Life Insurance?

Hmmm. The top insurance salesmen in North America sell millions and millions of dollars in whole life premium every year to rich CEOs and other multi-millionaires/billionaires. Guess whole life must suck.

Now, do you think if you're going to spend say $50,000,000 or more per year on a whole life insurance policy you aren't going to have your accountants and other professionals pick it apart? Do you think rich people just thrown millions away because some slick salesman drove up to their door in a Cadillac and put a pen in their hand. You are an idiot.

Whole life when sold to young poor people is mostly a bad option. Whole life for very wealthy older folks who want to tax shelter investments and leave a lasting legacy to families and charities makes perfect sense.

Another idiotic comment from a non-financial professional. Buy term and invest the difference is better than Universal Life? Idiot! What do you think the investment vehicle inside the UL policy is comprised of? It's frickin mutual funds or seg funds. The difference is UL offers tax free accumulation of investment income while term+mutual fund does not. Tax free compounding always trumps taxable compounding. Also at some point the term insurance will expire, often at ages 75-85. UL is permanent, it pays out at age 100 or death whichever comes first. So if you want permanent coverage and tax free compounding then get UL.

UL cost of insurance is fixed for life, typically. Term insurance might automatically renew every ten years or so but the premium will treble, quadruple or more. So if you want insurance that gets horrendously expensive every ten or twenty years then buy term, otherwise bite the bullet now and get the UL.

Young people with mortgages, kids, bills typically need as much death benefit as they can get for the least amount of money, cause money is tight. So they should look at term, say 10 or 20 year renewable and convertible term. Cancel it after twenty years when the mortgage is paid and the kids are gone if you want.

On the other hand, once the kids are all growed up, mortgage is paid, retirement is looming then maybe convert some of that term to UL so you can leave an estate for chartities, kids, grandkids etc. Unless you're a cheap Letsrun poster, in which case screw the wife and kids, they can look after themselves.

Flagpole and other insurance haters:

I will agree that many insurance salespeople in the past have sold whole life and universal life to anyone who could have cut a cheque for the initial premium. Even today, in my company, we have life insurance peddlers who sell whole life as the ONLY financial solution you will ever need. And that is unfortunate. These products have been given a bum rap over the years on account of men in shiny wingtips looking for a commission check.

Now, you speak with accountants, tax experts, actuaries, CFAs, CFPs and anyone who operates in the high net worth market and they'll all strongly endorse whole life and UL. These products have a place and a time. They can achieve things that no other products can achieve. They are highly complex, can can be manipulated to achieve very specific goals. They have their own legislation for Christ's sake.

And, Flagpole, if you have financial solutions that are better than what you can achieve with life insurance then start a company cause you'll make frickin millions, Baby!!!

38 yrs old, I make 100K a year married one kid. I have a $1M term policy for me which I pay $70 a month for, and $500K on the missus which costs $27 a month. terms out when we turn 90...if we're both still alive at 89 she'd better watch her back.

You'd both better watch your backs. If I was your kid and had a choice between inheritin' and changing your Depends, well.....

you gotta good point there amigo. She was looking at me kinda funny this morning when I was changing her diaper.

ding ding wrote:

38 yrs old, I make 100K a year married one kid. I have a $1M term policy for me which I pay $70 a month for, and $500K on the missus which costs $27 a month. terms out when we turn 90...if we're both still alive at 89 she'd better watch her back.

Who do you have your term life insurance through?

There are better solutions than whole life, but, unfortunately, they take a little bit of work. Whole life is successful because it is sold by a professional, and a wealthy person can transfer wealth tax free with the stroke of a pen. We live in a era of specialists, and very few people want to take the time to learn anything outside of their norrowly chosen field.

I agree that there is a time and a place for whole life. But, if I were a lawmaker, I would close these loop holes. Insurance is to cover risk. It should be for nothing else.

Farmers. My father-in-law is an agent so we get a special rate...and of course I aced the medical. My resting pulse rate of 42 bpm impressed the nurse greatly.

I am looking at buying life insurance and should probably read this entire thread. But I read your comments and am not sure I follow.

Why not buy 30 term and invest the money you would have put in the premium return into a Roth IRA and a higher percentage contribution into their 401(k)?

