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quote:

Originally posted by Aglifter:
Does it make more sense to buy a term life insurance policy and invest the difference in payments, rather than to buy a whole life policy?

Buy term insurance, NOT whole life.
Whole life makes insurance sales retire early, and you get squat. Been there......

It amazes me that the learned folks of SigForum have so much bad advice on Life Insurance. Life insurance is complicated. If you are not an expert, defer to one, don't opine on topics where you lack expertise.

I have a life, health, and LTC license in all 50 states and DC and I have studied and earned the Certified Life Underwriter designation to go alone with decades of experience.

1. Term is great for low cost and a specified need for a specified period of time. But God forbid you die on year 20 day 2...
2. UL/VUL policies are amazing if you understand how they work and can make them work for you.
3. Whole life is exactly that, you pay your whole life and when you die, the insurance company pays. Great for some folks and there are variations.

You have to be an educated consumer or have a really good life insurance planner that will help you understand the policy and take advantage of the features.

What policy is right for you? that really depends on what you want and need. Buy Term and invest the rest is fine advice for a lot of people. But are you a lot of people? I have helped young and old people buy many types of life insurance - there is no right policy for everyone. Ultimately, there is a policy for you depending on your needs. Anyone that tells you that one type of life insurance is crap is the person you should no longer take financial advice from. There is a person for every type of life insurance. The question is which one is for you. Find a true expert, and they will help you.

email in profile for what it is worth.

I wrote two whole life apps today. Both applicants were lifelong heavy smokers, but otherwise no health problems. The woman was 64 and the man was 71. Both on Social Security, so fixed income for the rest of their lives, will always be dirt poor, and they wanted something fixed for life, both said, "So my kids don't have to go out of pocket to get me in the ground." That's your textbook WL final expense demographic. Term or UL would be terrible for them.

Every thing in insurance is a gamble. My question would be how long would they need to live to just put the money in the bank to pay there final expenses vs pay for the rest of their lives for a whole life policy benefit Rick Lee?
Just curious.

quote:

Originally posted by old rugged cross:
Every thing in insurance is a gamble. My question would be how long would they need to live to just put the money in the bank to pay there final expenses vs pay for the rest of their lives for a whole life policy benefit Rick Lee?
Just curious.

That's an easy answer for people who are somewhat sensible about money. Take the face amount, divide it by the monthly premium and that's about how many months the insurance company thinks you will live, so they come out sort of even, not considering the law of large numbers.

But the final expense demographic lives SS check to SS check with no savings, investments or cushion. Once in a while they'll have a modest pension. And no one starts saving money for the first time once in their 60s.

Look at it this way. In 2023 I had 25 death claims and I was in in my fourth year in the biz then. So the oldest policy on my book was four years old and some of those folks died. But they hadn't paid in but a fraction of what their families collected. I had a guy die on the first day of a policy that year too.

My favorite one last year was a couple, where the wife hated me. They had guns laying around the house, both chain smokers and the wife just would not agree to the monthly bank draft. I showed the husband a video of me shooting my machine gun, told him he knew what it takes to own one of them, I'd been vetted, etc. He told his wife to get the checkbook. She made two payments of $75 and the husband died. Company paid her $12k. She loves me now.

quote:

Take the face amount, divide it by the monthly premium and that's about how many months the insurance company thinks you will live, so they come out sort of even, not considering the law of large numbers.

$1,200,000 / $500 = 2,400 or 200 years.

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Originally posted by chellim1:

quote:

Take the face amount, divide it by the monthly premium and that's about how many months the insurance company thinks you will live, so they come out sort of even, not considering the law of large numbers.

$1,200,000 / $500 = 2,400 or 200 years.

I was talking about whole life. With term, you need to be pretty healthy and the company is betting you outlive the term. That, and the fact that it doesn't build cash value, is why term is cheaper.

I'm not talking about term. It's a VUL.

I was only talking about WL. With a UL you'd need to run an illustration.

quote:

1. Term is great for low cost and a specified need for a specified period of time. But God forbid you die on year 20 day 2...
2. UL/VUL policies are amazing if you understand how they work and can make them work for you.
3. Whole life is exactly that, you pay your whole life and when you die, the insurance company pays. Great for some folks and there are variations.

armedprof is right... Life insurance is complicated. There are different solutions for different needs, ages, health status, and income levels.

I'll re-run the illustration every couple of years and sit down and discuss it with clients and adjust funding accordingly.

I had an appt a few yrs ago with a couple in their mid-70s, they swore they had WL, were paying $120/mo for $100k on the husband. I told them that was term. They didn't believe me. We called the company and, sure enough, not only was it a 10 yr term, it was expiring in a month and then became annually renewable. It was going to $750/mo. The woman was devastated. She asked me to check back with her in two weeks. I did and she said they were keeping it. I said, "You can afford that?!" She said her husband had just been given six mos. to live and so it was worth keeping it until it paid out.

quote:

a couple in their mid-70s, they swore they had WL, were paying $120/mo for $100k on the husband. I told them that was term. They didn't believe me. We called the company and, sure enough, not only was it a 10 yr term, it was expiring in a month and then became annually renewable. It was going to $750/mo.

