Life Insurance?:Term Life vs Whole Life

[meltingfeather]

Diversity is always better.

No it's not. Bad moves don't become good just because they are different from what you've got.
I'm not saying whole life is a bad move.
In general the more creative the salesmanship that has to be thought of to make something sound good, the better it is for the salesman.

[rubydog]

No it's not. Bad moves don't become good just because they are different from what you've got.
I'm not saying whole life is a bad move.
In general the more creative the salesmanship that has to be thought of to make something sound good, the better it is for the salesman.

I think you miss the point...... Diversity can come from a blended plan of term, universal, variable life and investments.

I think you are too keyed in on the "whole life' issue to realize my last statement.

What if the market crashes at the wrong time in life? Do you not think that people have been left destitute from stock based mutual funds and the market?

There is a guy working at the local hardware store for peanuts because he wasn't diversified and lost all his market invested money at the wrong time in life.

Just like insurance agents, there are plenty of investment brokers that are creative sales people as well. Choose wisely.
There comes a time that you need to worry more about the return OF your money more than you do the return ON your money..

[wisco-hunter]

There are variable life insurance policies that offer a higher risk portfolio and can put you up in the 12% range, but they can go down too, just like stocks and funds, these usually come with a minimum death benefit if your funds plummet (usually pretty low), but in order to sell these I believe your financial advisor must have at least a series 6 license (at least 10 years ago it was this way). There are better "tax free" income options that are available through other routes. But "tax free" withdrawls on your investments usually mean they are being taxed up front, also using a variable life insurance policy as a investment vehicle will cost more because of the fees you have to pay for the actual risk that you may die earlier than expected. If you do take out deposits after you retire it just lowers your (or someone elses, lol) final payout. If you are looking low risk and tax exempt withdrawls, take advice from Warren Buffett and invest the 100$ a month in municipal bonds and automatically reinvest your dividends (very simple on Scottrade).

[TxAg]

I think you miss the point...... Diversity can come from a blended plan of term, universal, variable life and investments.

I think you are too keyed in on the "whole life' issue to realize my last statement.

What if the market crashes at the wrong time in life? Do you not think that people have been left destitute from stock based mutual funds and the market?

There is a guy working at the local hardware store for peanuts because he wasn't diversified and lost all his market invested money at the wrong time in life.

Just like insurance agents, there are plenty of investment brokers that are creative sales people as well. Choose wisely.
There comes a time that you need to worry more about the return OF your money more than you do the return ON your money..

I don't have a dog in this fight, but that is a good reason for proper asset allocation.

[meltingfeather]

I think you miss the point......

Don't think so... you said diversity is always better, which is oversimplified and just not true.

[wisco-hunter]

Also there are longer "term" life insurance policies that can last you until you're 60 or more, they may cost a little bit more depending on how old you push them out until (once they go to a certain age it's going to cost as much as a whole life policy), but you have the piece of mind that you will always have insurance until a specific age. I would at least look at 10 and 20 year term policies and compare the coverage and prices, you may like what you see or choose to take another route.

[BigWes]

No it's not. Bad moves don't become good just because they are different from what you've got.
I'm not saying whole life is a bad move.
In general the more creative the salesmanship that has to be thought of to make something sound good, the better it is for the salesman.

OP, this is the simple pitch for whole life insurance (btw, I'm not a fan of it for my situation, but there are times where it is very appropriate).

Here's the simple sales pitch:
1. Whole life insurance gives you a level death benefit that will never go down.
2. When you die, no matter how old you are, your family gets a check.
3. The price you pay will be the same from today through the day you die.
3a. It pays dividends (like ownership in the company). If you allow the dividends to stay with the policy they could eventually pay for the policy, just like paying off your home mortgage.
4. Your term policy can be converted without you having to prove insurability.
4a. When you pass the convertible period, you can keep the term until it expires, but you may never be able to get more in the future for health reasons.
5. Insurance is about trading uncertainties for guarantees. Both life /death / health and investing have certain levels of uncertainties. Buying term and investing the rest doesn't take the uncertainty completely off the table. The extra cost of Whole Life Insurance is what you pay to get guarantees from an insurance company.

