were taken care of (disability, life insurance, etc). That is more concerning than his opinion on term vs whole. I don't know what all y'all have done or how long you've worked with him, so he may have done all these things, it just doesn't sound like it with the info you've provided so far.
This post was edited on 11/2/22 at 4:34 pm
Posted on 11/2/22 at 6:40 pm to AUHighPlainsDrifter
quote:
Not true. The families of people who were too short-sighted/selfish/poor/etc to afford to pre-pay for their own funeral benefit from their loved ones having a whole life policy.
If they can afford to pay the premium for a whole life insurance policy, then they can afford to save $20k over the next 30 to 40 years.
Why give the insurance company money for something that you can afford to do yourself. Insurance is for things we cannot afford.
Posted on 11/2/22 at 6:51 pm to Hou_Lawyer
quote:
36, non-smoker, excellent health
That gives you options to replace the life insurance coverage.
How much do you have through work?
It sounds like you have a strong income. $450k may or may not be a good personally owned side coverage on top of the group life insurance from your employer.
quote:
The advisor couched this as another investment vehicle where I could play off the cash value if needed down the road.
There is a concept about "banking against yourself". I haven't heard a good enough argument to buy into the theory. Someone else may be better versed in the concepts.
quote:
He didn't even go over term
Did he ask if you have a need for permanent coverage? This is a big red flag as to his intentions.
quote:
Why would anyone need whole life then?
Permanent life insurance makes sense for parents of disabled children.
Permanent life insurance can be used for large estate planning to pay taxes (and avoid having to liquidate businesses or real estate).
Permanent life insurance can be used to pass money to your heirs or pass charitable funds (this can be setup to be tax deductible).
I don't like the "death benefit" argument because anyone with a 401k or brokerage account should be able to afford a funeral.
I personally don't like whole life for any of the above scenarios because whole life includes a very expensive cash value component (i.e. banking on yourself). If you just want life insurance, why pay extra for cash value?
Posted on 11/3/22 at 8:27 am to Hou_Lawyer
Get a new adviser!
Posted on 11/3/22 at 9:58 am to meansonny
quote:
If they can afford to pay the premium for a whole life insurance policy, then they can afford to save $20k over the next 30 to 40 years.
Absolutely, but many people don't.
I wasn't giving advice on insurance or investing...just pointing out that there IS a benefit to having a whole life policy for the relatives of irresponsible people.
Posted on 11/3/22 at 10:23 am to TigerTatorTots
quote:
Kind of yes, Whole Life is a pretty shitty investment. Your financial advisor probably made a nice commission off of it as that type of investment pays the financial guy more than traditional investments.
And just so people understand the commissions that can be made on these things. Some places WILL pay a 100% commission on the 1st year premium. So if he paid $430/mo for the first year that could have been about $5.1k in his FI/agent pocket in commission.
Kind of disgusting when you put it that way. At mid 30s and very healthy a $1M 20 year term policy would be about $40/mo. It would take OVER 10 years of paying into that term policy with a $1M death benefit to equal the commission an agent gets on his $450k death benefit whole life policy @ 100% first year premium
Posted on 11/3/22 at 2:53 pm to PhiTiger1764
quote:
Alternative:
Take the $430/mo and do this:
$30/mo: $500k 30 year term policy
$400/mo: invest
At year 30, your investment will be worth about $450k assuming averaging a 7% return.
I'm stealing this framework the next time someone tries to sell me whole life or a family/friend asks if it's a good policy to have
Posted on 11/3/22 at 4:08 pm to AUHighPlainsDrifter
quote:
Absolutely, but many people don't.
I wasn't giving advice on insurance or investing...just pointing out that there IS a benefit to having a whole life policy for the relatives of irresponsible people.
I actually think poor people should buy whole life insurance.
They don't "invest the rest" nor know how if they wanted to.
They can use the cash value to float the policy premiums when times get hard (term policies just flat cancel). So the cash value provides real value.
There are aunts and grandparents who buy policies on their nieces/nephews/kids (these are young adults) so that there is a way to put them in the ground. And sometimes that is the only way to pass along any type of currency value to the next generation.
This idea typically gets blasted. But insurance is for things that one cannot afford. And living below the poverty line, this actually fits a real need.
Posted on 11/3/22 at 6:09 pm to meansonny
People living below the poverty line aren’t going to understand the policy they are buying.
One thing I would challenge…why $1M term as the standard response? Why not more at a younger age and you can always reduce the policy if you only need $1M in the future.
One thing I would challenge…why $1M term as the standard response? Why not more at a younger age and you can always reduce the policy if you only need $1M in the future.
Posted on 11/3/22 at 8:09 pm to lynxcat
Whole life is one of the oldest and most basic policies.
There is nothing to understand.
Make the payment and you have coverage.
If you have cash value and can't make the payment, the policy won't cancel.
It is actually easier to understand than term (which will drop coverage whether you want it to or not).
As for $1M being a standard, i think it is because of rate bands. There is a price break at $1M (cost per $1000 of insurance is cheaper at $1M than $900,000).
There is nothing to understand.
Make the payment and you have coverage.
If you have cash value and can't make the payment, the policy won't cancel.
It is actually easier to understand than term (which will drop coverage whether you want it to or not).
As for $1M being a standard, i think it is because of rate bands. There is a price break at $1M (cost per $1000 of insurance is cheaper at $1M than $900,000).
Posted on 11/6/22 at 2:32 pm to Hou_Lawyer
The most important thing to do is begin to realize that people will give you advice that has or will benefit them the most
Your advisor got his commission
Insurance agents posting on here love WL policies
Other posters swear by term life because they are capable of investing the difference properly
At your age you have to start separating the BS. Take all the advice you can, then apply that info to what best fits your life. No one knows the correct answer but you
As for me, I always had term. I used the extra cash each month to pay down debt. I retired at 52, so I swear by that as a good strategy. But if youre just going to blow the $400 a month on toys, it will just extend having your decisions controlled by debt, for years to come
Your advisor got his commission
Insurance agents posting on here love WL policies
Other posters swear by term life because they are capable of investing the difference properly
At your age you have to start separating the BS. Take all the advice you can, then apply that info to what best fits your life. No one knows the correct answer but you
As for me, I always had term. I used the extra cash each month to pay down debt. I retired at 52, so I swear by that as a good strategy. But if youre just going to blow the $400 a month on toys, it will just extend having your decisions controlled by debt, for years to come
Posted on 11/6/22 at 5:35 pm to Hou_Lawyer
The fact you are asking this means you need to fire your FA and terminate your WL policy.
You can handle investing the difference and avoid paying the commission to put your FA kids through college
You can handle investing the difference and avoid paying the commission to put your FA kids through college
Posted on 11/11/22 at 12:35 pm to meansonny
So poor people should buy inferior/bad products because they are poor?
So we should they should buy these products that are certain to keep them poor because they are poor?
So we should they should buy these products that are certain to keep them poor because they are poor?
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