LIFE INSURANCE

[yos9694]

Snake oil mumbo jumbo sales pitch.
Expiring worthless is exactly what you want from insurance. I'm just surprised they haven't applied that model to auto and home yet.
Better off buying term and investing in an index fund.

Autos and homes come and go, not much sense in creating a permanent policy for those. But you can't sell your life or trade up.

Life insurance is more expensive for every year older you get. When you pay those term insurance flat monthly premiums you're really overpaying in the beginning and then underpaying later on. The same is true for whole life, except in addition to overpaying for the risk of dying you're also paying for a cash value while you're alive (because of a law that requires the company to pay back some money if you cancel the policy). The insurance company needs an investment wing to hang onto that money and make sure the extra money grows over time. As @Lurker said, it's more of an investment product at this point than an insurance product.

[ushdadude]

But what does someone who is 50+ do when their term expires and their health isn't best. WL keeps them from getting to that place. Or are you suggesting they'd still be ahead with term paying the higher premiums?

as you get older, your need for LI should be less. you should be financially independent by then. not easy but doable

[ushdadude]

As @Lurker said, it's more of an investment product at this point than an insurance product.

so why not use an investment account instead?

[whacked1]

so why not use an investment account instead?

Diversification. Tax free inheritance .

[ExGingi]

as you get older, your need for LI should be less will change. you should be financially independent by then. not easy but doable

FTFY.

I know plenty of financially independent people that want to have life insurance. Also, in today's day and age one often adds a long term care rider to their whole life, so even when there might not be that much of a need for a death benefit, that benefit can definitely be used for something that has a very high likelihood to be needed.

[Dan]

I know plenty of financially independent people that want to have life insurance.

Why?

[ushdadude]

Diversification.

can't you diversify b investing in different things within the same account?

[Abey]

Snake oil mumbo jumbo sales pitch.
Expiring worthless is exactly what you want from insurance. I'm just surprised they haven't applied that model to auto and home yet.
Better off buying term and investing in an index fund.

BuT iTs GauRanTEEd. With no offense to the many brokers here WL is a terrible investment unless you need someone forcing you to save sort of like Dave Ramsey and not having cc’s which we all know if done responsible can be very lucrative. The only thing is that no one is marketing saving money with index or any of the multitude other investment vehicles which is why people don’t explore it. Buy term and invest the rest

[yos9694]

so why not use an investment account instead?

Do it. You're asking the wrong question though - first you need to get coverage that is appropriate. For most people that's probably term (due to its lower cost) but you need to consider a plan for when the term expires. One option is to roll into a new term contract but that has an unknown future cost.

If you're someone who thinks WL might be relevant THEN you can discuss should I be investing in WL or using an investment account.

[yos9694]

Why?

Plenty of reasons
- Tax advantaged investment (solid alternative to the typical bond allocation)
- Legacy (gift after death)
- Living benefits like LTC insurance
- Estate tax planning: have cash on hand so that executor doesn't need to liquidate assets
- Business key man insurnace: similar concept, take out insurance on business partner so that on death the other partner can pay off heirs without selling the business

and many more

[Mordyk]

BuT iTs GauRanTEEd. With no offense to the many brokers here WL is a terrible investment unless you need someone forcing you to save sort of like Dave Ramsey and not having cc’s which we all know if done responsible can be very lucrative. The only thing is that no one is marketing saving money with index or any of the multitude other investment vehicles which is why people don’t explore it. Buy term and invest the rest

bashing dave ramsey, yet preaching his words in one sentence. HAHA

he says only term life ins. and invest the rest.

[Kobe Bryant]

Why is that?

Term Vs Whole Life

[ExGingi]

Why?

Plenty of reasons
- Tax advantaged investment (solid alternative to the typical bond allocation)
- Legacy (gift after death)
- Living benefits like LTC insurance
- Estate tax planning: have cash on hand so that executor doesn't need to liquidate assets
- Business key man insurnace: similar concept, take out insurance on business partner so that on death the other partner can pay off heirs without selling the business

and many more

@Dan, have you ever read the piece by Richard Russell "Rich Man, Poor Man" which I've referenced on DDF numerous times?

If you read it and still ask the question as to why financially independent people want to have Whole Life, then there are other issues you might be unaware of, some of which were pointed out by @yos9694 above.

Also, as one lives and sees things, one realizes the power and value of having something stable and guaranteed as an anchor in one's financial life. There is value in having a death benefit (as in liquid cash, as opposed to an asset that needs to be liquidated) whenever one dies, regardless of age. Usually the wealthier the person, the greater the need for liquidity at that point (often in order to actually preserve the overall value of the other assets).

And while @yos9694 mentioned Estate TAX planning, I can easily show NON-TAX estate planning reasons that make people WANT to have a life insurance death benefit paid after 120.

[ExGingi]

The only thing is that no one is marketing saving money with index or any of the multitude other investment vehicles which is why people don’t explore it.

Are you conflating saving and investing?

[neveryou]

Buy 30 year term at 29.

I'm working on getting a 35 year term now, according to the broker later on I can switch it to WL without a medical

[aygart]

I'm working on getting a 35 year term now, according to the broker later on I can switch it to WL without a medical

I am not familiar enough with this specific product, but anything I have seen with such a concept has always been the worst of both worlds.

[ExGingi]

I'm working on getting a 35 year term now, according to the broker later on I can switch it to WL without a medical

I have not seen 35 year term from any of the major mutual insurers.

If buying Whole Life you would want to get it from a true mutual insurer (not one structured as a mutual holding company, which IMHO is the worst of all worlds when it comes to legal structure of life insurance companies).

[ari3]

A few thoughts to add to this discussion.

1) one should not need LI immediately when they get married. After a couple of kids? yes

2) In our communities many of us can be marrying off children and supporting children past retirement age, a 20 or even 30 year term wont cover that.

3) Assuming you will easily be able to get a reasonably priced term policy in 15 years at 40-45 is a mistake. While most 25 year old's don't have any health issues many 45yo's have high blood sugar, high cholesterol, or other problems that can drive the cost higher.

4) coverage needs rise as your family grows (and to cover inflation), Often it is worthwhile getting more coverage than your current needs, althoug you can add a second policy later.

[AsherO]

I'm working on getting a 35 year term now, according to the broker later on I can switch it to WL without a medical

Slow down and ask the broker to clarify. FWIU you can’t ever “switch” to WL, rather you can buy up to WL. I haven’t seen an analysis on the numbers anywhere, but my guess is it’s something like paying the difference between term and WL premiums going back to when you bought the policy, basically cost prohibitive. Basically only worth it with a really adverse health rating, and even then a ton of money to come up with.

[Mordyk]

Slow down and ask the broker to clarify. FWIU you can’t ever “switch” to WL, rather you can buy up to WL. I haven’t seen an analysis on the numbers anywhere, but my guess is it’s something like paying the difference between term and WL premiums going back to when you bought the policy, basically cost prohibitive. Basically only worth it with a really adverse health rating, and even then a ton of money to come up with.

+1

It's a whole life agent sales pitch