LIFE INSURANCE

[ExGingi]

We both agree that everyone needs to be able to tell time.


A better analogy would be is someone came into a store looking for a watch and left with a microwave that has a clock in it. Sure he'll know the time, but he's also paying for a bunch of stuff he doesn't need or understand

Why are you saying it's a better analogy? Will the microwave ever be worth more than was paid for it? Is it an appreciating asset?

It doesn't seem like you want to learn, understand, or even have an intelligent discussion about that which is being discussed with an open mind. You seem to have your mind made up, regardless of the facts.

And as such

Care to elaborate?

why should anyone care to elaborate? This isn't the politics or JS board. We aren't here for arguing. We are here to share information and knowledge.

[ushdadude]

Why are you saying it's a better analogy? Will the microwave ever be worth more than was paid for it? Is it an appreciating asset?

It doesn't seem like you want to learn, understand, or even have an intelligent discussion about that which is being discussed with an open mind. You seem to have your mind made up, regardless of the facts.

And as such

why should anyone care to elaborate? This isn't the politics or JS board. We aren't here for arguing. We are here to share information and knowledge.

I'm not sure why I struck such a cord or why you think this topic is off the table for discussion.


I am not a commissioned salesman, just an educated consumer with no skin in the game. My entire goal here is to answer the simple question that is often asked, "how can someone protect their family from a financial catastrophe in case of an untimely demise?"


The answer is term life insurance. Period


Now, if someone wants to upsell a more expensive "asset class" that also contains a death benefit, that's complicating the issue.

If people realized how simple and inexpensive it is to protect their family, more people would do it.

[Yosel]

I'm not sure why I struck such a cord or why you think this topic is off the table for discussion.


I am not a commissioned salesman, just an educated consumer with no skin in the game. My entire goal here is to answer the simple question that is often asked, "how can someone protect their family from a financial catastrophe in case of an untimely demise?"


The answer is term life insurance. Period


Now, if someone wants to upsell a more expensive "asset class" that also contains a death benefit, that's complicating the issue.

If people realized how simple and inexpensive it is to protect their family, more people would do it.

neh again!!!!

[ExGingi]

I'm not sure why I struck such a cord or why you think this topic is off the table for discussion.

I am not the one taking anything off the table for discussion. Go back and read your own posts to see who is not having a discussion.

I am not a commissioned salesman, just an educated consumer with no skin in the game. My entire goal here is to answer the simple question that is often asked, "how can someone protect their family from a financial catastrophe in case of an untimely demise?"


The answer is term life insurance. Period


Now, if someone wants to upsell a more expensive "asset class" that also contains a death benefit, that's complicating the issue.

If people realized how simple and inexpensive it is to protect their family, more people would do it.

Well, you might be partially educated, but definitely not fully educated.

You also lack real life experience in convincing people to get adequate financial protection. And servicing and maintaining adequate coverage for people at various stages of their life.

And if you're on such a mission to get people protected, why aren't you talking about disability insurance (roughly 3:1 chance of disability during working years compared to premature death).

[aygart]

I think that @ushdadude is trying to say that the best life insurance is the one that someone will buy. The benefits of whole life and its variations are great, but there is a much higher threshold to cross to get people to actually buy it. Many will find the best practices complicated and I have experienced some aspects of that complication as well with my policy. THe complexity may be well worth it, but that is not appropriate for everyone. The first step is that they should have coverage in whatever way they will actually get it. Anything else is a second step. THis is similar to what I've written about Dave Ramsey and how the best route out of debt is the one you actually take and keep to.

[ExGingi]

I think that @ushdadude is trying to say that the best life insurance is the one that someone will buy. The benefits of whole life and its variations are great, but there is a much higher threshold to cross to get people to actually buy it. Many will find the best practices complicated and I have experienced some aspects of that complication as well with my policy. THe complexity may be well worth it, but that is not appropriate for everyone. The first step is that they should have coverage in whatever way they will actually get it. Anything else is a second step. THis is similar to what I've written about Dave Ramsey and how the best route out of debt is the one you actually take and keep to.

100%

And believe it or not, some (even lower income people) won't buy term and will buy WL despite the agent telling them that they should buy term insurance.

That being said, I think DDF is more advanced than just getting people to get protection, and a discussion/education about various products and options is appropriate. Trying to kill discussion with ridiculous analogies rather than probing and debating the merits of information that was introduced, doesn't help anyone.

[Josef.koney]

Could I go off topic for a sec?
My employer is offering term up to 500k (for $52/month)
And no qns asked up to 50k for 5/month
I'm definitely hoping to get more than either of those ....
Is there any reason to get these? Or is it a total hoax.

