Whole and Universal Life vs Term life. Are they a ripoff?

It's depends on your philosophy about investments. Whole life and universal have a lot of costs and commissions built into them. But they also have tax advantages. Buying permanent insurance can also force saving discipline on a policyholder, since their insurance "bill" is due each month.

Another advantage for permanent insurance is for estate planning, something Dave Ramsey will ironically need to do for tax purposes.

Overall, Dave is right that it's best for most people to buy term and invest the difference. It's important to find a financially reputable insurance company with very good rates. The less you pay for term life insurance, the more there is left to invest the difference.

Permanent life insurance policies are only good if you can afford them. Most people can't and that's why they appear to the public as a ripout. They are actually fairly good investments, however, most people can't afford to keep them long enough to reap the benefits.

Whole Life works better the younger you buy it.

I am a strong proponent of WL for everyone (of course, if they can afford it).

Whole had many benefits. The main one being it flexible. Most people will have a dozen unexpected/unrealized/unknown events happen in their lives over the next 30 years that will alter their financial landscape.

*Buying a new house
*Taking out a second mortgage
*Getting a big promotion
*Getting fired
*Starting your own business
*New dependants (children and/or parents)
*Disability
*Natural disaster
*Having a child with special needs

Those are but a few things that can completely change where your financial train is rolling. Whole Life offers the solution to the questions:

*What if I need insurance longer?
*What if I need to replace more than just my income at death?
*What if I start to worry about how much I will leave my kids?

You get what you pay for, and Whole Life (if bought through the right company), is a tremendous financial tool.

Dave Ramsey has probably saved a ton of marriages through his debt management system. However, he misses the mark on WL. And as Dan aptly mentions, he is going to need some major estate planning down the road, and he'll wish he'd bought Whole Life earlier.

Hope that helps.

BTW, I would to see these mutual funds that are average 12%, and will continue to do so.

Hello my name is Fadeelah, I watched Suzie Orman on the Oprah show and she stay away from whole life insurance and I have whole life insurance for me and my children and grandchildren. my question is why stay away i don't understand.

Celebrity financial advisors have some advice that is great, and other advice that not for everyone. You will never have a time in your life when you will not want to impact someone or something positively if/when you die. Term insurance works out if nothing in your life will change over the course of those years in which you own it. However, you need flexibility with your financial plan, and Whole Life offers that.

Term and Invest the Difference strategies usually end up being Term and Spend the Difference strategies.

Even if you can stick to the plan, you have to do extremely well to warrant beating the tax free death benefit afforded by WL.

Talk to the people who are getting ready to retire....those whose lives have changed either by divorce, refinancing of a house, buying a new house, an unexpected pregnancy, a parent who had to move in, etc., etc., etc........

They will tell you they would have loved to have bough WL thirty years ago. You need to think long term, which most people cannot do, and which is why most buy term.

BTW, even if someone talks you into a term strategy, the WL policies on your grandchildren are excellent investments.

Hope that helped.

Suzie Orman thinks the same way and she worked for Primerica, which is essentially Citibank. So it would make sense that she wants you to buy term and invest the difference, since then Citi can use you and your money so they can try to make up for over $55 billion in write offs.
The first step in buying a life insurance policy is checking the company behind the policy.
There are four major rating companies that rate all insurance companies in the country:
Standard and Poor's
Moody's
Fitch
A.M. Best

These reports are not free, but any company that you are dealing with should be proud to tell you their ratings, that is if they are a good company, with a sound financial sheet and a surplus. The surplus is Very important, what this means is how much money they have in their "rainy day" fund. This is the fund primarily used to pay death claims. So it is important that they have a very well padded surplus, in cases of mass tragedy when many claims have to be paid at once. This surplus also represents what the company is doing with your money, are they investing it wisely so that they will be there for you 20, 30, 50 or 70 years from today.

The company that I have my policy through is New York Life. They have the highest ratings from all four of the rating companies. They also have a surplus of over $14 billion.

Standard and Poor's AAA
A.M. Best A++
Moody's Aaa
Fitch AAA

They are also a Mutual Company which means that they are owned by me, a policy holder. So...when New York Life makes money, I make money. The opposite of a Mutual Company is a Stock Company, what this means is that the owners of the company are share holders, not policy holders. This is quiet a conflict of interest in my opinion because a stock companies interests are not in line policy holders interests. These companies are MetLife, AIG, Hartford, and Prudential to name a few.
This is quite opposite from New York Life, since they are a Mutual company their one and only concern is making sure that they are there, strong and solvent on the day where my family will need them the most. They do not take risks without making sure that it is in the best interests of the policy holders.

