Term life insurance vs. whole life

[ChrisL68]

I have $100K on my wife for that reason.

 

[SkyDivingDeacon]

I've got a whole-life policy that my parent's started when I was a little kid. It is what NC calls a jumping juvenile policy. It started at $10,000 and jumped to $25,000. I pay a monthly premium of $14 and I'll keep it. Otherwise, I did the employer life insurance. They pay for 2x salary and I buy another 3x on the cheap for like $3 every two weeks.

I had an NC Life & Health Insurance License with my mortgage job a few years ago. If you are married or have kids and few investments, a term policy is a good idea. Otherwise, your money is better off in investments. The only thing to consider is that life insurance pays off to the beneficiary and does not become part of the estate where your other investments and assets would and could be taken by creditors.

This is not true...

 

[ATLDeac]

Good article. My wife and I have both whole and term policies. I consider whole life to be a good tax-free investment vehicle, but it's not for everyone. If you're just worried about taking care of the wife and kids if you die in the next 30 years, get a term policy and invest the rest in your Roth, Traditional, or 401k.

We invest in a Traditional, 401k, and have the insurance policies. Diversification is good.

 

[SkyDivingDeacon]

Thanks.

My guy is Northwestern too. He almost sold me based on the argument that Northwestern's rate of return is so stable that if you have a whole life policy with them you can get really aggressive with your 401k and other investments and fall back on the whole life if you lose big elsewhere. I just don't see myself ever getting comfortable with that approach though.

For every Northwestern Mutual Rep. there are 10 suckers out there that buy in with crap like this. Good for you for listening to yourself.

That WSJ article is very good, IMO. First time I've seen the WSJ with a good enough break-down like that to print off a copy and put in my folders.

...

WakeLaw is right, again. The questions over whether to get Whole Life or Term are far reaching. There are no cookie cutter answers because it depends on the client's own personal situation. My logic goes like this:

1) If you get Term, hedge your bets and make sure it's convertible if you ever do fall in the category of needing permanent coverage.

2) Ask your brilliant Northwestern Rep. about these three things and see if he falls out of his chair.
a. Risk Based Capital
b. Delay Clause
c. Willful overpay

If you read through a Whole Life Prospectus, or a Life Insurance Company's Charter, some of the above will be there. Read through what some of those are. It's pretty interesting to understand why some of these Life Insurance companies are so profitable.

...

Also, at some point there's going to be compensation disclosure that comes down the pipe of the Insurance and FA/FP lines of business, and I can't wait. It's going to put 3/4's of the schmucks out of business and make the world better for it.

 

[Wakelaw2006]

I've got a whole-life policy that my parent's started when I was a little kid. It is what NC calls a jumping juvenile policy. It started at $10,000 and jumped to $25,000. I pay a monthly premium of $14 and I'll keep it. Otherwise, I did the employer life insurance. They pay for 2x salary and I buy another 3x on the cheap for like $3 every two weeks.

I had an NC Life & Health Insurance License with my mortgage job a few years ago. If you are married or have kids and few investments, a term policy is a good idea. Otherwise, your money is better off in investments. The only thing to consider is that life insurance pays off to the beneficiary and does not become part of the estate where your other investments and assets would and could be taken by creditors.

This is not true...

If you designate a beneficiary (other than your estate) it is true - not a part of the probate estate and in most, if not all, jurisdictions, not subject to the claims of creditors of the insured/decedent. Unless you are talking about being part of the taxable estate for estate tax purposes, in which case, you are right, but I'm about 99% sure that wasn't what Helton was talking about.

 

[SkyDivingDeacon]

If you designate a beneficiary (other than your estate) it is true - not a part of the probate estate and in most, if not all, jurisdictions, not subject to the claims of creditors of the insured/decedent. Unless you are talking about being part of the taxable estate for estate tax purposes, in which case, you are right, but I'm about 99% sure that wasn't what Helton was talking about.

Ahh, couldn't tell and shouldn't have jumped to conclusions. Sorry, Helton if you were talking about the former. I read it as not being included in the taxable estate, and it is.

