Can anyone explain whole life insurance

amother

Dill

Wed, Oct 26 2022, 3:17 pm

It’s basically insurance/investment/forced savings. But primary driver should be insurance as it’s not the greatest investment. Your basically buying a permanent guaranteed life insurance policy (as opposed to term which usually expires after 10-15 years) but paying a much higher premium because the benefits are permanent and guaranteed. So for example term can be $30/month for a million dollar policy for a young healthy adult but whole life may be $200 or more for a much smaller death benefit, like 250k.
The plus side is that eventually your premiums turn into cash value through dividends and other complicated stuff, but this takes time. The first few years there will basically be little or zero cash value but then it starts building up. Depending on the policy it can take 10-15 years until there’s a significant cash value that will let the policy be we pay for itself, meaning you can stop paying premiums out of pocket. (You are paying with dividends). At any point you can cash out of the policy with whatever the value is or borrow against it with a predetermined interest rate. It’s complicated but hope this helps a little.

We have a policy that’s 12 years old, we put in around 29k in premiums and it’s currently with about 23k. If we would have invested the same amount monthly in an index fund it would have been worth double. But don’t know if would have done that and we wouldn’t have life insurance.

Strictly as investment you can do much better with mutual funds etc if you are consistent and disciplined to invest every month. But if you won’t be doing that or for other considerations whole life can be something to look at.

Monsey

Wed, Dec 28 2022, 6:12 pm

If your goal is savings, there are better places that will give you more.
If your goal is leaving a death benefit after your 120 for your 90 year old children, buy a whole life.
If you just want a safety net to be protected g-d forbid if you pass away while still having young kids, buy a 30 year term policy. (Cost about 700 annually for one million death benefit for a health person in the 20’s)