The company is over 163 years old, have insured americas greatest legends:
Babe Ruth
J.C. Penny
Suzan B. Anthony
Colonial Custard
and 11 U.S. Presidents
In-fact Calvin Coolidge, pushed a button in the White House that was linked to an American Flag that unraveled at the grand opening of the New York Life Insurance Building in New York City (1928)

Just think of that, 163 years old, New York Life was crossing civil war lines to deliver death claims. They paid EVERY claim during the panic of 1856, the crash of '29 and throughout the Great Depression. They have also paid a dividend to whole life policy holders for 162 years straight.

In today's world it is hard to trust anyone, but when you find a company that is build on such integrity and values it is hard to not spread the word. Check them out if you are looking for long term promises that you would like kept.

I applied for life insurance for myself and my husband. I was told by my agent to put the child rider on my husbands. He ended up being denied and mine was completed. Now I can't add a child rider to my existing policy so our children are not covered. My agent now wants me to do either whole life or universal life for them, he is pushing the universal life more. It seems like more then I can afford right now. What is the best thing to do to get them covered?

Children don't need life insurance. That is waste of money. No one is dependent on their income.

It is not that someone is dependant on the childs income / it is a head start. If they are below 18 they should not need a physical exam. And the policy will have "account value" at age 65 that is very nice for retirement. Plus they wont have to qualify for coverage when they are older and possible unhealthy.
National Agents Alliance
htt://naablast.us

Buy whole life from New York Life. They pay a dividend which goes to your cash vale. The product is called custom whole life, best whole life insurance policy in the business. They are A++ by all four rating companies, but yes it is expensive. The average return on investment is 6-7% with no taxes on capital gaines if policy holder dies with the policy inforce. This product is the best for estate planning

Orman was born on the South Side of Chicago, Illinois, in 1951 to Russian-Jewish immigrants Ann and Morry Orman.[6][7] Orman came from a working class background and has said that she did not "grow up with money."[6][8] She was an undergraduate at the University of Illinois at Urbana-Champaign, from which she holds a B.A. in social work. In 1973, she moved with friends to Berkeley, California and lived for three months in a van on Hearst Avenue. She soon became a waitress at the Buttercup Bakery on College Avenue. In 1980, a longtime customer gave Orman a loan of $50,000 to help her fulfill her dream of opening her own restaurant. Orman invested the money at Merrill Lynch, but four months later was broke again, after she was swindled by her stockbroker.[9][10]

Knowing that she couldn't make the money back as a waitress, and having started learning more about finances and investing, Orman returned to Merrill Lynch and entered their training program to become an account executive. She discovered through her training that her stockbroker had committed an illegal act and she thus sued Merrill Lynch. Suze received the entire $50,000 back plus interest and was able to pay back her former customer. After she completed the training, she was hired by the firm and remained there until 1983 when she left to take a position as a vice president of investments at Prudential Bache Securities. In 1987, Orman resigned and opened her own financial planning firm, the Suze Orman Financial Group, in Emeryville, California. She acted as director of the firm until 1997, when she stepped down as her writing career took off with the publication of her second book.

1. I don't see anything about Primerica/Citibank?
2. There are other products out there for estate planning other than Whole Life Products.
3. Go to any major fund company's website and you will find fund lifetime performance(10yrs+) on an annualized basis to be higher than any whole life policy cash values(which recommended to be held at lest 15-20 years)
4. The dividends paid on your whole life policy are for overpayment of premiums. Meaning your insurance company charged you too much in the first place. Its like getting a refund for overpayment into your escrow account on a mortgage.
5. Babe Ruth and all the others mentioned were wealthy, not working class people.
6. If you work with a financial advisor, not an insurance agent you will get the same response you hear from Dave and Suzie. Who have no financial gain in you purchasing term and investing the difference.
7. Whole life for kids is the worst investment. I know my parents had one for me. Luckily my grandparents set up an UGMA/Education IRA for me at about the same time. I was able to cover my college expenses, Masters, with my Education IRA, the $3,200 in my whole life policy after 20yrs well it went into an IRA.

I am 65 and my husband is 72 yr old. Our trusted friend and State Farm Insurance agent convinced me to buy Universal Life Insurance a few years ago. He converted my 10-year term life insurance policy (premium was $279/yr for $100,000 coverage) to a Universal Life Insurance Policy for $100,000 coverage - NEW PREMIUM $2,616/yr. What a dope I was to fall for his sales pitch that Universal Life was really an investment I would get back. I spent nearly $10,000 in premiums before I realized I had been duped. If I had stayed with my original Term Policy, I would have spent less than $1,000 and I could have invested the other $9,000. In the end I recovered about $4,000 so I LOST about $5,000. Dave Ramsey is right. Universal Life is a RIPOFF.

The whole purpose of life insurance is to offer financial protection in the event of the policy holder’s death. It is best not to look at it primarily as an investment plan. Term life policies purely offer death benefits during the period of the term. There is no cash value on a term life policy. Some term life policies will offer you refund on the sum of premiums paid, after the term is over.

