maize Posted January 17, 2017 Share Posted January 17, 2017 (edited) Thinking about this because my husband has been denied term life insurance in the past for medical reasons. Term life is great for those in good health who can get good rates. I've wondered if whole life might benefit someone who has a high probability of developing medical problems in the future? Edited January 17, 2017 by maize Quote Link to comment Share on other sites More sharing options...
TechWife Posted January 17, 2017 Share Posted January 17, 2017 Absolutely! There are definite benefits to having a whole life insurance policy. The main one is that it accumulates cash value and can be cashed out early (there are tax implications if you do this). If you don't cash out early, it can accumulate value over and above the insured amount. Investment dividends are often paid and can be applied to the policy premiums. Whole life insurance policies are more expensive because there is a guaranteed rate of investment on payout (term life insurance policies expire and don't necessarily pay out, so they are cheaper). My dad had a whole life insurance policy for - get this - sixty years! He took it out when he was in his twenties. When he died, the benefit was more than what he had paid in, even after all of those years. Not bad for $10 a month. That probably seemed like a fortune when he took it out. I remember him saying that he earned $57 a week when my parents first married. 1 Quote Link to comment Share on other sites More sharing options...
Greta Posted January 17, 2017 Share Posted January 17, 2017 I'm not very knowledgeable about this stuff, but I would urge extreme caution, because every finance expert I've ever listened to or read has said that whole life is a rip-off. Definitely do your research from sources other than the person who stands to make a HUGE commission by selling you the product. Eric Tyson, for example, says that it's the most over-sold financial product in the history of the industry, and that it actually only makes sense for a very small percentage of people. Like, if your husband owns a multi-million dollar business and you'd be hit with estate taxes if he died, then it makes sense. Otherwise it is very, very expensive and a poor ROI. 4 Quote Link to comment Share on other sites More sharing options...
xixstar Posted January 17, 2017 Share Posted January 17, 2017 (edited) Absolutely! There are definite benefits to having a whole life insurance policy. The main one is that it accumulates cash value and can be cashed out early (there are tax implications if you do this). If you don't cash out early, it can accumulate value over and above the insured amount. Investment dividends are often paid and can be applied to the policy premiums. Whole life insurance policies are more expensive because there is a guaranteed rate of investment on payout (term life insurance policies expire and don't necessarily pay out, so they are cheaper). Why wouldn't I just do my own investments and not put them into a life insurance policy? I could put them into an IRA to get the same tax benefits. Also, from what I've read, when you die your family only gets the face value of the life insurance and NOT the face value plus those "investments". Why would I not buy a term life insurance policy, for much less, and then have my IRA inherited by my survivors versus losing that money? Why do I need lifetime life insurance? I thought life insurance was there to replace my income for my dependents. In 20-25 years, my dependents should all be gone and on their own. My IRA should be taking care of my needs by then and would be supplemental to my spouse should I die first. I don't see a lifetime need for life insurance. These are the questions that come to my mind when people mention whole life policies. But none of this addresses the OP question - being denied term life insurance is a different situation than the questions I have. My dad had a whole life insurance policy for - get this - sixty years! He took it out when he was in his twenties. When he died, the benefit was more than what he had paid in, even after all of those years. Not bad for $10 a month. That probably seemed like a fortune when he took it out. I remember him saying that he earned $57 a week when my parents first married. So he paid in about $7,000 - I hope his survivors got a good benefit. If he had invested it, it could have been worth $150,000 after 60 years. I wonder if that's what his family got out of it. Most whole life plans I see have monthly payments in the hundreds! Wowsa Edited- trying to fix the formatting problem. Edited January 18, 2017 by xixstar 4 Quote Link to comment Share on other sites More sharing options...
Butter Posted January 17, 2017 Share Posted January 17, 2017 My uncle could not get term life insurance so he had a whole life policy that he paid about the same for a couple decades shorter as TechWife's dad. It paid out WAY more than he put in. He wanted that for funeral costs (which it more than covered; he was single, never married, no kids). He had several investments that he left to his heirs completely separate from the insurance policy. He didn't want us to be in a situation where we'd have to pay for his funeral out of our inheritances. For him, it turned out to be a good deal. I doubt you'd be able to get a whole life policy as cheap today. 3 Quote Link to comment Share on other sites More sharing options...
elegantlion Posted January 17, 2017 Share Posted January 17, 2017 My parents took out a whole life policy on me many years ago. It now pays for itself from the dividends. Since my life has been on a financial roller coaster for a while, it's currently my only life insurance and is enough to bury me when that need arises. It would not have been my first choice, but I like having it now knowing that at least ds will not have to worry about my funeral expenses. 2 Quote Link to comment Share on other sites More sharing options...
