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Term insurance vs Whole life

Term insurance is the cheapest and simplest.  You pay a premium and  if chv”sh the insured person dies, the beneficiary gets the insurance amount. The higher the risk a person is, the higher the premium.  So people with worse health  will pay more than healthy people for the same amount of insurance, and older people will pay more than younger people.
Level term.  One popular type of term insurance has a level premium for a fixed number of years. Many people prefer this to the traditional type of term insurance where the premium each each year pays for coverage only in that year (and as a result the premiums increase every year, because you are aging). In contrast, a level premium term insurance policy has an unchanging premium amount that is guaranteed for a specific number of years. As a result of the design you are overpaying in the early years of the policy to subsidize your cost in the later years. Popular guarantee periods are 10, 20 or 30 years.  As with any insurance, it pays to get one while you are healthy to lock in the lowest rate possible (in general, health only declines, you rarely hear of people getting healthier with age).
Return of Premium (ROP) Level term. Same as level term, but with a higher premium. At the end of the level period (e.g. 20 years or 30 years) you get back all of your premiums. Your premium is buying you two things: Part pays for the term insurance, and the other part pays for the cash payment you can get if you are alive at the end and didn't miss any premium payments. If you are mathematically inclined you can calculate an IRR and decide if you see a value in doing this.

The policies below combine "investing" with insurance. As they are front-loaded with large fees and commissions, they typically lose money for a few years and then break even. These rarely make sense for lower to middle class families.
Whole life has a level premium that is guaranteed not to increase for as long as you live. Because of insurance laws in the US, this type of insurance policy must always have a "cash value", which is the amount of money you get back if you cancel the policy. That makes Whole Life a much more expensive choice relative to pure insurance coverage (where you'd get nothing back if you cancel) and therefore a bad choice for most people who are not rich (this is complicated to explain in great detail, but it is an effective summary of who is most likely to see good value in buying Whole Life). One fringe benefit of having a cash value in Whole Life is that you have saved money which can be used for your retirement or any other purpose if you are still alive.  For most people though, other savings vehicles will be better.
Universal life is very similar to whole life, in that it is meant to provide insurance coverage for as long as you live (as opposed to Term, which is meant to for a short to medium period of time). The most important difference is that the premium rates for Universal Life are not guaranteed, unlike Whole Life which is completely guaranteed. The concept behind Universal Life is that the insurance company tells you all the charges you are paying for and lets you pay as much or as little as you want for the coverage. Anything extra that you pay goes into an account that can earn interest, and as long as that account doesn't run out of money you stay insured.
Variable Life is an offshoot of Universal Life. The difference is that instead of the extra money going into an account that earns interest, you can choose to invest the extra money in mutual funds. Take my word as an expert in insurance that Variable Universal Life is only for the most investment oriented people (meaning that they barely care at all about the insurance part of the policy). If you are trying to decide on Term or Variable, the answer is always Term.

Choosing a company
Generally, the companies that focus on term insurance will have the best prices (i.e. rates) for term. Those companies are Banner, SBLI, AIG, etc. If you want to buy term, use a quote aggregator to get quotes from several companies at once. Here is one example of an aggregator (a good one!).
[No one here is getting a commission for this link]
http://www.term4sale.com/
https://www.accuquotelife.com/
https://www.matrixdirect.com/term-life-insurance#fv

If you are looking for Whole Life, Universal Life, or any other permanent product, you won't find quotes on aggregators- you will need to go to a company agent or an independent broker. A simple piece of advice for someone in this position is to get quotes from companies that focus on the product you want. For example, Whole Life is done best by mutual companies (e.g. New York Life, Guardian, Northwestern, Mass Mutual, Penn, Mutual of Omaha). Universal Life (and VUL) are the main products of public stock companies (e.g. Metlife, Prudential, etc.). Most big companies sell all the different types of products, but may not be competitive in price for all of them.

