:

Term vs. whole life

We just had a life insurance agent visit us a few days ago, because we thought of buying a certain term life insurance.
The agent kept pushing a "whole life" policy on us and he just would not shut up. I had to tell him, perhaps, ten times to stop talking about it before he got the message.
He just kept on going, talking, pushing this whole life product on us, and he was clearly very interested in selling us that.
selling us this product. This, alone, suggests that it is not in my interest to buy this product.
I think that whole life insurance is, first and foremost, a very complicated financial instrument, that mixes up two things (savings and life insurance) together.
It would be a more rational approach to save money separately from protecting one from a catastrophe.
Any thoughts?
i
Reply to
Igor Chudov
The groups charter prohibits making remarks about the way these fold make their living, no ad hominem attacks.
My best friend happens to be an insurance salesman. So in a rare moment for me, I'll give you his side. "I tried to sell Chuck a whole life policy 20 years ago. He said he'd do better investing on his own. We just had drinks and the topic came up. His kids are starting college, he has no savings to speak of. Some people need that monthly bill to come in. I'd not sell you such a policy, Joe, you and Jane max out your retirement accounts and fund Jane 2.0 college savings. Most people aren't so disciplined."
Igor - I've seen you here awhile now. You are not Chuck.
Reply to
JoeTaxpayer
Not really - it actually says "And except in flattering terms, reference to another poster or group of people is inappropriate."
The insurance agent that Igor talked about is neither a poster here, nor is he a *group* of people.
Reply to
bo peep
Does the groups charter prohibit me from mentioning that Igor's experience reminded me of the last time I bought a car? The salesman kept pushing a model I didn't want. Pushing and pushing. And after I finally did get the car I wanted, he pushed undercoating, extended service warranty, and tinted windows.
Reply to
Don
Thanks for clarifying, I would hate to run afoul of any rules, this is a great newsgroup and I have nothing except flattering to say about all posters here.
i
Reply to
Igor Chudov
Sorry, I didn't mean to imply that you were guilty of this. It was more a preface as to why I, myself, was choosing to answer the way I did.
Reply to
JoeTaxpayer
These categorical dismissals of whole life don't recognize that there are valid reasons to buy it - it's not strictly an oversold overpriced product. Whole life lives at both ends of the financial spectrum - at low net worth, in many cases because of pushy selling directed at uninformed consumers, and at high net worth, because it fills a need.
One of the whole-life scenarios is "significant net worth tied up in illiquid assets." Igor I think you've mentioned owning a sub-s and looking at rental real estate. These sound like relatively illiquid assets. Maybe they're not worth much now but long-term, you might end up having a need for a big lump of cash at death, even at age 102, that is best provided for by life insurance. That may one to talk through with an agent and attorney who deals with these kinds of cases - small business owners, estate & succession planning, etc.
-Tad
Reply to
Tad Borek
cial spectrum - at
But couldn't an executor get a quick loan using real estate or other illiquid assets in the estate as security? Would not the interest on a short-term loan be less than the cost of an insurance policy over the years?
Reply to
Don
To generalize it, the scenario is: large lump of cash needed at death, irrespective of when you die. A loan doesn't really do that. It isn't a certainty that you can even get a loan - e.g. borrowing against a closely-held business is not a straightforward transaction and might not even be possible. And even if available, you have to pay the loan back somehow and that isn't always what you want to do.
Think of a business owned by a few principals, where there is a buy-sell agreement designed to cash out heirs - the spoiled-brat kids who would just run the company into the ground. When one owner dies, their share gets bought out and the heirs get the cash so they can blow it on whatever they want. That would typically be funded with a life insurance policy, otherwise the other principals would need to pony up the money somehow - at an unpredictable time.
And keep in mind that life insurance has tax advantages that can be weighed against the policy costs.
-Tad
Reply to
Tad Borek
Yes, thanks. I guess the crucial matter here is that a LARGE lump of cash is needed by the executor or the relatives for some purpose at the time of death. I can appreciate that scenario in your business example, but have doubts that it applies widely to very many small estates or even large estates where there are real estate and securities, usually along with quite a lot of cash.
Reply to
Don
Tad, while I agree about the importance of having enough cash, I wonder why that cash cannot be simply held as cash? A whole life policy only becmoes cash at death, whereas actual cash is cash at any time. I do not quite see something that is an inherent advantage of a whole life policy, over simply saving cash.
i
Reply to
Igor Chudov
On Tue, 3 May 2011 00:39:11 CST, bo peep wrote:
I think everyone is right - Tad is right given his scenario, Don is right that Tad's scenario affects a minority of people, and bo peep is right that many people are not ready to die soon and their death would cause financial distress to their dependents, in which case some term insurance is in order.
Reply to
HW \"Skip\" Weldon
You were specifically comparing whole life insurance to saving. No mention of term life. See:
Reply to
bo peep
I have a little of both - from about 20yrs ago when our son was born. It was not a lot, enough to cover things - at that time - but now seems totally undervalued compared to my portfolio.
My basic take is that you buy Term for, well, the term of your major concerns. - kids growing up - college or whatever - paying off the mortgage - paying off any loans... cars, etc - portion of survivor's lifestyle
The Whole Life is just like social security - a "forced savings plan" - There is no magic, it's just another investment like any other.
I've been thinking of just dropping our Term since the premiums are starting to increase and the actual coverage payout is only 6% of our total investment portfolio now...
The Whole Life is another matter - fixed premiums. It's more like a CD or other low yield but safe, investment. Again, in our case, the payout is only about 5% of our portfolio.
Back 20 years - when I purchased both - my portfolio was smaller and I wanted to make sure things were covered... Now - not so much a big deal....
Reply to
ps56k

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.