1. It's amazing that so many people don't know what they bought years ago. That's either forgetful on their part or malfeasance on the part of the agent. But even smart, sophisticated people will forget over time. My own sister was surprised when her 20-year term policy was close to expiration.
2. In this case, they got lucky. Most people wouldn't know they only have six mos. to live and would just cancel. The annual renewable option is a good thing in a case like this.

There's a company out there (which totally sucks) that requires a smoker to be tobacco free for a year by the end of the third policy year, documented by a doctor's letter. I can't count how many times I've run into these where the people had no idea. And if they don't prove they've quit, their coverage gets cut by about 40%, but their premium stays the same. I've run into these where the envelope was postmarked years ago and had never been opened. I've seen policies that looked like they were printed on parchment paper, envelope still sealed and postmarked decades ago.

Another happy ending I ran into a few years ago was a Russian woman, who had mailed in the lead card right when her husband had gone into hospice. By the time I got in front of her, he had died. She showed me his policy and it was a 15 yr. term for $250k. He had died TWO DAYS BEFORE it expired. She was pretty sure it was going to pay. I said, "Lady, I'm sorry for your loss, but this is a lottery ticket here. Go cash it in." The man died at 80, which means he got a 15 yr term when he was 65. That's not normally a good move. But it worked out in this case.

For a young healthy couple with a healthy young child, they are almost certainly better off with term plus investing. That was the OP's scenario.

We found out the hard way that all the projections of wealth from our whole life policies were smoke and mirrors when we needed to cash out 30 years later. Fees, taxes, and penalties cut the number in half. Now maybe the industry is better at providing full disclosure than it was 40 years ago.

Having said that, senior citizens who have a dependent such as a special needs adult child will have a tough time buying a new term policy. Many times that parent uses their own current resources to support the child, and need life insurance to continue funding support after their death.

This a narrow special case where a whole life type of policy would be valuable, because buying term coverage as an 85 year old is unaffordable, whereas the whole life cash value and dividends could fund perpetual life insurance for the parent even when they are very old. But this presumes the policy is started decades earlier to build that cash value.

Life insurance is one investment that I hope I lose out on.

We have 30 year term plans on both myself and my wife that we're about 9 years into. $250K on me and $100K on her. I don't remember the exact premium but it's under $400/year for all of it. I also have a couple of smaller policies through my work and through the FOP, which I believe will go away upon termination of employment/membership.

Term life made sense for us as long as the kids are in the house. She stays home with the kids and we wanted her to have enough to pay off the house and get back into a job if I died, and for me to make arrangements for child care if she did. At this point, the kids are old enough that some of those things would be less of a concern. We also have no debt, the house is paid off, and we've built a pretty decent retirement savings, plus social security and after next year she'd have my pension. My plan right now is to keep the policies for the full term, but we probably won't renew when they're done.

25 years ago I got a term policy for 30 years. No regrets at all. Whole life is SUPER lucrative for those that sell it, which (in my opinion) is pretty solid evidence that it's a bad deal for you. Insurance should be insurance. Investments should be investments. Though the agent that hounded me on my phone until I blocked him would disagree. I don't run into him much in person, since he lives in the fancy McMansion neighborhood.

I will note that the amount of term coverage I got seemed like plenty at the time, but it isn't all that much now I guess. But then, I don't need it as much now, so that's appropriate. That said, I got it when I had my first child, and then I had three more children after. So I'm not totally out of the woods. Run some inflation calculators and try to imagine whether you want to help with college. Also, consider whether more children may be in your future.

quote:

Originally posted by r0gue:
Whole life is SUPER lucrative for those that sell it, which (in my opinion) is pretty solid evidence that it's a bad deal for you.

It's only lucrative for the less than 1% of agents who make it past their first year in the business. The demographic I work are all too old or too unhealthy to qualify for term. And when you're on a fixed income and want insurance to cover your funeral expenses and/or to leave something behind you'd never be able to save up, term is the worst thing you could get, even if you could qualify for it. That said, my biggest customer is a term customer, but then she's in her 50's, still works and makes good money. Out of about 1000 customers on my books, she and I are the only term policy holders.

I’m of the mindset to separate insurance and any investing or savings programs. I guess like anything, different people, various requirements.

As is so often the case, details matter. Depending on the contract, sometimes those details are deliberately fuzzy with a fair amount of fine print.

In any case, you would expect to pay more if older, then any health issues. Say the couple is older, empty nest, no home or auto loans, different situation than young kids, one main breadwinner.

For me, term insurance was the way to go hands down. It is cheaper than whole life. I can take my premium savings vs. whole life and invest them elsewhere. Whole life is both an insurance and a savings vehicle. The only question for me was "How does my rate of return from whole life compare to that of other investments? In my case, I earned much higher returns by investing the difference elsewhere.