[ckmk47]

I suggested lowering the term portion to 150k, and informed the client that if they would dump-in 39k, that term would be fully bought out (the client would pay a 5% sales charge on the 39k, but in 2 years that would be fully recovered by the cash value growth and dividends). So in this example (female in mid 40s), one payment of 39k buys a lifetime of 150k (and growing with dividends), where the ONE TIME cost is 1.95k which is FULLY RECOUPED in 2 years. Year over year cash value growth is slightly north of 4%.

Plan B: The client pays $500/yr for 30 yr level term of 150K  life insurance. Total paid out: $15,000.  No cash value. no growth.  At the end of 30 years, no insurance.
If they also put $800/yr (total $24K over 30 yrs) into a growth savings vehicle: @ 3% growth, they'd have $37k.  @4% = $44k.  @5%=52K
Total pay out 39K.  But in increments of $1200/yr. 
Requires continuous discipline to not use the money elsewhere.  But aren't they in the same position?

[Yosel]

Plan B: The client pays $500/yr for 30 yr level term of 150K  life insurance. Total paid out: $15,000.  No cash value. no growth.  At the end of 30 years, no insurance.
If they also put $800/yr (total $24K over 30 yrs) into a growth savings vehicle: @ 3% growth, they'd have $37k.  @4% = $44k.  @5%=52K
Total pay out 39K.  But in increments of $1200/yr. 
Requires continuous discipline to not use the money elsewhere.  But aren't they in the same position?

a very small percentage of people who buy term insurance end up putting money growth savings vehicle.

a big percentage of people who buy Whole life Insurance will put money into savings, real estate, etc.

So, IMO its all in the mind.

I hope @ushdadude makes it big one day

[ushdadude]

I'm not sure how this became personal.


This thread was opened as a PSA to help educate people to avoid financial catastrophe in case of an early demise and as predicted:

It should not come from the sales people.  They will start with whole life discussions etc.[..]..We need straight up awareness from concerned individuals

[ushdadude]

I am not the one taking anything off the table for discussion. Go back and read your own posts to see who is not having a discussion.

Well, you might be partially educated, but definitely not fully educated.

You also lack real life experience in convincing people to get adequate financial protection. And servicing and maintaining adequate coverage for people at various stages of their life.

And if you're on such a mission to get people protected, why aren't you talking about disability insurance (roughly 3:1 chance of disability during working years compared to premature death).

Admittingly, I am not as knowledgeable as you are in all the flavors WL offers. As the consumer I don't have to be. I need to know enough to be able to have a conversation and make educated decisions.


I don't have experience trying to convince people to become financially protected. I would have to imagine upselling a more complicated and expensive policy makes it a harder sell though.


I agree that disability insurance is important. Maybe we should open a new thread to discuss.

[ushdadude]

100%

And believe it or not, some (even lower income people) won't buy term and will buy WL despite the agent telling them that they should buy term insurance.

That being said, I think DDF is more advanced than just getting people to get protection, and a discussion/education about various products and options is appropriate. Trying to kill discussion with ridiculous analogies rather than probing and debating the merits of information that was introduced, doesn't help anyone.

@mods can you merge with proper thread?

No. This is not a discussion. This is a PSA to bring new awareness

[ushdadude]

a very small percentage of people who buy term insurance end up putting money growth savings vehicle.

a big percentage of people who buy Whole life Insurance will put money into savings, real estate, etc.

So, IMO its all in the mind.

So the solution is to combine insurance with savings or to educate people to save more?

I hope @ushdadude makes it big one day

Amen! V'chein L'mar!

[yos9694]

As for the costs, I pointed to this before, and I think this should be stressed again. I think anyone that will see how Paid-Up-Additions work will agree that they are not a high cost product, but actually (at least in the short term, and for younger people) one of the lowest cost insurance products out there. If the entire cost is the lost-opportunity cost of 5%-10% of the premium which is fully recovered in 2-4 years, how is that costly?

So in this example (female in mid 40s), one payment of 39k buys a lifetime of 150k (and growing with dividends), where the ONE TIME cost is 1.95k which is FULLY RECOUPED in 2 years. Year over year cash value growth is slightly north of 4%.

It's a high outlay. And because it's a high outlay, it's not a practical way to get enough insurance coverage. And if it's not a practical way to get enough insurance coverage, then they're going to have to buy another insurance product to cover their insurance needs (i.e. term).

So just buy the other insurance product without the extra hoops.

What's more, if you end up buying too much PUA and MECing the policy (which seems likely in the example you gave) the capital gains are devalued for taxes and much less likely to beat the returns you could get with similar fixed assets outside of a life insurance contract.