SparklyUnicorn Posted January 17, 2017 Share Posted January 17, 2017 I don't know. They are SO EXPENSIVE. DH has some small policies from Germany that he bought in his late teens. There are some nice perks. After a period of time they pay out a fixed monthly sum. You can freeze payments without having the policy cancelled. No clue if there is anything like that here. We did have to freeze it because it's difficult to make the payments without spending a lot of money on fees. He won't completely lose out on benefits. The benefits and worth just won't grow larger. 1 Quote Link to comment Share on other sites More sharing options...
FaithManor Posted January 17, 2017 Share Posted January 17, 2017 It is one of those things that is situational. For some term is the way to go, and for others whole. We followed the advice of an Edward Jones financial consultant and have been happy with his counsel. 2 Quote Link to comment Share on other sites More sharing options...
AngieC Posted January 17, 2017 Share Posted January 17, 2017 Life insurance agents/brokers take home a significant portion of first year premiums as their sales commission so I would be very cautious about taking their recommendation. (Premiums on whole life are much higher than term, so they make more money selling a whole life policy.) I have never come across any information that would make me conclude that whole life is a better strategy than term life + investing the difference. 1 Quote Link to comment Share on other sites More sharing options...
maize Posted January 17, 2017 Author Share Posted January 17, 2017 Life insurance agents/brokers take home a significant portion of first year premiums as their sales commission so I would be very cautious about taking their recommendation. (Premiums on whole life are much higher than term, so they make more money selling a whole life policy.) I have never come across any information that would make me conclude that whole life is a better strategy than term life + investing the difference. Term life rates are great if your health is good. 1 Quote Link to comment Share on other sites More sharing options...
xixstar Posted January 17, 2017 Share Posted January 17, 2017 Term life rates are great if your health is good. Does this imply that whole life policies are great when your health is poor? Whole life insurance still has to manage risk, so I would assume their rates are higher just like term life rates are higher when your health is poor. Quote Link to comment Share on other sites More sharing options...
maize Posted January 17, 2017 Author Share Posted January 17, 2017 Does this imply that whole life policies are great when your health is poor? Whole life insurance still has to manage risk, so I would assume their rates are higher just like term life rates are higher when your health is poor. But whole life doesn't expire and need renewing so the rate wouldn't increase if a health problem surfaced later. I've only ever read that term life is better, but the sources always seem to assume decent health and good rates on term. Quote Link to comment Share on other sites More sharing options...
xixstar Posted January 18, 2017 Share Posted January 18, 2017 But whole life doesn't expire and need renewing so the rate wouldn't increase if a health problem surfaced later. I've only ever read that term life is better, but the sources always seem to assume decent health and good rates on term. But your term life rates also don't increase later if your health becomes poor after you have the policy either - so that comparison doesn't work. If my dh gets cancer this year, his premiums will remain the same over the next 10 years of our policy. Yes, it would be more expensive if we wanted a new term-life insurance policy after a diagnosis. We'd also be paying more because he's 10 years old than we when got our first policy too. Whole life would charge us more if we got a policy at 50 vs 40 too or if we waited to get a policy after a health issue. Also I continue to counter this assumption that you need life insurance for your entire life - I don't believe you do. But just because whole life builds in an "investment" doesn't change the calculation of risk they have to do to be profitable. Now if you only have whole life insurance and develop a health issue - I would not cancel it unless you can get affordable term-life insurance. If continuing with a bad product is the only life insurance option you have, while you have dependents depending on your income (or the service you provide as a homeschooling parent), then keep it. I am always happy to learn more or to be shown where I am mistaken in my understanding. Whole life insurance is one product I scratch my head about a lot. 3 Quote Link to comment Share on other sites More sharing options...
Georgiana Daniels Posted January 18, 2017 Share Posted January 18, 2017 It is one of those things that is situational. For some term is the way to go, and for others whole. We followed the advice of an Edward Jones financial consultant and have been happy with his counsel. This ^^^ (I agree because I used to be one!) To the OP, life insurance as an investment only makes sense for certain people. As a generic example, someone who is already investing up to the company match in their 401k, has maxed out their ROTH or traditional IRA, and is now looking for other long term investment options may consider whole life. But I agree with the PPs who pointed out that the commissions on whole life are much larger than other investment options. Sadly, they are often sold for the benefit of the adviser rather than the customer if you don't know who you're dealing with. If you can, talk to a financial adviser who can look at your total picture and give you advice for YOUR situation. A firm like Edward Jones is good because you can get advice with an appointment that doesn't cost you anything to start out. 5 Quote Link to comment Share on other sites More sharing options...
LucyStoner Posted January 18, 2017 Share Posted January 18, 2017 (edited) Some people are not insurable for any significant amount, term or whole be damned. The trouble with whole life is that the premiums are large enough for older adults with health problems that there's a strong case to be made for saving yourself the commission and fee costs and just investing those funds. Edited January 18, 2017 by LucyStoner 2 Quote Link to comment Share on other sites More sharing options...
