OT: Life Insurance
- Thread starter GTAdawg
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95% of people need term. Whole life can be a decent addition to a wealthy individual’s overall investment portfolio. That’s a rather small sliver indivuals that end up with whole life policies though.
Term. Get what you need to replace your income for 10+ years. Take the money you save vs whole life and put it in retirement/brokerage account. When term is up, you will be so wealthy your self insured anyway.
I can only see whole life being worth it for someone who plans on raising grandkids or starting a family late, has to care for a disabled child past retirement age, or has a very narrow estate planning path.
Simply put, you should not need life insurance past retirement. At that point the kids are grown and retirement income has kicked in.
I can only see whole life being worth it for someone who plans on raising grandkids or starting a family late, has to care for a disabled child past retirement age, or has a very narrow estate planning path.
Simply put, you should not need life insurance past retirement. At that point the kids are grown and retirement income has kicked in.
Twenty year term is what you want, but you need to be self insured at the end of twenty years if you go that route. That's not necessarily easy to do.
One option is to get some of the longer term policies. These will be more expensive, but ensure that if you get sick in ten years and you aren't going to be self ensured in twenty, you'll still have coverage.
A cheaper and very slightly riskier route is to get a couple of policies now for whatever you need. In 5 years, re-evaluate and get a new twenty year policy, dropping one of your prior policies, so that some of your policy will expire in 15 years, some in twenty. If you was between 15 and twenty and aren't fully self insured, you'll still have a big chunk of coverage left.
Shouldn't be much of any more expensive in five years if you don't have any health issues in the mean time. Much easier to be self insured after twenty five years than twenty, but if it's looking iffy, can do it again in another three to five years.
Thanks for the feedback, fellas. I believe you have confirmed what I was thinking. I just couldn’t find any reason to do whole life, but I thought I would try to solicit some feedback to see if I was missing something obvious. The only thing I’m debating on at this point is if I want to go ahead and do the 30 year term or possibly stagger a couple shorter than 30 year term policies that would get me to 60. The obvious goal being by then that I am more than covered by my own assets.
A lot of good advice in this thread. And yes, term is your only option if you don't want to get ripped off. Get only the amount of coverage you need to provide for your wife and kids to maintain a comparable standard of living. Don't buy enough to make them rich if you die. As my dad used to say, I don't want enough insurance to give any of you a motive. Also, don't forget about getting insurance for your wife too.
My only problem with this suggestion is no one ever invests the savings. But even with that term is still the better option.
One place where universal whole life policies shine is on children. You can pay $50 to $100 a month on your child, starting at a month old and set them up for life. Pay the policy till they are 18 and then it will continue to build interest and grow to something that will have a retirement income of $100,000 a year or more.
That is about the only time I sell a universal/whole life policy.
I met with a financial advisor multiple times when setting up my disability/ life insurance. Each visit he tried to sell me whole life insurance. He tried multiple times to explain how it was a great idea with compounding interest. However, it never made sense to me, and I’m not an idiot. I am now glad I went with the term life insurance.
When I left college, I worked for one of the big, fancy life insurance companies who pushed a ton of whole life. Then, I owned a captive P&C+Life agency. Now, I own an independent agency. So, I've seen it from all sides. Whole life is a very niche market. There are some interesting UL policies out there. However, term is probably your best bet for now. Lincoln Financial, Banner (Legal & General), and AIG have been the best "deals" I have seen lately on term. Drink a lot of smoothies with anti-oxidants in the days leading up to your medical exam. Your exam is a big deal. For example, I just got a 29 year old a 30-year $1mil term. I quoted him at "standard" which came out to $120/month. He was in great health, so they gave him "preferred best," and it dropped to $61/month. I don't live in MS anymore, but I could point you in the direction of someone if you'd like.
Of course he wants to sell you a whole life policy. That first year premium essentially all goes to him, then he gets runoff commissions for as long as you keep the policy. And with the surrender charges, you're going to have to keep it a long time to get anything out of it if you drop it. But you do bring up a very good point that needs to be addressed. Disability insurance is just as important as life insurance, if not even more important. You're more likely to become disabled before you retire than you are to die before then. And you need disability insurance regardless of if you have a wife and/or kids to provide for.