[yos9694]

A better analogy would be is someone came into a store looking for a watch and left with a microwave that has a clock in it. Sure he'll know the time, but he's also paying for a bunch of stuff he doesn't need or understand

Should I rent or buy a house?

Buying a house is a better financial decision.  But if you need 1500 sq ft of space, it's much better to rent a place that is 1500 sq ft than to buy a place that is only 100 sq ft

[ushdadude]

Should I rent or buy a house?

Buying a house is a better financial decision.  But if you need 1500 sq ft of space, it's much better to rent a place that is 1500 sq ft than to buy a place that is only 100 sq ft

If someone needs 100 sq feet of living space and 1400 sq ft of commercial space, why can't he buy a home and rent an office?

[ExGingi]

Plan B: The client pays $500/yr for 30 yr level term of 150K  life insurance. Total paid out: $15,000.  No cash value. no growth.  At the end of 30 years, no insurance.
If they also put $800/yr (total $24K over 30 yrs) into a growth savings vehicle: @ 3% growth, they'd have $37k.  @4% = $44k.  @5%=52K
Total pay out 39K.  But in increments of $1200/yr. 
Requires continuous discipline to not use the money elsewhere.  But aren't they in the same position?

Not sure why you think this is Plan B. All I was trying to show was how PUAs work with a one-time small cost that is fully recouped in a very short period of time.

As for the specifics, you say put $800/yr into a "growth savings vehicle" - could you please explain what that is? Growth is usually used with investment vehicles, not savings vehicles.

If I were to illustrate the same $800/yr going into PUAs on the base policy (no need to keep the term rider for such small annual contributions) the cash value in 30 years illustrates to roughly $44k over what it would be without the extra $800/yr. And along the way no 1099 would be issued, and the death benefit would also gradually increase (to about $71k more than what it would be without the extra $800/yr by the 30th year).

[ExGingi]

Should I rent or buy a house?

Buying a house is a better financial decision.  But if you need 1500 sq ft of space, it's much better to rent a place that is 1500 sq ft than to buy a place that is only 100 sq ft

Can you buy 100 sq ft and rent the other 1400 sq ft (and buy them out slowly and incrementally)?

Part of the hold-up that some people have with Whole Life is that they are looking at it as an alternative to Term Life insurance. They think of it as Term vs Whole Life.

It is not an either/or decision for most people. Each of those two products that has its place and they could complement each other in a complete financial picture.

[ExGingi]

It's a high outlay. And because it's a high outlay, it's not a practical way to get enough insurance coverage. And if it's not a practical way to get enough insurance coverage, then they're going to have to buy another insurance product to cover their insurance needs (i.e. term).

So just buy the other insurance product without the extra hoops.

What's more, if you end up buying too much PUA and MECing the policy (which seems likely in the example you gave) the capital gains are devalued for taxes and much less likely to beat the returns you could get with similar fixed assets outside of a life insurance contract.

Do you really think I would advise MECing a policy? (in the example I mentioned part of the reason for leaving the term rider is to avoid MEC).

Would I advise everyone to just get their coverage by buying PUAs? Absolutely not (with the exception of properly structured blended juvenile policies, for those that care for them)! All I was addressing is the COST question of the PUAs. In my book, a small sales charge that is recouped in 2 years isn't considered expensive (though admittedly, PUAs aren't as lucrative as they used to be pre-2022).

As for needing another insurance product, what's wrong with that? Do people only have one tool in their toolbox? Do some tools serve multiple purposes?

[ckmk47]

Not sure why you think this is Plan B. All I was trying to show was how PUAs work with a one-time small cost that is fully recouped in a very short period of time.

As for the specifics, you say put $800/yr into a "growth savings vehicle" - could you please explain what that is? Growth is usually used with investment vehicles, not savings vehicles.

If I were to illustrate the same $800/yr going into PUAs on the base policy (no need to keep the term rider for such small annual contributions) the cash value in 30 years illustrates to roughly $44k over what it would be without the extra $800/yr. And along the way no 1099 would be issued, and the death benefit would also gradually increase (to about $71k more than what it would be without the extra $800/yr by the 30th year).

"plan B" - I meant an alternative. not necessarily a worse alternative.
So I'm understanding:

You're saying there's no annual tax on the investment income and the death benefit would increase over the years.
So the only down side seems to be the large outlay.  Which I think is quite prohibitive, but becomes an individual's choice.
The benefit is the "set and forget" aspect.  That avoids the "I'll catch up on  my premiums later" - lack of savings.