LIFE INSURANCE

[yos9694]

Do you sell insurance?

No. Every time this topic is discussed someone asks me this (Dan was the first)

Since the chance of dying is very slim at a young age LI is low on the priority list.

This point has some validity on its own but how many people know what the chance of dying is? What are the odds that a 25 year old will die before reaching 65 (assuming they started out healthy)? It is far less than it used to be - but still not a remote enough risk to easily accept.

Term insurance is much cheaper today too. So you're only saving a few bucks per month by not transferring away the chance of a million dollar loss. I contend it is not rational thought at work rather people rationalizing a choice made out of either a lack of understanding or laziness

[CountValentine]

No. Every time this topic is discussed someone asks me this (Dan was the first)

The reason I asked is because the example you gave is classic example of what agents use.

This point has some validity on its own but how many people know what the chance of dying is? What are the odds that a 25 year old will die before reaching 65 (assuming they started out healthy)? It is far less than it used to be - but still not a remote enough risk to easily accept.

Term insurance is much cheaper today too. So you're only saving a few bucks per month by not transferring away the chance of a million dollar loss. I contend it is not rational thought at work rather people rationalizing a choice made out of either a lack of understanding or laziness

I believe it as simple as coming down to cost. If a person is reasonable (most are) and can afford it in their budget they will listen. My SIL is a perfect example. He has the classic thinking of "I am young so why do I need insurance". He now has insurance besides what his work offers.
The answer to his question was "because you married my daughter". 

[yos9694]

The reason I asked is because the example you gave is classic example of what agents use.

Where's that guy who read Thinking Fast and Slow? Paging @shmebeble

[Euclid]

The answer to his question was "because you married my daughter". 

ALOL

[Abey]

+1


Also, you want to put a piece of your income into WL, not a large percentage where you would make a higher interest rate.

100% Diversification.

Investing 101

There are plenty of diversification options that are not WL.

[ExGingi]

There are plenty of diversification options that are not WL.

Indeed.

So this morning, when I picked up last night's mail I saw



and this thread came to mind.

It's amazing how 0.4% can be called "high yield". Over the past 12 years or more those savings account rates haven't been much higher. All along my cash value in my WL policies grew by anywhere between 3% and 5% without any added risk, similar liquidity, better tax treatment. And I have a line of credit secured by my policies that I can draw against at any time with a rate of 3% (most such lines charge 3.25% nowadays, which is still great when keeping in mind that the collateral is growing by a higher rate).

[CountValentine]

My WL is paying 5.5% on unborrowed funds. Is that better than .40%?

[yos9694]

It's amazing how 0.4% can be called "high yield". Over the past 12 years or more those savings account rates haven't been much higher. All along my cash value in my WL policies grew by anywhere between 3% and 5% without any added risk, similar liquidity, better tax treatment. And I have a line of credit secured by my policies that I can draw against at any time with a rate of 3% (most such lines charge 3.25% nowadays, which is still great when keeping in mind that the collateral is growing by a higher rate).

Your life insurance purchased years ago is growing faster than today's rates - so what? That doesn't mean anything for someone buying a policy today.

It would really be better to keep all discussion of cash value life insurance separate. People unfortunately need to be convinced just to consider simple protection insurance, and it is a disservice to them to start discussing pros and cons of WL. Let them just learn about term.

Please make sure you have enough coverage! Term life insurance is so cheap these days.

Think about your responsibility towards your family.

I get sick every time I see another family become rachmonos cases when a parent dies. They raise a few hundred thousand dollars. Not nearly enough to sustain and marry the kids off. A life insurance policy would give $1mm-$2mm easily.


This is a PSA. I don't work for any life insurance companies.

I would like to start running ads in local newspapers really screaming this from the rooftops.  I'm looking for anyone to sponsor (can be an ad as well for your company etc).  PM if interested. Tizku lemitzvos

[ExGingi]

My WL is paying 5.5% on unborrowed funds. Is that better than .40%?

IDK. Maybe ask DR. 

(though technically your WL probably isn't "paying" 5.5% - unless that is the actual dividend, which would be amazing, but your total YOY cash value growth could be 5.5% which would include the guaranteed growth and the dividend. Of all people I would have expected you to know the difference between "paying" and "growing").

[ExGingi]

Your life insurance purchased years ago is growing faster than today's rates - so what? That doesn't mean anything for someone buying a policy today.