Three things:
1. Most people do not follow through with the investment part.
2. What if you become disable? Will you still be able to make the investments? You can add waiver of premium the life product. If you become disable the premiums are paid and the cash value will continue to grow.
3. Over a 20 to 30 year period the Whole Life and Term end up being about the same price. Add up the premiums in both products over that period of time. The subtract out the cash value in the Whole Life from the total premium paid on the whole life. You end up paying about the same. Also if the WL is participating you will receive back the unused portion of the premium each year.
I would suggest buying the biggest 20 pay you can afford. After 10 years take a reduced paid up non forfeiture. You will have about one half the policy paid up, it still builds cash, if participating you will get money back each year or you can use the dividend to build interest or buy more paid life insurance. If you keep it for the full 20 years the full face amount is paid up. Eventually you will have more cash value then you paid in premiums. 20 pay is the best product on the market. Once you have cash value you have options. The only options you have with term is, paid the premium, let it lapsed, or convert to Whole Life. Eventually the term is going to run out or the premiums are going to get too high and you might not be insurable at that time.
Me personally I have both. I figure I will always need insurance in one form or another and term is really too expensive when you hit a certain age.
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Or go with a 30 year Term with a return of premium option. You eat the opportunity cost of those dollars but “you won the bet” and get your premiums back if you outlive the policy term.
They will need it one day so why not buy it at a young age when the premiums are at it less expensive. You are doing you kids a freaking favor. I wish my parents didn't think like you. I could have a paid up'ed policy right now. Plus if your child dies you going to pay cash for the burial? Chances are you will have medical bills from their death. You going to pay cash for that? Everyone needs life insurance.
Depending on what you want to accomplish, I don’t think it’s an either or thing....I bought term to cover me through my earning years and bought universal policies to provide my legacy... that way I was able to convince the wife that we don’t need to worry about preserving our savings to leave something for my daughter, I decided to let life insurance provide our legacy.
on another note...I did buy a convertible policy on my daughter when she was a baby and I’m glad I did as she was diagnosed with diabetes. I was able to make it a permanent plan so that she was able to have coverage which would be impossible after the diagnosis.
like anything, it’s about personal choices and your priorities.
on another note...I did buy a convertible policy on my daughter when she was a baby and I’m glad I did as she was diagnosed with diabetes. I was able to make it a permanent plan so that she was able to have coverage which would be impossible after the diagnosis.
like anything, it’s about personal choices and your priorities.
3 is true, only if 1 is true. If I spend an extra $150 per month on WL for 20 years you are saying I will have a cash value of $36,000 or so, thus negating the extra premium... True if we assume the money would never have been invested. If the $150 per month were invested outside of the WL policy and earned a modest 5% per year over the 20 years, the value would be $61,268 after 20 years.
If it wasn't invested, then you had $150 per month for more fun stuff.... So whole is more expensive either way in opportunity cost.
Not true at all. Life insurance is to replace your lost earnings for your loved ones. Kids typically aren't breadwinners, so no need for life insurance. Also, you only need life insurance for the amount of lost earnings that can't be provided from your savings, investments (including retirement accounts) and Social Security benefits. Medical insurance pays for medical bills. And it's cheaper to bury a kid than it is to raise one.
Most basic whole life has at lest 4% guarantee interest built in. 20 pay has more. Plus if you die your beneficiary will receive way more money income tax free.
Yep. And it looks like he's found his way into this thread. They always do when insurance is discussed.
Go with term. Invest the difference for much better return on investment.
Perhaps one of the worst aspects of whole life, even if it gave equal returns, is that it ties your hands. You HAVE to make the payment every month. You have an emergency? Too bad. The money is tied up. If you are investing on your own, it’s money you can get to or you can stop investing for a few months to access the cash.
Perhaps one of the worst aspects of whole life, even if it gave equal returns, is that it ties your hands. You HAVE to make the payment every month. You have an emergency? Too bad. The money is tied up. If you are investing on your own, it’s money you can get to or you can stop investing for a few months to access the cash.