I work for AccuQuote and this is my personal opinion. Many prefer an investment advantage to their life insurance plan, but this should be considered an added advantage to a life policy, and not primarily viewed as an investment. It’s the age old comparison of apples with oranges. A whole life policy accrues cash value over the years. It will definitely not give you the same kind of investment returns as mutual funds or shares but neither can investments in mutual funds or shares give you the kind of death benefits a life insurance plan would? How many years of investment would that take?

Universal life is similar to a whole life policy except that the policy holder has more control over the investment component. Universal life is usually chosen by people who are market savvy and want to use their life insurance as a combination of life insurance and investment. This kind of policy is subject to market risks.

Denise
Disclaimer: I work for AccuQuote and this is my personal opinion.

I don't put horse shoes on my cat.

I don't make my horse "go" in a litterbox.

Both strategies have merit, the real key is selecting the plan THAT BEST FITS YOUR CLIENT. Period.

I advocate whole life, but if someone is dead set on the dave ramsey approach, I'll help them out (and in 95% of the cases, sell Whole Life to them later when they finally realize they need it). Life Insurance is about more than death benefit.

Anyway, I feel my job is to provide the client with as much information as possible, to give them my opinion, and then let them decide what route to take.

First, I am no expert. However, I would like to echo some of the points made earlier. There is no doubt whole life is expensive and so to is universal life. The annual premium for a 35 yo male is about $16,000/year for WL and $10,000/year for universal for million dollar policies. This is a lot of money! But down the road, if you live to 70, there will be a tremendous amount of cash value in either type. However, if you need 10x's annual income for adequate coverage for a death event, and you earn 180k/year, the WL and Universal policies would fall short unless you had at least 15-20 years of premium paid. I think every head of household should have 10Xs annual income, but you can have more than one type of policy.

I have four policies, 2 term and 2 whole life. I can convert the term to WL at anytime as my overall wealth grows.

Other benefits are both estate planning mentioned above/tax benefits as well as protection from creditors.

Finally, for professionals, limits on disability insurance are around 25k/month. A whole or universal policy has a disability clause that your premiums continue to be paid in-full until age 65. This will provide ongoing wealth accruement, something you will lose with only having 60% of income once you are disabled, assuming the best possible scenario with disability insurance.

A person is 12 X's more likely be disabled than an untimely death

Some interesting information. True, the buyer should beware. I was hoping for a good resource of information in order to make a wise buying decision. I noticed Wayne in America is full of critical remarks but offers no positive information. Wayne in America, is there anything meaningful and positive you can offer as an alternative or an insight?

Wayne - who peed in your cornflakes today?

First off term has a place in people's life especially when you are just starting off with a young family when coverage is critical. I think the desired form of insurance though is Whole Life. It is not perfect and yes insurance companies make money (all businesses must make a profit otherwise there is no business!). People also overlook that with Whole Life your money is not tied up. Think about a mutual fund (or any stock market instrument) and realize that if there is a correction it may take years to get back to "0" and your funds were never available. Also Mutual Funds only became popular in the 80's (mainly due to the 401k), and they do not have a long track record as an industry of good returns (funds open and close all the time, managers leave etc., by the way I am talking 30+ years). Life insurance is a contract and I like contracts (it means the company promises something in return)! Mutual funds promise absolutley nothing at all! Finally if you don't like Whole Life, and think the stock market and mutual funds are the way to go, then keep drinking the kool aid junior. You'll probably being asking me for a handout when your 65+.

I think everyone needs to remember to take Dave's advice as a WHOLE. his thinking is you have term life insurance for about 20 years b/c you want to cover all expenses and take coare of your family if you should die during their childhood years. After 20 years.....they SHOULD be living on thir own and making a living and yo uson't need to support them. Your house will be paid off (b/c he recommends a 15 yr mortgage) and you will have an emergency fund of 3-6 months of expenses if anything should happen. The money you have saved investing the difference btwn term and whole has earned you a nice nest egg and so if you die, it isn't a catastrophe that it would have been yers earlier when you had many more things to cover with your income. Alos for those of you who think whole life pays you everything that you have paid in premiums, think again. If you die, the insurance company oinly pays the policy value. not all the cash you paid into it. Have some discipline and invest the difference. Also, take what Dave says as a whole, not picked apart.

I don't understand why people say that kids don't need life insurance? Of course they don't have an income. However, in the even the unthinkable should happen, the average funeral costs $7,000. Also, I would be a basket case and unable to work for I don't know how long. There would be the loss of MY income. I may be able to take FMLA for 12 weeks, but that is unpaid leave. That's a substantial amount of lost income.