One ddf'er feels strongly that when choosing a company to buy Term from, a major factor is the what "conversion" rights the policy comes with. Conversion is a feature that entitles you to buy Whole Life or Universal Life at some point in the future (presumably when you have more money and can afford the higher priced plans) without being underwritten again - meaning you keep your rating no matter how your health may change. Conversion is certainly a valuable benefit if you anticipate needing permanent insurance at some point, and not all companies are created equal. When evaluating conversion features, you need to look at 1) how long does the conversion right last and 2) what product does the company let you convert to. Many companies offer liberal conversion rights but have bad permanent products, and you need to be educated enough to see through this and value it as a poor option.

Valuable tips for when you apply
Underwriting is the insurance company deciding which rating to give each applicant. They check health and driving record, but do not check credit rating. They can approve with their best rating, or pretty much offer whatever they want as each company has many rate classes.

Different companies can and do give different ratings to the exact same people. So if you don't like the rating one company offered, apply to a different company and maybe you'll be happier. Often, they can use the test results from the other company and you won't need to give blood a second time.

Do not eat for at least 12 hours before blood test. You can drink water.

Pregnant women can apply but most companies view blood work and weight as is. Translation: not wise to apply for life insurance while pregnant... do it before.

Shameless plug  :)
After you've done your own research, you could reach out to a broker to make the purchase. Remember to take advise from a broker with a grain of salt, since he is a salesman and your decision affects his income. Best to come prepared.
Henche's Broker, via ddf recommendation
Heshy Sheldon Breier. 
Worldwide Ins.
T:(718)253-9500
F:(718)252-3426
E:Sheldon@ww-ins.com

Author Topic: Whole Life Vs. Term Life Insurance  (Read 136303 times)

Offline Lou Bob

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Re: Whole Life Vs. Term Life Insurance
« Reply #540 on: September 05, 2019, 08:09:51 PM »
Absolutely. Though different companies and products allow for more or less flexibility in structure and funding.
this is something to keep in mind when buying a term policy.
What company will have the best options and flexibility to convert to later on.
Always use an Amex, you'll thank me one day.

Offline ExGingi

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Re: Whole Life Vs. Term Life Insurance
« Reply #541 on: September 05, 2019, 08:13:19 PM »
this is something to keep in mind when buying a term policy.
What company will have the best options and flexibility to convert to down the line.

That is correct, though even with the best companies, there's what's in the contract and what they agree to do even though they're not contractually obligated to do (for example: convert to a blended policy). When times get tough (as they are with low interest rates) companies will slowly toughen practices and make changes to new versions making them more restrictive.
I've been waiting over 5 years with bated breath for someone to say that!
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Offline ltttc

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Re: Whole Life Vs. Term Life Insurance
« Reply #542 on: March 01, 2020, 03:46:09 PM »
WL was easy to understand. Pay my premium and I will have millions when I retire. They lied!!!  :)
Can you explain how they lied?

Offline JACKBLUE

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Re: Whole Life Vs. Term Life Insurance
« Reply #543 on: March 01, 2020, 04:14:24 PM »
Can you explain how they lied?
maybe in his next גלגל.

Offline JuryDuty

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Re: Whole Life Vs. Term Life Insurance
« Reply #544 on: March 01, 2020, 06:17:37 PM »
I just got term insurance, used a local broker who was absolutely amazing and got much better quotes than anyone else I heard from. He also got amazing rates for my then-pregnant wife. PM if you want contact details
Jury Duty: Nothing to do there but chill and write a TR. Kinda like the beach but missing the view and ocean breeze.

Offline ltttc

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Re: Whole Life Vs. Term Life Insurance
« Reply #545 on: March 02, 2020, 10:29:02 AM »
maybe in his next גלגל.
He's not around a/more??

Offline as2

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Re: Whole Life Vs. Term Life Insurance
« Reply #546 on: March 02, 2020, 10:44:36 AM »
Haven't read through the thread in it's entirety, but were return of premium policies discussed at all? I was highly considering this type of policy as it blends affordable and return.
Memories last forever, make them while you can.

