give me a good reason to buy whole life insurance

[llacap]

My roommate started a job and says that I should buy whole life. He is an agent for New York Life which is a very big and reputable company.

his pros to me are:

force savings
a stable increase of 8+/- percent each year
tax deferred when you pull the money out
stocks, iras, and 401k are bad because you get taxed when you pull them out
stocks, iras, and 401k are bad because they follow the market



my cons for whole life are:

up to 12 years or more, most of my money will go to commission
penalties for early withdrawal leaving me with nothing
more expensive than term

So what makes whole life insurance good? What kind of person buys this besides the ones who are duped????

thanks,

 

[nsxotic911]

My roommate started a job and says that I should buy whole life. He is an agent for New York Life which is a very big and reputable company.

his pros to me are:

force savings
a stable increase of 8+/- percent each year
tax deferred when you pull the money out
stocks, iras, and 401k are bad because you get taxed when you pull them out
stocks, iras, and 401k are bad because they follow the market



my cons for whole life are:

up to 12 years or more, most of my money will go to commission
penalties for early withdrawal leaving me with nothing
more expensive than term

So what makes whole life insurance good? What kind of person buys this besides the ones who are duped????

thanks,

If I understand correctly, you can do a "soft withdrawl" by borrowing from the account which only gets paid out once the plan executes, eg you die.

It is in effect untaxed gains.

I didn't know about the commision.. I actually have wanted to get it for the pros you listed, but when I applied, both my wife and I could not b/c of some medical issues, hunh.

On a personal note, my best friend's brother in law died yesterday... He went to take a nap, his wife found him blue in the face, called 911 and within a few hours, everything gave out.

He was 26, good health, no previous medical issues that could explain it. Autopsy is underway..

His wife is ~20 years old, one baby, and one coming. I don't know if he had life insurance.... I'm afraid to ask, but if you do have a family, I personally think it's irresponsible not to have life insurance. Don't be cheap, it's your family and anything can happen. Earlier you get it, the cheaper it will be too..

 

[01blacks4]

the biggest reason is that it is a hell of alot cheaper to buy when your young...

there are pros and cons for everything, depends on how you spin it...

i say do it...assuming your young, buy the BIGGEST deal you can

 

[NeoNSX]

If you have any enemies that are likely to kill you, definitely get whole life insurance.

 

[docjohn]

To me whole life is not life insurance it is another investment vehicle,but I doubt you will be guaranteed 8%.The biggest winner is the person or institution selling it to you.If you want life insurace buy as much term as you can that will cover your expenses and income replacement for your dependents.Whole life gets you squat if you croak in the near term and ends up costing more than a term policy.Of course at the end of your term you get back nothing.

 

[Bilulan]

buy term!

w/ the whole life insurance, it's basically renewable every year, thus you are paying higher and higher premiums out of your savings as you age. You don't realize it. Imagine being 60 and asking to get a year renewable plan. Pretty high rate they charge!

Also, not a good investment options because you must keep more insurance than your investment. Say you get $2 million in your investment account when your 65.....you will be required to carry even more insurance in order for this plan to qualify.

Who needs $2.2 million in insurance @ age 65 when you have investments of $2 million accumulated and probably almost all of your debts paid off.

Don't mix the 2. You can't tell where all the hidden fees and higher insurance charges are at, as you get older.....it eats into your investment money. Don't let someone tell you to pay a bunch of money in for 10 years and then sit back and let it grow with no premiums. Eventually someone will call and say you have nothing when your older.

Plus, for the first 2 years, your premiums give you no cash value...They basically supply the agent that sold you with some pretty sweet commissions!

Also if I remember correctly, there are a few different premium options once you decide on the amount of coverage. Some only give you your insurance coverage back if you die...e.g. if you carry $1 mil in insurance, and you have $500k in your investment....you still only get $1 mil. They combine your 500k with the pay out. If you want to get both, your investment and the coverage amount, you will be asked to pay more premiums. How does that make sense?