Also, as far as buying term and investing the rest, I pay my bills each month on time. However, I am not as disciplined in investing because I know that I can always adjust my contribution in order to buy that Playstation 3 for Christmas, etc.

I have UL policies on each of my kids and am seriously considering converting to WL for them. It's forced savings. Plus some diseases run in my family. God forbid that my son gets prostate cancer at age 50 and his term life expires (if that's all he has). As we're going through with my father, life insurance at that point is impossible to afford. I'm buying WL now, while my kids are still preteen.

Both are useful products and they cannot be compared without a chrystal ball. I have seen both backfire in my 25 yrs in the business. Most often, I see term cover a person until they get old and then dissappear. The coverage offered peace of mind but no real value and they wish they had permanent coverage. This topic is quite complicated by the tax code also. Whole life or UL can offer advantages to the wealthy that no other product can bring. One has to be committed and able to pay. Ins cos prey on those who lapse policies. Whole life was the best thing my father ever bought-and from a mutual company.

i plan on becoming an insurance agent... what ever the case insurance.. is used at a tool..... whether it be whole life, universal life, termlife...etc...its just a matter of informing the client and building a relationship with the client to fully understand the situation and from there we can help them by giving them the best option in which they can afford and be comfortable ... this is for the better interest of the client and their family.....my gf sells life insurance ... and to tell you the truth .... she believes in whole life and universal life... it was through her experience with the death of her brother that makes her become the best insurance agent to help all families be secure for their children and family.... tell me wha to think peoples

Life ins industry is THE biggest ($) industry on Earth. DO NOT BE FOOLED... get TERM, at upwards of 1/10 the cost as an example below shows. Keep this SIMPLE - Whole Life is great if you want to
A. Give the salesperson a HUGE commission, (my case wanted $4k+)
B. Be confused by insurance companies
C. Waste YOUR money.

Simply put, life ins is just like car ins. Buy it only FOR THE TERM YOU ACTUALLY NEED IT!.You do NOT need life ins for your WHOLE LIFE (hence the name). The biggest rip off is putting life ins on an infant. Life ins is to COVER THE LOSS OF INCOME, PERIOD. Children do not have incomes.

You and or a spouse need it when you have those responsibilities (kids, mortgage etc.). The problem with this insidious, greedy industry is they want you to put ins on your infant and then hopefully they will keep it there for 60, 70, 80+ YEARS. Insane! A traditional funeral is approx $6-10k, creamation is 1500-2000. You buy ins until you don't need it, then in your later years, when you have all of the money you saved by not giving it to the WL ins co., your loved ones will just take the 1500 to 10k and bury/creamate you!

-You're told you can "borrow" on your policy for low interest. WHY would you borrow YOUR OWN MONEY-AND pay to do it???. Don't. Did you know that IF you borrow, THAT AMOUNT gets deducted from the payout when you die-right off the top.

Check out this simple comparison found on the Web:
For a 30 year old male in good health, 20 year term life for $500,000 of life insurance coverage is $22 per month. A whole life (universal life) insurance policy for $500,000 of coverage is $213. That’s a difference of $191 per month!

But wait, the whole life is an investment. According to Fortune magazine, the average whole life rate of return is 2.6%, for universal life 4.2%, and for variable life (invests in mutual funds), 7.4%. Let’s do some quick calculations:

Whole life: $213 per month at 2.6% for 35 years = $146,817.19

Universal life: $213 per month at 4.2% for 35 years = $204,225.88

Variable life: $213 per month at 7.4% for 35 years = $414,222.09

Investing: invest the difference, $191 per month at 10% for 35 years = $683,306.64

Investing: invest the difference, $191 per month at 12% for 35 years = $1,108,097.46
Save the Difference

If you take out a term life insurance policy, you can invest the difference in a high growth mutual fund and be a millionaire at age 65. One of the quick arguments against this back of the envelope calculation is that most people do not have enough will power to invest the difference that entire time. You can solve this problem by creating an automatic withdrawal each month into a money market account. Have the insurance paid from the money market account and have a monthly sweeping take the rest to invest in your choices of mutual funds or in a Roth IRA.
Choose Term Life

Unless you have complex estate planning issues, term life is the best deal for life insurance. It is far cheaper and the investing power you have outside of it will make you “self insured” before your death – you won’t have to rely on the insurance policy to fund your estate.
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and another "Top 10 Things To Know"
- Insurance is sold, not bought.

- Agents sell the vast majority of life policies written in the U.S. because the life insurance industry has a vested interest in pushing high-commission (and high-profit) whole-life policies.

- Whole life is expensive. Policies with an investment component cost many times more than term policies. As a result, many people who buy whole life often can't afford an adequate face value, leaving themselves underinsured.

- Whole-life policies are built on assumptions.