I was only looking at term and term with premiums returned. When I compared the two it looked like the premuim returned earned just under 6% apy. I think I could earn a higher rate than that with a diversified portfolio in a Roth IRA.

I guess I should look into UL. I am not really familiar how it works with the mortality fee vs investment portion.

Do insurance companies offer 30 year term policy with a set premium for the 30 years with a guaranteed option to buy into another policy at the end of 30 years with a higher premium?

That seems like the best option to me. It seems like it would be much cheaper to go this route but I have no idea how the costs for this type of policy would compare to a UL policy.

It just strikes me that if the insurance company is doing investing that they will skim off the top so I would rather they offer me a policy that pays me a death benefit and I do my own investing in a Roth or 401(k). Maybe after I have maxed out on those accounts using an insurance policy as a tax shelter might make sense but I am not able to max out on my first options and don't think I will in the near future.

in the market to buy wrote:

Why not buy 30 term and invest the money you would have put in the premium return into a Roth IRA and a higher percentage contribution into their 401(k)?

you should do that. the problem arises once you've reached your limits in your roth and/or 401(k). one should nearly always invest money in tax sheltered/deferred accounts before anything else.

in the market to buy wrote:

I am looking at buying life insurance and should probably read this entire thread. But I read your comments and am not sure I follow.

Why not buy 30 term and invest the money you would have put in the premium return into a Roth IRA and a higher percentage contribution into their 401(k)?

I was only looking at term and term with premiums returned. When I compared the two it looked like the premuim returned earned just under 6% apy. I think I could earn a higher rate than that with a diversified portfolio in a Roth IRA.

I guess I should look into UL. I am not really familiar how it works with the mortality fee vs investment portion.

Universal Life sucks too brother.

I posted this earlier in this thread, but here it is again for you:

"A Univeral Life policy is just a more recent version of Whole Life. The problem with Universal Life is that it is wrapped up with an annual renewable term life policy (or ART). ARTs go up every year based on your age, so it's a HORRIBLE way to pay for term life insurance. If you were to buy a term life policy for 20 or 30 years then you pay a fixed premium based on your age and health when you bought the thing. It does not go up."

Regardless of what people are saying about whole life for the wealthy, it is STILL not the best way to do what they are intending the Whole Life policy to do. Believe it or not, but just because you're wealthy doesn't mean you make the best decisions. Whole life insurance people get a LOT of money from selling policies to people, and the wealthier the person they are selling to, the more money they will make. I know why some super wealthy people buy whole life. It's just not the best idea. Thing is though, since they are super wealthy they can afford to make some financial mistakes. And, before someone says "they're wealthy because they know how to NOT make financial mistakes", I disagree. Some are wealthy and are that way because they are financial people. MOST super wealthy people are that because of some other thing other than just making smart financial decisions. The Walton kids are pretty damn wealthy yet I bet any recent college grad who has passion for economics and majored in it and studied well and understands it all has more financial knowledge than some of the Walton heirs. Paris Hilton is damn wealthy, and so is Britney Spears. Wealth does not necessarily equal know how.

You are a blowhard.

Old Duty Ranch wrote:

You are a blowhard.

He is not. Flagpole Willy knows more things about every subject that any person ever in the history of mankind. If you don't believe me just ask him.

Stater of the Obvious wrote:

Old Duty Ranch wrote:

You are a blowhard.

He is not. Flagpole Willy knows more things about every subject than any person ever in the history of mankind.

NOW we're getting somewhere! [note: I even fixed your wrong word problem.]

I have never met the loudmouth but I would bet he is short and bald, he definitly has " little mans syndrome" . Kind of like a little dog down the street that always barks and screams for attention.

to add to what was stated about...you can only invest 4k a year into a roth (will go up to 5k) and thats only if you qualify if you earn over i think 95k a year you can't do a roth.

furthermore everyone on here states what long term rates of returns are but these can vary very widely, so just be careful when making assumptions and never ever forget about taxes. 9% in a taxable mutual fund could only end up being 6.75% after taxes.

Old Duty Ranch wrote:

I have never met the loudmouth but I would bet he is short and bald, he definitly has " little mans syndrome" . Kind of like a little dog down the street that always barks and screams for attention.

Well, with minoxodil and shoes from the Elevator Shoe Company, no one knows the difference. The size of my biceps usually draws everyone's attention when they first meet me anyway.