 

[Hal_396]

It's a really good deal for the person selling it to you. Do some research on the web. My wife has a whole life insurance policy she got suckered into 13 yrs ago before I met her. It's not all its cracked up to be. For one thing it doesn't figure in inflation. Her policy is for 60K which seemed like a lot back then. Look what 60K will get you today.

 

[RPM217]

To me whole life is not life insurance it is another investment vehicle,but I doubt you will be guaranteed 8%.The biggest winner is the person or institution selling it to you.If you want life insurace buy as much term as you can that will cover your expenses and income replacement for your dependents.Whole life gets you squat if you croak in the near term and ends up costing more than a term policy.Of course at the end of your term you get back nothing.

Damn Doc, you're good. Buy term, invest the difference, you'll be way ahead. Whole life is not an investment vehicle. The only one who gets rich is the person that sells you the policy.

 

[SilverStone05]

My roommate started a job and says that I should buy whole life. He is an agent for New York Life which is a very big and reputable company.

his pros to me are:

force savings
a stable increase of 8+/- percent each year
tax deferred when you pull the money out
stocks, iras, and 401k are bad because you get taxed when you pull them out
stocks, iras, and 401k are bad because they follow the market



my cons for whole life are:

up to 12 years or more, most of my money will go to commission
penalties for early withdrawal leaving me with nothing
more expensive than term

So what makes whole life insurance good? What kind of person buys this besides the ones who are duped????

thanks,

The big insurance companies will use their wet behind the ears agents to brainwash everyone into thinking that they need whole life insurance. New York Life, MassMutual, Northwestern Mutual. It's a crock of shit. The people touting it and selling it rarely have it themselves.

Whole life insurance has its place. In Estate/Tax planning. But 99% of people don't need it.

I'm going to go ahead and argue with your buddy here, because he's misguided and giving you bad information.

1. You are not going to get an 8% internal rate of return on your cash value each year. That's a fact. Ask to see an illustration. Actually, better yet, don't.
2. ROTH IRA's are NOT taxed when you make withdrawals.
3. Your boy is misguided about what an IRA is. An IRA is a tax "wrapper" not an investment vehicle. You can invest your IRA in whatever you would like......stocks/bonds/etfs/funds/cd's/etc. However, contrary to what your buddy told you, the BEST RETURNS AVAILABLE are generated by the stock market. I'm sure he'll switch his sentiments toward the market once you ask about the high expense loaded mutual funds he's selling.

Buy a million of 20 year level term from a cheap term company and call it a day. Put the difference in a low cost ETF that tracks the S&P and you'll be just fine.

 

[eddiensx]

I'm a Certified Financial Planner. Just so you know my credentials.

When it comes to whole life insurance, you need to look a little deeper than your friend is telling you.

Just because an insurance company may be large, and projects a large dividend, doesn't mean you will actually get the illustrated dividend scale.

New York Life, Prudential, Mass Mutual they pay a small percentage of what they project. many of the ones I review aren't even close to what was sold.

There are some good companies out there.

Term insurance at a young age is fine, but financially responsible people understand that insurance isn't the best investment, and investments aren't good insurance. You need to have both. you need to have a complete analysis of your finances done before you can make an educated decision.

If you plan on being successful in your life financially, get permanent insurance. You will need it for estate planning, and a nice tax deferred investment vehichle. If you can get an internal rate of return of 5%-6%, that is the return of a decent bond. Remember, if you do purchase permanent insurance, purchase a waiver of premium rider as well.

Only listen to someone who will show you how it works "with" your plan, not how it is "the whole" plan.

If you choose to purchase term, make sure it is convertable for a long period of time. If you buy a 20 year term, at least have 15 years in which to convert. Make sure you can convert in your same underwriting classification as well, and in any permanent plan they have, not just one of their bad performing products.

 

[BD]

Just think of it... A mutual fund and life insurance account with only one payment. The only draw back is... Even though you can borrow money against the cash value, you really can't take the money without penalty (loan interest) until the maturity date... or the day after you die.

It's not a bad deal, if you start young, the payment is cheap.

I bought a $150k/30 years whole policy and my premium is $55 bucks a month. After just three years, I have $7K in there at the moment.