- The returns quoted by the agent are simply GUESSES - not reality. And some companies keep these guesses of future returns on the high side to attract more buyers.

- Keep your investing and insurance strictly separate. There are better places to invest - and without the high commissions of whole-life policies.

- Buy enough term coverage to fill your needs. Life insurance is no place to skimp, especially with rates at historic lows.

7. Match the term of the policy to your needs. You want the policy to last as long as it takes for your dependents to leave the nest - or for your retirement income to kick in.

Sorry to disagree with many that have commented in here. I'm a big supporter of Whole life, Universal Life, and Variable Universal Life. It all depends on how you use it and what you want it to accomplish for you..and at what stage of life you are in. There is no one financial product that is right for everyone....same with life insurance. And just like you would want to diversify your investments...you should treat life insurance the same way. "Get term and invest the rest." Well...what happens if you are 25 years old and get a 30 year term policy and that's it?? That will give you protection until you are 55..which you are likely to outlive. Then you are left with nothing to show for. A blend of term plus perm is likely the wisest scenario for a younger individual with a growing family. Get what you need for the time period you will need it in case something were to happen to you...then your spouse and kids will be covered. Depending on your budget...for example, get $500,000 for a 30 year term...that will cost you maybe $400 a year or so....then get $100,000 of whole or universal coverage that will last you for life. You get coverage for 30 years in case you die early....your wife can pay off the house/debt/college expenses. After 30 years those things should be already paid off...so you don't need as much coverage. You will still have at least $100,000 of coverage left over that will last you for life. And that will build cash value. You can take out policy loans against the cash value up to 90-something percent. You can take out those loans tax-free. The tax incentives are huge.

Then things you can do with life insurance are amazing if you do them correctly. Use it for a fund for you kids....set them up with a perm policy when they are babies and you can pay a chunk of their college with it 20 years down the road. You control how you spend it or use it..and it's tax free. These are great ideas....and you can do things with it that an IRA simply cannot do. Fund an IRA for 10 years...if you die you wife gets that IRA cash value and that's it. Fund a life policy wisely for 10 years and if you die your family gets so much more. If you don't die...you can still use the cash value in ways just as you could an IRA.

So....do it all. Blend your life policy something like 80% term and 20% whole or universal or variable universal. Meanwhile diversify your financial investments wisely. Don't put all your eggs in one basket...but don't limit yourself to either/or.

Again, your age and life circumstances are important to look at...customize a plan that is right for you and get the most out of your money. It is foolish to give a blind statement and say, "Get term and invest the rest." Maybe for some people that works...but for others who understand the products better know that's not always the best road to take.

I've been looking into getting a whole life policy, and going through the comments here I can see there are some things that people are not considering.

People who say: "Buy Term and Invest the Difference" might not be looking at the big picture.

First of all: Taxes.

Let's say you're earning a decent salary, and each year you max out your IRA and 401k contributions....and you still have a couple thousand dollars left over that you don't need immediately. You could:

1. Put it into a taxable brokerage account and invest it
or
2. Buy some whole life insurance.

Assuming you keep the money invested until your are old/retired:

With the whole life insurance, maybe you will only get a 3.5% percent return. However, you never have to pay taxes on the returns...so when you consider this, your returns are more like 4% or 5% equivalent to returns in your taxable investment account. It's even a better equivalent return if taxes go up.

Still, that might not be the best return that you could possibly get but consider the following:

1. You have insurance for your entire life, which could be used, if for nothing else, to offset estate taxes when you die, or you could use that money to help fund your retirement.

2. You can use that money for things like funding your child's education, and it doesn't count against the child for financial aid (the money in the taxable account would). In that sense it's comparable to a 529 plan, but you can use the money for any purpose if your child didn't go to school. You can't do that with a 529.

3. That money isn't going to go away when the market crashes.

I agree with the above poster (Ryan) that you should have a good mix. I think ppl should pay off debts first, then fund retirement fully, then if they find that they still have extra cash, that would be the time to consider some permanent insurance.

Would I put every cent that I didn't put into retirement into a whole life policy? Of course not. Is it worth having access to money in a cash-like account and a also have a death benefit for your entire life? I think it makes sense.

Basically in my mind, it is like a tax-free cash bank account. It doesn't pay a lot of return over inflation, but the money will be there when you need it.

It doesn't make a lot of sense unless you plan to have the policy for at least 20 years....much like buying a house doesn't make sense if you are only going to live in it for 2 years.

I'm 60 + years old and I borrowed against the face value of my whole life policy and didn't pay the borrowed amount back. The amount borrowed continues to accumulate interest, so much so that I'm afraid I won't have anything left if I should die. I thought that money was mine but it seems ...not so...now I am going to surrender the policy and take out term life or better yet...put the money into a death fund. At this point in time, I think life isurance is a rip -off for me.

