Do you have Life Insurance? Term or Whole Life?

amother

Wed, Nov 20 2013, 4:25 pm

goldyisintown wrote:

WL is the cheapest insurance for actual net cost of insurance, its much cheaper then term, the out of pocket cost is 10 times or 20 times the amount then term insurance, but the net cost over 20 years is less.

goldyisintown wrote:

Can you provide an example of a how whole life insurance's net cost would be cheaper than term??

From what I can see that's not possible.
For example, a healthy, non smoking woman in her 30s can easily get a 500,000 30 year term life policy for a cost of $99 a year.
Compare that to a whole life quote I got for $100,000 policy. It's cost was $1,020 a year.

So after 30 years in the term policy you would have paid $2,970. Whole life cost after 30 years would be $30,600.

So you can take the amount of money, $27,630 you have saved by not buying the whole life, and invest it. Over 30 years, if just invest it in a total stock market index fund, would gain to around $126,000.

amother

Thu, Nov 21 2013, 7:20 am

amother wrote:

goldyisintown wrote:

What company do you have that you're paying so little?!
I'm in my twenties, and in the highest category (perfect health b"h) and I am paying almost 400 $ a year for half a million dollars of term insurance. It goes up slightly each year unless you do a set policy which stays the same yearly but is more to begin with. I'm with New York Life btw.

Also whole life term insurance collects interest at a higher percentage than my bank is giving.
I currently have both types of policies, but my whole life is definitely more worthwhile as it has cash value of initial plus interest.

amother

Thu, Nov 21 2013, 9:10 am

amother wrote:

goldyisintown wrote:

I mistyped before. The $99 a year policy was for the $100,00 term policy. I originally meant to write it for a term life $500,000 policy. But I changed it to a $100,000 policy to compare it to the $100,000 whole life policy quote that I got. The $500,000 policy quote that I got was for $320.

amother wrote:

Also whole life term insurance collects interest at a higher percentage than my bank is giving.
I currently have both types of policies, but my whole life is definitely more worthwhile as it has cash value of initial plus interest.

You would get a higher return if you had invested the money instead of paying the whole life insurance cost.

Never mix investments and life insurance.

The only people who gain from whole life insurance is the salesman.

amother

Thu, Nov 21 2013, 9:37 am

I happen to have a whole life policy cause it was purchased for me when I was 2 and I dont pay into it anymore.

The idea of term vs. whole is easier answered if you understand the purpose of insurance.

the purpose of insurance is that while you are bringing in income, if something should happen to you, your income should still come in, just in a different form. Retirement age is 65. If you are currently 40, then technically you only need insurance to replace your income for 25 years. After 65 you wouldn't be bringing in income so there is no need to replace it.

if you say but, whole life has cash value so its an investment, I've done the math, and there are much better investments out there.

If you are not using your money wisely and you are not saving for retirement or you will HAVE to work until the day you die because your expenses are too high for retirement, then maybe the whole life is the way to go (never priced this concept out though).

Once one retires the income stops. you get checks from social security, long term savings may become available. You need to still keep some money aside to pay for burial (although its a segula for arrichas yamim if you purchase while alive).

oh and just to go back to my whole life policy, I've priced out what it is currently worth (again stopped paying on it) and looked at the surrender value. It would be better for me to surrender policy and take the cash value, buy a new term for worth 10 times what my whole life is worth right now, and then I would still have money left over to invest and grow for me.

amother

Thu, Nov 21 2013, 11:42 am

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.

chocolate chips

Thu, Nov 21 2013, 12:22 pm

Someone mentioned to dh and I the other day that even though we cannot afford Whole Life for us (we have term and pay very little each month), you can get whole life for your kids for literally nothing a month and then you can use it to help with wedding expenses etc. It is like a college or savings account.
This person mentioned that he did it for his kids and he is reaping the benefits.

just something to think about if you want the investment but not for too much money a month.

amother

Mauve

Thu, Nov 21 2013, 4:04 pm

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 :-))

Last edited by amother on Mon, Feb 05 2024, 11:00 am; edited 1 time in total

Cookies n Cream

Thu, Nov 21 2013, 5:12 pm

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.

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

Cookies n Cream

Thu, Nov 21 2013, 5:14 pm

ColorMom wrote:

When comparing rates, be sure to compare interest rates as well...