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Do you have Life Insurance? Term or Whole Life?
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amother


 

Post Thu, Nov 21 2013, 6:31 pm
Cookies n Cream wrote:
amother wrote:
Cookies n Cream wrote:
Many investments carry some percentage of risk, while whole life insurance carries none.
Some people prefer to make a bit less (interest) because it's guaranteed. I understand both sides.


The attempt to escape market volatility associated with stock investments by investing in more stable, but lower-returning, assets such as Treasury bills can expose a portfolio to other, longer-term risks.

One such risk is "opportunity cost," more commonly known as shortfall risk: Because the portfolio lacks investments that carry higher potential return, it may not achieve growth sufficient to finance ambitious goals over the long term. Or it may require a level of saving that is unrealistic, given more immediate demands on the investor's income or cash flow (in the case of an endowment or pension fund, for example). Another risk is inflation: The portfolio may not grow as fast as prices rise, so that the investor loses purchasing power over time. For longer-term goals, inflation can be particularly damaging, as its effects compound over long time horizons. For example, Bennyhoff (2009) showed that over a 30-year horizon, an average inflation rate of 3% would reduce a portfolio's purchasing power by more than 50%.
For investors with longer time horizons, inflation risks may actually outweigh market risks, often necessitating a sizable allocation to investments such as stocks.

Asset allocation and diversification are powerful tools for achieving an investment goal. A portfolio's allocation among asset classes will determine a large proportion of its return—and also the majority of its volatility risk. Broad diversification reduces a portfolio's exposure to specific risks while providing opportunity to benefit from the markets' current leaders.


I can also spit back my microeconomics textbook.
Or is it macro?
Definitely not my favorite subject regardless. ..


It's a simple explanation of how to view the risk of investments. Even items that are considered by some to be safe and risk free are inherently damaging and full of risk - the risk being not keeping up with inflation.

If one cannot understand the concept of shortfall risk they should do more research on investing.
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amother


 

Post Thu, Nov 21 2013, 6:52 pm
ColorMom wrote:
I just want to clarify some misconceptions. Whole life costs more per year initially, but if you can afford it, you end up paying less in the long run. That is because unlike what one poster claimed, you will not end up paying 30k over the years because after a certain amount of time ( I think 10 yrs but I'm not sure) the policy has enough cash value to pay for the premiums itself. So you will end up with life insurance, cash value and you won't even have to pay premiums anymore.

With term, you pay the premiums every year and hope you won't need to use it, but there is no cash value to it - like fire and auto insurance. How do you know what your health will be like in 10-20 years? You might not be able to renew your policy if you develop health issues.

Regarding investments: insurance is a very safe investment. Do you really think these major companies who have been around for over 100 years will suddenly go under?

One more thing: Shop around for rates. I happen to know that a certain company mentioned in this thread does not have the best rates.

Disclaimer: My husband is an insurance agent. (Which means I have reliable info :-))


That means your husband makes money from selling whole life insurance. It's a cash cow for insurance salespeople.

All one has to do is a smidgen of research to discover why for most people it's a very poor decision. Unless of course, the goal of the person is to have less money for retirement.

If one doesn't feel capable of investing for themselves the next best thing to do is to find a fee-only financial advisor. One that isn't a salesperson. One that doesn't make money from selling whole life insurance policies. Life insurance salespeople make huge commissions on selling these policies, so of course they love them.
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amother


 

Post Thu, Nov 21 2013, 6:57 pm
Many people like whole life insurance because it has cash value and it's a great way to set aside money for a time that it's needed.
I know many people who have cashed out their policies and used it to marry off children etc..

btw this is an old debate that has been going on for years....
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amother
Mauve


 

Post Thu, Nov 21 2013, 8:05 pm
amother wrote:
That means your husband makes money from selling whole life insurance. It's a cash cow for insurance salespeople.

All one has to do is a smidgen of research to discover why for most people it's a very poor decision. Unless of course, the goal of the person is to have less money for retirement.

If one doesn't feel capable of investing for themselves the next best thing to do is to find a fee-only financial advisor. One that isn't a salesperson. One that doesn't make money from selling whole life insurance policies. Life insurance salespeople make huge commissions on selling these policies, so of course they love them.


First of all I want to say that I added the disclaimer because I am honest.

Your accountant, plumber, appliance repair man, etc. all make money through a service they provide. Your insurance agent is just as entitled to make money through a service that he provides. Just because he makes more on a whole life policy does not mean that it is not a wise choice for some people. Again, I said SOME people. Every person needs to do what works for him/her, based on their own financial needs and capabilities. A good and honest agent will always explore ALL options.

The purpose of my previous post was not to convince people that whole life was the way to go. Not at all! I had just wanted to debunk some common myths discussed in this thread.

I can't resist adding one more thing. It often happens that someone tells my husband that his/her accountant doesn't believe in insurance. DH asks, "Would I be able to speak to him?" After they meet, the accountant not only okays it for his client but tells DH that he too, wants to buy insurance for himself. That is because although he might be a very good accountant, he is trained in accounting, not in life insurance, and doesn't understand all the ins and outs as well as the agent.

So do your research, and not just on imamother :-)

P.S. Why are you amother?


Last edited by amother on Mon, Feb 05 2024, 10:58 am; edited 1 time in total
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Sparkle




 
 
    
 

Post Thu, Nov 21 2013, 9:22 pm
I used to be in finance. Whole life insurance is often a very good thing to have for someone who can afford it. Term insurance is like renting a house - costs less per month/year but you are paying for the protection. There's no investment. Whole life insurance gets you the protection AND is an investment (and you don't have to worry about your health and requalifying as you do with term). Don't most of us want to buy instead or rent? That being said, people often can't afford to buy, so the rent. Term is still better than nothing since you are being responsible and protecting your family.

Just my 2 cents.

OH, and make sure you buy with a very good and reputable company. For whole life insurance I think mutual companies are the way to go. But again just my 2 cents.
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amother


 

Post Fri, Nov 22 2013, 12:24 am
Term insurance is a necessity for every married adult. Whole life is a luxury that can be purchased if it is affordable. Term is cheap, especially if locked in at an early age, like in the 20's. For a nonsmoker a million dollar 20 year fixed term policy can be had for a few hundred a year. Some SBLI offers at your local bank can also be the cheapest way to go.
Insurance agents try to sell whole life policies because they make a lot of money on those sales. On term policies they make very little. But if they get you as a customer of term, someday if you do have the money you will use them to buy a whole life policy as well.
Insurance is a responsibility, not having a minimum term policy is a lack of responsibility to the ones you love.
Buying insurance for children is a waste of money.
There are many good books explaining this topic, every person needs to do his research and provide what he can for his family.
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