Offline ltttc

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Re: Whole Life Vs. Term Life Insurance
« Reply #547 on: March 02, 2020, 10:57:41 AM »
Haven't read through the thread in it's entirety, but were return of premium policies discussed at all? I was highly considering this type of policy as it blends affordable and return.
Yup - it's in the wiki

Offline as2

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Re: Whole Life Vs. Term Life Insurance
« Reply #548 on: March 02, 2020, 11:37:44 AM »
Yup - it's in the wiki
Wow. I'm ashamed of myself.
Memories last forever, make them while you can.

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Re: Whole Life Vs. Term Life Insurance
« Reply #549 on: March 02, 2020, 11:38:33 AM »
Wow. I'm ashamed of myself.
no need, happens to the best of us

Offline dm123

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Re: Whole Life Vs. Term Life Insurance
« Reply #550 on: June 14, 2023, 12:16:58 PM »
I imagine this discussion has been had (multiple times?) in this thread and around this forum but if someone wants a chazara (review):

Some notes:
  • this is IUL not WL
  • investing in this projected IUL one would have $320K vs $96K if was just stuffing the cash in a mattress
  • seems he works for an investment company (Merril Lynch)
  • I'm sure there's many more that others will point out







https://www.linkedin.com/posts/yudi-goldfein-299777174_want-to-lose-14-million-dollars-buy-a-activity-7074440696484515840-Afld
Link to article he links: https://www.personalfinanceclub.com/is-iul-a-scam-yes/

Offline ExGingi

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Re: Whole Life Vs. Term Life Insurance
« Reply #551 on: June 14, 2023, 01:03:41 PM »
I imagine this discussion has been had (multiple times?) in this thread and around this forum but if someone wants a chazara (review):

Some notes:
  • this is IUL not WL
  • investing in this projected IUL one would have $320K vs $96K if was just stuffing the cash in a mattress
  • seems he works for an investment company (Merril Lynch)
  • I'm sure there's many more that others will point out







https://www.linkedin.com/posts/yudi-goldfein-299777174_want-to-lose-14-million-dollars-buy-a-activity-7074440696484515840-Afld
Link to article he links: https://www.personalfinanceclub.com/is-iul-a-scam-yes/

This is so out of context that I'm not sure it's worth responding to, but I will point out a few things for the benefit of fellow DDF'ers:

IUL isn't an investment in the stock market. It is life insurance. It is also designed to have the cash value earn a crediting rate which is linked to an index (or several) nothing is invested in the S&P or any S&P ETF of fund.

Missing from the description above (and from the article) is the face amount of the life insurance.

In the article I see that it was marketed by WFG - I will hold comment on that, but it does say something.

To be clear, even the IUL could have worked if structured properly (and no, a $2,400/yr IUL premium does not make sense). Policies have minimum and maximum premiums. When the focus is Cash Value accumulation, the premium should be close to the maximum.

Every product has its place. IMHO IUL for cash accumulation might have a place for people who want to build significant additional wealth in a tax efficient way, where ROTH IRAs are maxed. As such, I don't think anyone wanting to put less than $15,000 or $20,000 per year into such a product should be looking at it.
I've been waiting over 5 years with bated breath for someone to say that!
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Offline farmbochur

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Re: Whole Life Vs. Term Life Insurance
« Reply #552 on: June 14, 2023, 07:28:08 PM »


This is so out of context
+1

OTOH out-of-context critiques of permanent insurance is understandable given how frequently it's pitched where no need exists.
Risk is opportunity

Offline ExGingi

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Re: Whole Life Vs. Term Life Insurance
« Reply #553 on: June 14, 2023, 08:18:44 PM »
+1

OTOH out-of-context critiques of permanent insurance is understandable given how frequently it's pitched where no need exists.