OP, best of luck to you in your decision making.

[lilavidhunter]

I think you miss the point...... Diversity can come from a blended plan of term, universal, variable life and investments.

I think you are too keyed in on the "whole life' issue to realize my last statement.

What if the market crashes at the wrong time in life? Do you not think that people have been left destitute from stock based mutual funds and the market?

There is a guy working at the local hardware store for peanuts because he wasn't diversified and lost all his market invested money at the wrong time in life.

Just like insurance agents, there are plenty of investment brokers that are creative sales people as well. Choose wisely.
There comes a time that you need to worry more about the return OF your money more than you do the return ON your money..

This is Spot-On correct. Asset Allocation is very important.

[trailboss]

Not sure why someone would have an issue with the agent making more money if his recommendation is sound. Lots of reasons stated above for each type policy. Renting vs owning, etc.
Also keep in mind insurability. What happens if you keep the term and develop a dreaded disease? Your term runs out and now you're uninsurable!
Lots of reasons to own permanent vs term. Term has its place, but so does permanent insurance.

Trailboss

[FamousAmos]

I had term when I was younger and had kids and mortgage to pay. If I died it paid everything off, put kids through school, and gave my wife some funds to start again. Kids are grown and mortgage is almost done. I converted to whole life and my insurance coverage is lower but the additional premium is channeled to a fund. If I die my wife gets the insurance AND the cash value, something Dave Ramsey says won't happen, but it will. If I live I get the cash value at 65 with a tax hit only on the interest earned. Obviously the insurance company makes money off of this. However, I didn't die in the 20 years that I had term insurance so they got 100% of those premiums.

[skyhawk]

Term.

The need for life insurance is not a permanent need. If you manage your money well, you will not need it later in life. By the time my term insurance expires, I will be self-insured through savings, paying off house, etc.

The cost difference and crappy returns of whole life make it an easy decision.
Take the difference that whole life would have cost you, and invest it, and you will have more than the "cash value" will accrue over the same period of time. Rarely will you find anyone who recommends whole life who is not selling it.

[rconn]

I sold life insurance for a while and they told us to sell whole life to family and friends and try to push term to everyone else.

[rubydog]

I don't have a dog in this fight, but that is a good reason for proper asset allocation.

Not everyone that you encounter in life has assets great enough to allocate. Some just barely have a means for survival and want to leave something behind. Every situation is different...

Don't think so... you said diversity is always better, which is oversimplified and just not true.

More so than not diversity is stronger and safer than being a one trick pony with all you eggs in one basket.

[Bad-Karma]

Mutual fund companies don't work for free. They are making money off your money no matter what. There are brokerage and management fees everywhere.

you are both right and maybe a little not so right. A brokerage firm receives a commission for bringing a buyer and seller together. That's it. In a mutual fund there ARE ALWAYS ongoing fees. There are the management fees and the administrative fees. Not only that, there are internal commission charges. You don't really believe these guys get to buy and sell holding inside the fund for free do you A fund with high turnover is going to have increased internal brokerage charges. Yes you need to know the expense ratio but also the turnover rate of the fund.

An index fund is not the same as traditional mutual fund. It is only designed to mirror a particular index. It is considerably cheaper to use and exchange traded fund and you will also have the ability to get in an out whenever you want unlike a fund that only allows you to buy are sell at the closing daily price.

I realize this is totally apart from the OP question but just trying to help.

Please folks, don't always assume that the agent is just trying to make more money.

I am a registered investment advisor, series 65 securities lic. I have a fiduciary responsability to act in a clients best interest. A broker only has to follow a sutability standard as does an insurance agent, which I also am.

Hope this helps some of you.

[flywise]

Term.

The need for life insurance is not a permanent need. If you manage your money well, you will not need it later in life. By the time my term insurance expires, I will be self-insured through savings, paying off house, etc.

The cost difference and crappy returns of whole life make it an easy decision.
Take the difference that whole life would have cost you, and invest it, and you will have more than the "cash value" will accrue over the same period of time. Rarely will you find anyone who recommends whole life who is not selling it.

This is my plan