 

[Wakelaw2006]

Ahh, couldn't tell and shouldn't have jumped to conclusions. Sorry, Helton if you were talking about the former. I read it as not being included in the taxable estate, and it is.

Pitfall of the trade - "includable" is 99% of the time in the context of the taxable estate for me as well, but since Helton was talking about creditors, I'm pretty sure he was talking probate estate. Also, I forget that less than 1% of folks actually have to worry about estate taxes and for most people, the probate estate actually is what matters to them.

 

[LSDeac]

Good discussion. I was a Northwestern Mutual agent 10+ years ago. I still love the company and the very secure value it brings to the table for life insurance clients. I do still highly recommend them. The key though is to find an agent that you know has your best interest at heart. At the time that I was with NML, commissions for the agent ran 10% on term premiums and 30% on whole life premiums.

With all of that said, my #1 goal as an agent was to take care of a family's need first and foremost. I did not care whether that was through term or whole life --- just determine the actual dollar amount need of the family if the parent(s) were to pass away and satisfy that need. For every family, that final dollar amount needed was very different since priorites were different for every family.

In the market that I was in at the time, I was mainly dealing with young couples starting familes, and most of the time term was the best option for them because the need was so big. As time went on, what actually became a very popular option to some people that I worked with was to do a very small base whole life policy and attach a term policy to that. That was still a fairly inexpensive option that gave them the coverage they needed, some 6% to 7% returns over the long haul in the small whole life policy, and a term policy that was convertible up to a certain age in case they ever needed to do that. Also by going this route, the term policy was actually a little cheaper than the same term policy by itself due to a fee being waived that was charged for a stand alone term policy.

So determine your need and take care of it with whatever life insurance vehicle you are most comfortable (even within the realm of term insurance there are a lot of options). That is the most important thing (dont ever let an agent tell you otherwise). Dont leave your spouse / family with financial burdens to deal with as they suffer your loss as well.

 

[TravelingDeacon]

About term life:

When should you buy it? I'm 25, single, no kids, no marriage for at least 2-3 years. I've got a steady job and invest quite a bit. I have a 400k policy but it will expire when I leave my job (perhaps in 2 years after my contract expires).

I figure I'll buy a new policy when I'm about to get married and more when kids happen. But, is that the right call?

 

[HeltonCreek]

Ahh, couldn't tell and shouldn't have jumped to conclusions. Sorry, Helton if you were talking about the former. I read it as not being included in the taxable estate, and it is.

No problem. It's been a few years and a totally different field from what I'm doing now so my memory could be off. If you name a beneficiary, which in my experience most people did, the payout goes to them and cannot be touched by creditors (again, things may have changed). You can decline to name a beneficiary and then it goes to the estate.

Life insurance sales are not local government budgeting (thank God).

 

[TheTwinAndreBen]

Not this again.

 

[LSDeac]

About term life:

When should you buy it? I'm 25, single, no kids, no marriage for at least 2-3 years. I've got a steady job and invest quite a bit. I have a 400k policy but it will expire when I leave my job (perhaps in 2 years after my contract expires).

I figure I'll buy a new policy when I'm about to get married and more when kids happen. But, is that the right call?

Right now, you really do not need it and you have plenty through your employer. However if you hold off on getting any individual term now, you are banking on the fact that you will still be insurable in a few years. Most of the time assuming you are in good health now, that is a very safe bet based on your age.

If I were in your shoes looking at term, I would wait until you are about to get married. Get enough at that time to allow your spouse to pay for your burial and pay off your newly married acquired debts should you meet your untimely demise. Once your wife gets pregnant for the first time, revisit it all and buy some more to cover the kids, college, etc. Again, you are taking a risk that you are still insurable at those times, but you should be fine.

 

[tnt234]

term life insurance versus whole life

Obviously you should purchase the one that you can afford - first and foremost. Shop around for the best rates and review your "health status" as determined by the life insurers underwriting before you apply so you can be confident of the rate you are applying for.

 

[tnt234]

I'd agree with this ideology and another one - "buy term and invest the rest"