To have a little bit different conversation, how are y’all managing late life care expenses for your parents and yourselves?
My family recently found out the hard way as to how insanely expensive round the clock care is for a grandparent, and while you can get a reasonable long term care policy at 55, it’s pretty much too late for our parents now. I guess my thought is that this is where a decent life insurance policy might be beneficial to children in this same situation. In other words, they might have to shell out some cash to keep you comfortable as you get older, but the life insurance policy would help to eventually put some of that money back in their pockets
It’s a tough conversation, and it keeps getting tougher with skyrocketing medical costs that aren’t all covered by insurance, Medicaid, and retirement income
My family recently found out the hard way as to how insanely expensive round the clock care is for a grandparent, and while you can get a reasonable long term care policy at 55, it’s pretty much too late for our parents now. I guess my thought is that this is where a decent life insurance policy might be beneficial to children in this same situation. In other words, they might have to shell out some cash to keep you comfortable as you get older, but the life insurance policy would help to eventually put some of that money back in their pockets
It’s a tough conversation, and it keeps getting tougher with skyrocketing medical costs that aren’t all covered by insurance, Medicaid, and retirement income
That's a tough one. My understanding is that a lot of insurance companies lost money on these policies in the past, so they've jacked up the rates or just gotten out of the market. My parents have a policy that should pay half the cost of long-term care if/when it's needed, with savings to pay the rest. I'm at the point I need to start shopping for a policy, but haven't gotten off my butt and done it yet.
You could also just have a lot of money if they just set it aside for you (or just added it to their wealth and then gifted it to you or left it as an inheritance). With anything like the current law, most people just do not need a tax advantaged way to pass money to their kids. If you have two working spouses with access to 401k or 403bs, you have about $48k per year in tax advantaged accounts available. AFter 50 that goes to $62k. Most people aren't saving even that much a year, and that most likely won't get you into inheritance tax territory over your career (or it will be close enough to be manageable with annual gift tax exclusions). If you own your own business (which will be common for people pulling in enough money for where to save to be an issue), you can put much more into tax advantaged savings. Even for people who don't have access to tax advantaged plans other than an IRA, you can still get pretty tax efficient with real estate or just tax efficient mutual funds, and then gift it over time. If you're pulling down $400k per year
A good perspective on whole life policies is to see if your insurer will tell, or if you can figure out how much they will make off of the transaction. My accountant helped be back into the numbers I found out a few years ago that a policy I was looking at for a little over $1 MM was earning the "Salesman" over $50,000 and it would take me over 10 years to break even. Not a good investment in my mind. Term is a different animal and while it may be good when young and your kids are at home, as you get older, do you really need to replace income if you are retired or near retirement?
you can “borrow” from the policy at anytime ...if you go the “invest the rest” route, you have to pay the taxes on your investment every year...and if you are in you peak earning years, that could eat 28% of your returns....
that’s the problem with making blanket statements about what is best...it depends on your situation and what you need to accomplish and how much risk you are willing to assume....
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Well, the "invest the rest" part should go into either a tax-deferred traditional IRA/401(k) or a post-tax Roth IRA/401(k). Or a mix of both.
Why use your money? Use the insurance companies money. There money will be income tax free and it avoid's probate and estate.
Because the average purchase of insurance is going to get less money from the insurance company than the cost of premiums + return. If you're going to have an estate tax, or if you think you are going to die with more liabilities than assets, then insurance is good. But otherwise it's not that big of a deal to avoid probate. Hell, despite Mississippi law requiring probate for each deceased resident, I think there are a lot of counties where people without major debts and bank accounts and real estate held as joint tenants can just avoid probate all together.
first, thanks to all for the back and forth, it helps some of us who want to learn gain perspective. Slightly different question related to insurance on kids. I've always been intrigued about how to get my kids "employed" enough to fill out a roth and let the compounding do its thing. Anyone heard of this being successfully done? If they could make 5k it's not enough for taxes but could go to roth and add up.
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