I beg to disagree. I personally think that everyone "needs" (i.e. can have a real benefit from) permanent life insurance. The only question is how much. For the average person it would probably only be a portion of their total coverage.
I've been waiting over 5 years with bated breath for someone to say that!
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Offline yos9694

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Re: Whole Life Vs. Term Life Insurance
« Reply #554 on: June 15, 2023, 11:42:09 AM »
In the article I see that it was marketed by WFG - I will hold comment on that, but it does say something.


😂😂😂

Offline yos9694

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Re: Whole Life Vs. Term Life Insurance
« Reply #555 on: June 15, 2023, 11:52:27 AM »
I imagine this discussion has been had (multiple times?) in this thread and around this forum but if someone wants a chazara (review):

Some notes:
  • this is IUL not WL
  • investing in this projected IUL one would have $320K vs $96K if was just stuffing the cash in a mattress
  • seems he works for an investment company (Merril Lynch)
  • I'm sure there's many more that others will point out







https://www.linkedin.com/posts/yudi-goldfein-299777174_want-to-lose-14-million-dollars-buy-a-activity-7074440696484515840-Afld
Link to article he links: https://www.personalfinanceclub.com/is-iul-a-scam-yes/

I don't have an issue with pointing out that Indexed Life Insurance won't get the same market returns as Index Funds. They also don't have the same risk level. Risk/reward is a better way to look at your investment choices.

If we were talking about Whole Life rather than Indexed, I think the difference would be more obvious and easily understood.

Diversifying almost always includes making investment choices that will underperform the stock market for the sake of reducing earnings volatility and/or liquidity (e.g. bonds, cds, cash). If someone wants to think of life insurance only in terms of its investment value, think of it as part of the low vol, liquid portion

Offline ExGingi

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Re: Whole Life Vs. Term Life Insurance
« Reply #556 on: June 15, 2023, 08:14:47 PM »
😂😂😂

And that was even before I noticed that they actually have such a page on their website. Just based on word of mouth and some encounters.

https://www.worldfinancialgroup.com/is-wfg-a-legitimate-business

How many reputable agencies have such a page?
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline knowitall

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Re: Whole Life Vs. Term Life Insurance
« Reply #557 on: June 17, 2023, 11:42:51 PM »
This is so out of context that I'm not sure it's worth responding to, but I will point out a few things for the benefit of fellow DDF'ers:

IUL isn't an investment in the stock market. It is life insurance. It is also designed to have the cash value earn a crediting rate which is linked to an index (or several) nothing is invested in the S&P or any S&P ETF of fund.

Missing from the description above (and from the article) is the face amount of the life insurance.

In the article I see that it was marketed by WFG - I will hold comment on that, but it does say something.

To be clear, even the IUL could have worked if structured properly (and no, a $2,400/yr IUL premium does not make sense). Policies have minimum and maximum premiums. When the focus is Cash Value accumulation, the premium should be close to the maximum.

Every product has its place. IMHO IUL for cash accumulation might have a place for people who want to build significant additional wealth in a tax efficient way, where ROTH IRAs are maxed. As such, I don't think anyone wanting to put less than $15,000 or $20,000 per year into such a product should be looking at it.
I agree with you that in an ideal world, nobody would compare an IUL to the S&P. However, many agents sell them to people as "a safe way to invest in the stock market". They call them Chasuna plans, Retirement plans, etc.

The article does say the face amount of the life insurance- It was $100,000.

While this article likely picks a bad IUL to make the point stronger, I can't imagine a "better" IUL from a different company would get anywhere near what the S&P earned.

My biggest issue with most IULs is the insurance company can change the rules in the middle of the game. They often change the caps. I know of one case where the cap started at 11% and now is at 7%.

As others have pointed out, permanent life insurance products can make sense, if

#1- You have an honest, ehrliche agent, that shops around from multiple companies, instead of just selling his own company's policies.

#2- You have an estate tax issue, or another reason why you need permanent insurance.

However, in reality, there are far too many agents not included in #1 selling to people not included in #2.