You know what the problem with this term vs whole argument is? you dont know the situation. A 25 year that has a history of financial responsibility and an understanding of markets and investments would probably be better off with term + invest. However we have a whole generation (baby boomers) with negative savings that probably should have purchased whole life 30 - 40 years ago. Thats why its important agents do their homework. Mutual funds are not for everyone, neither is term or whole life, or Long term care, or E-mail. Its situation specific. The only possible outcome of blindly trumping one method over the other is hurting your clients and their families.

Dave Ramsey and Suzy Orman don't know what they don't know about the benefits of different forms of permanent life insurance. For example, anybody who is using what is known as Fixed Indexed Universal Life as a cash accumulation vehicle has sailed right through the Financial Crisis WITHOUT LOSING ONE DIME! How many of Dave or Suzy's followers would like to be in the same position.

The power of compound gain which Einstein said was the greatest force in the universe only works provided it is not interrupted by compound loss.

You ever here Dave or Suzy or any of the other financial gurus ever - repeat, ever - talk about what can happen when hit with compound loss

For people who know what they're talking about, show me a financial product that can beat the safety features and tax advantages of a life insurance contract. It is one of the greatest wealth/preservation vehicles out there for both living and legacy benefits.

People need to get informed. Look what the big casino selection of products pushed by all the high-profile media types has done to this country. Enough already. There are other ways to go that will put the power of compound gain to work while eliminating the setbacks of compound loss.

This is the age of Financial Conservation.

Here is a Real Life Apples to Orange-Apples.

I purchased a Universal Life Policy for me and my wife the year we got married. I was 24 at the time.
I pay $35 a month as a Male Non Smoker with no health problems for $150k insurance.

My friend who is now 32 just purchased a 20 year $200k Term Policy that is costing him $50 a month.

In 20 years he will have paid $12,000
In 28 years I will have paid in $11,760 (adding the 8 years to make us even on dates)

So when his policy runs out we will have paid the same amount in. Sure if we die in a car crash together his wife gets more money! But lets say we live. And his policy stops and I cash out. Am I rich...no. But I have somthing in my pocket. and we are both back to square one.

The flip thought is if we keep our policies, My rate is the same at the time...his will more then likely go up since he will now be 52.

My thought was exactly that. I am locking in at what I considered a decent rate. with coverage that pays off all the major bills for the wife. IF I need more coverage later I will add a term policy for the what if. I purchased it as a Death Benefit that I could get out of later and not lose everything.

I keep hearing people talk about awesome term life rates, but I have talked to more then just my friend who pay as much if not more then me for their coverage. Sure it is more coverage but I am not trying to be a lottery ticket of death! I see comercials for like $8 a month term. But no one I know has that rate!

Plus Everyone keeps saying keep the difference and invest. Not every Adult american has life insurance. And I know not every american is investing. It is easy to no save that $20 a month savings.

Just my thoughts. I never claim to be right. But the example I gave is thr truth. So it makes sense to me.

I think a lot of people who advocate whole life insurance miss one crucial point: even while you are alive, you don't "cash out" your cash value, you BORROW against your insurance. That's said, you need to PAY IT BACK plus the INTEREST. "Fine", your agent tells you, "you don't need to pay it back if you don't want to, the money will be deducted from your death benefit." But wait a second, what will your beneficiary gets then? Nothing, if you borrow against (or "cash out", if that sounds more comforting to you) all the cash value/death benefit. Oh yeah, and what about your $7000 funeral expenses? You'd be thinking you are saving money for yourself each month, but no, you are just handing your hard earned money to the blood sucking insurance company that charges mysterious management fee and commission (for they don't disclose the allocation of your premium.)

Anyhow, I'm still quite skeptical about any life insurances other than term. Not that I think term is the best solution for the whole mass, it is just straight forward, compares to other over packaged products, as if our lives weren't chaostic enough.

This is worse than a discussion about religion.

First off you can buy a UL policy that has an increasing face value as the cash value increase, so in fact your heirs do get access to the cash value of the policy

Second, there are GDIUL policies which are less expensive than a traditional UL policy, provide coverage for life, and generate very little cash value. Think of them as perm. term.

Third, in all the calculations I have seen thus far, taxes on earnings have not been considered. This can be problematic as the taxes on earnings may have to be funded by an source of funds not contained in the investment.

Fourth, as we all know estate taxes are back and liquidity is needed in your estate to pay taxes; this is often easier to do with insurance that is certain to be there at the time of our death.

what's the loan interest?? and where does it say 6% to 7% of rate of return??

I have read through most comments and still my quest for answers remains undiscovered. I have a UL that I purchased about a year ago. I am thinking about canceling and buying term. I have been gathering information regarding the cash value and it's lack of attainability come cash out time. If you are young enough and have a young family is smarter to buy UL and possibly never see the fruits of that labor or spend less money for a larger policy that could really help you family while they need it most?

