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Re: Correcting the errors regarding whole life insurance. (Reply to this comment)
by keithpruitt
Bob, your example sounds like a bunch of gobbly guck to me. Here is the reality, as I grow older, my need for large amounts of insurance should decrease because my assets should have grown and my negative outlay should lessen. So when renewal time comes for renewing the term policy, you merely decrease the amount of insurance to match your present situation. One has to look at the amount one is putting into a whole life policy verses how much one is going to spend for a term policy. When one places the differences in a mutual fund or something similar, one comes out ahead by buying term every single time. How could you possibly deny this?
Answer me this: how much will it cost for a 40 year old man to buy a $100,000 whole life policy at Mass Mutual? How much could the same man buy a $100,000 policy from the same company in term life? Case closed!
You talk about borrowing the cash value in the policy. Answer me this, who does the cash value legally belong to? Right, the insurance company. That's why you have to borrow it. If it is the customer's why do they borrow it. And if you don't pay it back, they take it from the face vaule of the policy. These are the facts!
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Nov 24 '09
6:04 am PST
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Correcting the errors regarding whole life insurance. (Reply to this comment)
by bobfromaustin
Ah, where to begin. Let's start with term insurance. Why is it so cheap? Because so few people die during the time they own it. So consider this: you understand the consequences of your early demise for your loved ones. You want to financially protect them, so you buy 10, 20, or even 30 year term insurance (you have to be younger than 50 to buy 30-year, btw). After 20 years, your insurance expires and holy cow, look what they want to charge me now! It becomes unaffordable. What if you realized during the 18th year that your health had become much worse, so that you are now uninsurable? Tough luck, unless you were able to buy a policy with extended conversion. But I won't need life insurance after age 65 will I? Uh, let's think about this. Let's say you have $500,000 in your retirement account. How much can you draw from that each year in retirement. You don't know because you don't know how long you'll live, but since you're only earning 5% on your money better to be safe than sorry and take no more than 5% per year, or $25,000. Now look at your brother-in-law who foolishly bought $500,000 or whole life insurance and has only $450,000 in retirement savings (you bought term and invested the difference so you're $50,000 ahead of him). But wait, he says he's going to anuitize his $450,000 over 15 years and take out $35,000 per year BECAUSE HE HAS LIFE INSURANCE TO FILL THE BUCKET BACK UP WITH WHEN HE DIES. What happens if he doesn't die in 15 years? The cash value on his whole life from his excellent mutual insurance company has grown to $500,000 and the death benefit is now $650,000 and he can either take the dividends as cash payments or take distributions from the policy (and not pay one nickel in income tax). Tell me, who made the better choice? Also, let's say you paid on your policy for 15 years and now you're mid-fifties and need to access the cash value. Great. Borrow against the policy at 8% and your cash value STILL GROWS WITHIN THE POLICY at 5%. Your net cost is 3%! What if you don't pay it back? It's likely your death benefit would decrease, but why wouldn't you want to pay it back? Rememember how it's helping you in retirement? But greedy insurance companies don't really pay you anything. Oh really? How does a 5% IRR sound? That's over a 30 year period because, basically, you bought into a bond fund (that's how insurance companies make money) that happens to have a death benefit.
Now, the examples I've provided above work only with good mutual companies, like The Guardian, Northwestern, Mass Mutual, and NY Life, and with their permanent (whole life) policies.
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Nov 23 '09
12:13 pm PST
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BY FAR THE BEST (Reply to this comment)
by killerqwe
I too was excited to see this catagory. I was surprised to find people with differing views. Most questions have two sides but not this one. I am shocked to find so uniformed epinions in this section. In this day and age, I thought whole life salesmen were confined to preying on the uneducated poor in the back woods and inner city.
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Dec 14 '00
7:12 pm PST
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question list (Reply to this comment)
by vhorton1
Thanks for the question list!!! I just called USAA about life insurance two days ago and was NOT impressed. Now I am armed with some good questions for them!
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May 19 '00
9:57 pm PDT
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