It would really be better to keep all discussion of cash value life insurance separate. People unfortunately need to be convinced just to consider simple protection insurance, and it is a disservice to them to start discussing pros and cons of WL. Let them just learn about term.

While I agree that the Cash Value discussion shouldn't be part of this one, and I tried to avoid it in most of my posts on this thread, I have multiple WL policies which were purchased at various times between 2001 and 2020.

The "cost" of a Whole Life policy is the lost opportunity cost of the first few years of premiums until the cash value catches up. After that, I can't see how anyone could describe it as a cost, rather than an allocation.

[moko]

The answer to his question was "because you married my daughter". 

love it...

[solls108]

There are plenty of diversification options that are not WL.

A. Never said not
B. Interest rate justifies risk generally, so be careful when trying to attain same rates that you can get in WL

[CountValentine]

IDK. Maybe ask DR. 

(though technically your WL probably isn't "paying" 5.5% - unless that is the actual dividend, which would be amazing, but your total YOY cash value growth could be 5.5% which would include the guaranteed growth and the dividend. Of all people I would have expected you to know the difference between "paying" and "growing").

YOY is a little over 6%. Paying/growing who cares. All I know my cash value went up. 

[ExGingi]

YOY is a little over 6%. Paying/growing who cares. All I know my cash value went up. 

And you didn't get a 1099 for it.

[CountValentine]

Your life insurance purchased years ago is growing faster than today's rates - so what? That doesn't mean anything for someone buying a policy today.

It would really be better to keep all discussion of cash value life insurance separate. People unfortunately need to be convinced just to consider simple protection insurance, and it is a disservice to them to start discussing pros and cons of WL. Let them just learn about term.

The convectional wisdom is term plus investment instead of WL. We can't even get them to get term insurance. How in the world would you get them to invest also. While WL may not be the best answer it is better than having nothing.

[solls108]

The convectional wisdom is term plus investment instead of WL. We can't even get them to get term insurance. How in the world would you get them to invest also. While WL may not be the best answer it is better than having nothing.

and term will expire...

also, no legacy

[CountValentine]

And you didn't get a 1099 for it.

On my Metlife yes I did, because dividends are left to accumulate with interest. They do not buy paid up insurance. Am I understanding that right?

[skyguy918]

The convectional wisdom is term plus investment instead of WL. We can't even get them to get term insurance. How in the world would you get them to invest also. While WL may not be the best answer it is better than having nothing.

Term+invest vs WL is an investment question. He's saying there's an earlier more critical step of covered vs not covered (independent of invest vs don't invest, which is less critical IMO), and the best way to discuss that is with term, not WL.

On my Metlife yes I did, because dividends are left to accumulate with interest. They do not buy paid up insurance. Am I understanding that right?

That's probably a 1099 on the interest generated by the dividends, not the dividends themselves. What rate are they paying that it's worth letting the dividends sit with them?

[JMHO]

I think this thread is the reason so many young people don't have life insurance.

The average 21 y/o who went through the Yeshiva system and gets married, knows that he has a responsiblity to purchase some term insurance. What turns these young people off is the snake oil insurance salesmen pushing WL and other funds which is not explained properly or in the customers best interest.

Finding a new agent might be the answer but many young people will just say that they're young and healthy and they'll get insurance when they are a little older and more educated. By then they are 40, marrying off kids and will have a much harder time getting the coverage they need.

If someone really wants to change what's going on out there, there needs to be some basic life insurance education offered (in post EY Yeshiva's?) and some affordable, basic, easy to understand plans available. Yes, people are stupid and lazy but we need to reach these people so there isn't a Charidy every day!

[Abey]

The convectional wisdom is term plus investment instead of WL. We can't even get them to get term insurance. How in the world would you get them to invest also. While WL may not be the best answer it is better than having nothing.

That is exactly my point, it’s that people need someone (broker) to convince them to save which is their problem, it doesn’t change the discussion for people who are principled in saving+term.

Additionally @ExGingi what about Roth for avoiding tax ? And you can borrow agains it as well. Injecting money market accounts in the discussion is deflecting from the options mentioned here.

Mostly I see the defenders of WL to be brokers and ppl who have WL defending their investment, which I’m sure works for many! It has its merits as pointed out but still doesn’t beat investment