All those people who bought term and invested the difference are now re-entering the job market at 70 or 80 because their investments didn't pan out. Whole life insurance policies are still paying out right on schedule. There's a price you pay for higher % return. It's a shame so many people insist on learning the penalty behind risk by experience. Regardless, the idea that insurance companies make all their money from Whole Life policies is just laughable. Term pays out a whopping 5% of the time or so. The other 95% is pure profit for the insurance company, and EVERYBODY buys into this policy. Whole life always pays out. And yes, it makes the company profit - everything does. When you buy food at the grocery store, the grocery store is making a profit off the purchase. Guess that means we should stop buying groceries! And when you apply for a mutual fund, they are making a huge profit for themselves with your money. How awful, time to stop investing in mutual funds!

Or maybe, just maybe, it means it's time to grow up and stop hating other people for making money. Maybe it means it's time to stop worrying about everyone else's profits, and worry about how YOU'RE doing. If the whole life insurance policy benefits you and your family more than the term insurance policy, then it's the one you should buy. Period.

Of course, the opposite may be true. There are advantages and disadvantages to each option. You should do your own research for your own situation and decide based on which benefits you the most, NOT which benefits the insurance company the least.

I am about to buy a UL policy. I am a healthy 28yo male and my premium will be $2500 per month. According to my agent i will pay for it for 25 years = $750,000.00 $ i would have to pay) at that time i can stop paying and take a loan on my money of 171,000 per year till im 100. This sounds great to me just kinda scared because paying $2500 for the next 25 years and if it doesnt pan out that would be a real shame.

Have the people saying only buy term looked at the costs of term for older people? Once a term policy runs out and you are 10 or 20 years older the premiums will rocket for a new policy! Permanent insurance is exactly that, permanent! You cannot just keep buying term forver, it would cost much more than a permanent policy.

Layering is a great option though. Having 25-50k in Whole life, and maybe a few hundred thousand of term until the kids are out of the house.

Bought a Universal Live back in the 80s when I was 25 years old, from Jeffeson National. Me and the husband paid aprox. $52.00 for a $100K coverage each. The policy was sold to Conseco. About 3 years ago took out the cash value of approximately $6,000 ( 4% guarantee all these years)
The company, Conseco, is now asking me to pay $400 monthly to be able to keep the insurance because their administrative expenses have increased a lot...!!!@&*&#^&!!
So, after paying the Univ. Life for 28 years, I find myself now at 53 years w/o life insurance.
Just some real life facts here so other people learn from my situation.
Question: What should I do now, go with term ???
Can we sue this company, isn't Universal Life supposed to be forever w/o any premium increase?

As one of the good guys in the insurance business I never recommend term. Whole and UL are permanent, that is the point. I see people every day who are no longer insurable after their term ran out. Whose premiums skyrocket. Or who lost their insurance over not being able to pay the premiums.

People above me have mentioned that you don't get the cash value which is the selling point of permanent insurance.

Exactly what do you get after paying rising premiums on 3 ten year terms and you end up uninsurable? Nothing.

The whole point of the cash value is a safety net, that's what you pay for. You get the tax advantage and high interest rates of borrowing against it. In the case of an unforeseen financial crisis.

Lose your job for two months with term? You're screwed.
Lose your job for two months with WL/UL? Your cash value will pay your premiums FOR YOU. Your cash value will provide for financial needs during your unemployment.

The real fact is, insurance companies make more money with less risk for term.

The only instance I would ever suggest term is in the case of having Decreasing Term used specifically to cover a financial burden. I.E; A mortgage or loan which decreases over time.

Just for information sake, I am an independent agent and counselor appointed to sell just about every form of insurance for just about every company.

Ask yourself who these people are that suggest specific products to you and whether they stand to gain or lose.