Crimson Wife Posted January 18, 2017 Share Posted January 18, 2017 This ^^^ (I agree because I used to be one!) To the OP, life insurance as an investment only makes sense for certain people. As a generic example, someone who is already investing up to the company match in their 401k, has maxed out their ROTH or traditional IRA, and is now looking for other long term investment options may consider whole life. But I agree with the PPs who pointed out that the commissions on whole life are much larger than other investment options. Sadly, they are often sold for the benefit of the adviser rather than the customer if you don't know who you're dealing with. This is basically what my dad (who has a MBA in finance) said as well. There are certain situations where it can make sense to buy a whole life policy. One of them IIRC was as a way of sheltering assets so they won't count against the family for college financial aid. None of the things he mentioned applied at the time we got our term life insurance policy. 2 Quote Link to comment Share on other sites More sharing options...
Amy in NH Posted January 18, 2017 Share Posted January 18, 2017 I got policies on each of my kids when they were born. ~$200/yr for 10-15 years for ~$20,000 policy. Quote Link to comment Share on other sites More sharing options...
Georgiana Daniels Posted January 18, 2017 Share Posted January 18, 2017 This is basically what my dad (who has a MBA in finance) said as well. There are certain situations where it can make sense to buy a whole life policy. One of them IIRC was as a way of sheltering assets so they won't count against the family for college financial aid. None of the things he mentioned applied at the time we got our term life insurance policy. Exactly! Whole life is great for the right people, but definitely not for everyone. It used to upset me to meet people who didn't even have a ROTH or contribute to their 401k who had been talked into a whole life plan. Quote Link to comment Share on other sites More sharing options...
MASHomeschooler Posted January 18, 2017 Share Posted January 18, 2017 When we were buying our first house at age 23, we realized that would be a good time to get life insurance. We didn't have any kids yet (and weren't planning to start super soon), but knew we wanted 2-3. We wanted to maintain coverage at least until they were all through college, which would probably be past the 30 years that's the max you can get term for, at which point a new policy would be much more, even assuming we didn't develop any conditions in the meantime. We also shopped around and were able to get whole life policies for not much more than 30-year term. And I'll have to look up the details, but at some point we can stop making payments and have remaining premiums be paid from the accumulated value so we'll have continued coverage without continued payments (vs most likely - hopefully! - having nothing to show for almost the same amount of pay-in with term), or at any time we could cash it out if needed for a major emergency. So, for our specific circumstances, it was the right choice. (And we were maxing out our retirement funding at the time.) But I agree it's often not, and agree with seeking advice from a financial advisor who won't benefit from your choice. Quote Link to comment Share on other sites More sharing options...
TechWife Posted January 18, 2017 Share Posted January 18, 2017 Why wouldn't I just do my own investments and not put them into a life insurance policy? I could put them into an IRA to get the same tax benefits. Yes, it's possible that you could. Also, from what I've read, when you die your family only gets the face value of the life insurance and NOT the face value plus those "investments". Why would I not buy a term life insurance policy, for much less, and then have my IRA inherited by my survivors versus losing that money? ​My family received much more than the face value of the policy. Why do I need lifetime life insurance? I thought life insurance was there to replace my income for my dependents. In 20-25 years, my dependents should all be gone and on their own. My IRA should be taking care of my needs by then and would be supplemental to my spouse should I die first. I don't see a lifetime need for life insurance. I think that depends on your income. My parents were of a low, fixed income. They needed life insurance in order to pay funeral costs. These are the questions that come to my mind when people mention whole life policies. But none of this addresses the OP question - being denied term life insurance is a different situation than the questions I have. So he paid in about $7,000 - I hope his survivors got a good benefit. If he had invested it, it could have been worth $150,000 after 60 years. I wonder if that's what his family got out of it. In this case, all investments were lost in a business venture. The $150,000 would have been gone about 35 years before his death. Not all people are cut out to invest money. Instead, the family had money to pay for his funeral. Well worth it. Most whole life plans I see have monthly payments in the hundreds! Wowsa WOW! Edited- trying to fix the formatting problem. Answering above in blue! Great questions. Quote Link to comment Share on other sites More sharing options...
Guest Posted January 18, 2017 Share Posted January 18, 2017 We got a combo term/whole life a number of years ago. It was PART of a whole strategy. It's been an ok investment, and the premiums are now and have been for a long time paid by the account. The main benefit that it has offered us that term would not have is the ability to borrow the cash bake in emergencies. This has come in handy twice. We were stupid in one aspect and did not realize that you can't get a line of credit when you don't have an income stream. It doesn't matter how much you have in tied-up investments. Whole life has been a lifesaver for us twice in short term cash flow emergencies. Quote Link to comment Share on other sites More sharing options...
Joules Posted January 18, 2017 Share Posted January 18, 2017 It is one of those things that is situational. For some term is the way to go, and for others whole. We followed the advice of an Edward Jones financial consultant and have been happy with his counsel. I just talked to my dad's Edward Jones' advisor yesterday, the new fiduciary rule will make it less likely that you will be sold into a bad investment. I don't know all of the details of who is covered, but I know investment advisors like Edward Jones are, so that may be a good place to start. 1 Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.