Before people come and blast me saying I'm a saleperson, I was, am not anymore. I'm now a financial advisor and stricly sell investments, so I'm not trying to push something I get paid for. I worked for Northwestern Mutual which, as anyone who actually knows anything about this will know that Northwestern, New York Life and Mass Mutual are probably the only three companies, as their (net of expenses, commissions and fees) are decent, not competitive with market returns, but are typically in between treasury yields and corporate bond yields. A nominal amount of coverage (no one ever buys all whole life, usually it's a mix that's primarily term insurance), for people, regardless of age or income can be a decent idea. With a policy that has a "paid up additions" option, dividends each year buy additional death benefit as well as increase cash value. Example, a policy purchased today with a face value of 100k for a 25 year old may grow to having cash values of 300k by 65 and a death benefit of 400k (the numbers aren't drawn from any actual policy, just thrown out to show how it works). If you look up the full disclosure review of all policies, taken over the last 30 years, shows the actual performance of policies, their net rate of return on cash value and net rate of return of death benefits. If you're a diciplined savvy investor whole life may not be the best cash accumulator, but there is nothing better on the planet for passing money from generation to generation. Also it can be a nice place to access money, 401k loans can be taken and work similarly, however the amounts are capped at 50k and must be paid back within five years, however these loans are subject to what the market does and you could potentially miss out on a lot of future earnings if you pull out when the market is down and pay back as the market goes up. Dave Ramsey is an author, not a finacial advisor or an investment advisor. He holds no insurance or investment licenses of any kind. If you have a health issue you go to a doctor, not webMD, if you have a marital problem you seek a counselor, not Dr. Phil. He has done good to many people and his debt stuff is right on, but he speaks in very general terms and should not be taken too seriously. VUL's are crap, UL's are OKAY if you fund the hell out of them, most VUL's and UL's will blow up and leave the person with no cash and no death benefit. Stick with basic whole life with additional premiums overfunding and you'll be best off. If you're looking for money to pass down to heirs, whole life is pennies on the dollar. If you're looking for an alternative investment to compliment other types of accounts, it can be a good option. If you're making 30k a year and trying to retire of of whole life then it is terrible. Go with a good company, I'd advise buying from someone with a series 7 if it's for cash accumulation purposes. People in the industry who don't have their 7's are primarily insurance only and tend to be more biased and can't offer as many options. Just my .02.

I would like to put in a good word for permenant life insurance that builds cash value. When I took out my policy 27 years ago at the age of 28, my primary concern was for my family in case I should die while they were still dependant upon me for support. The idea of building cash value that could be borrowed at some distant future was also highly desirable as I did not have the disipline or finances to save or invest money. I had a good paying job and never dreamed that life would shortly come crashing down around me. I was injured on the job and the disability rider paid the premiums during this time which kept the policy in force. Over the years I have lost 2 jobs due to injuries, 3 due to terminations and a few due to voluntary quits. I have even been homeless and unemployed a few times. But during this whole time I always somehow paid my premiums. At least 3 times this policy has come to my rescue financially when I had no one I could turn to for help by allowing me to borrow some of the cash value without jepordizing the policy. I know this policy cost more that a term policy would have for the same face value but the security and peace of mind it has provided is priceless to me. I shudder to think what it would cost me for a term policy now at the age of 55 and with the illness and disibilities i currently have. 2 of my children are now married with children of their own and 1 is a senior in H.S. so...I suppose that I could cancel the policy now but I have managed to sacrifice and pay the premium for so many years why stop now?, besides what a blessing and help the payout will be to my children and grandchilden, something I never had. And they have been protected financially all these years to boot. Try to get that kind of comfort out of your 401k, IRA, or smilar investment!!!

I got screwed by an insurance agent posing as a financial adviser. Of course he "sold" me a GVUL policy. It's total garbage. He dialed in all the surrender charges he could and to make sure it went through, he hid the policy from me while the free look period was in effect.

Of course there are guys here defending the nonsense that whole life is. It's where the commission is.

The only thing that I take solace in is that the lying scumbag that sold this garbage to me is going someplace warm some day. I don't care if I meet him there, Ill give him a warm welcome.

My wife and I are about to buy thru Penn Ins.& Annuity and with the help of a finacial advisor are planning to pay $2500/month for the next 5 years for a total of 150k and then would stop putting in and just hold for investment or Death beneifit if/when that happens. I am 41 and at the age of 62 I would have roughly 600k Net Dealth Benefit and ~400k Net Cash Surrender Value. (assuming 7.25 Annual Rate Return. It's capped at 12% but I can't earn less than a 2% return. It's based off the SAP which I know historically is about 6-7% in any given 10-12 year period.) Should I do this? I know I could likely earn more in mutual funds but am looking for a tax free investment and some risk hedging against any market disasters. (I'm conservative by nature). Even if I know I'll earn slightly less (call it 50-100k) vs getting a bit hot in the market in mutual funds I think it's something I would like to do but would value options.

So, say you are approaching 70, with the end of a 10-year term life looming. You don't have savings built up (as Dave Ramsey suggests) because you've been busy struggling to put food on the table, and a roof over your head.
The insurance agent is pushing Whole Life. Says it's what he has. (naturally)
Is Whole Life the answer, in this particular case?

The question of Term Life vs. Whole Life isn't one of "or", but one of "and".

If you die younger, term life is much less expensive. The downside of term life is that most people don't die by being hit by a bus while crossing the street. Most people contract chronic diseases over time and eventually die in old age of their disease. A term life policy when you are younger is very inexpensive, however like myself, if I intend to keep my current term life coverage past age 75, my monthly premiums due to chronic illness will be in excess of $400. As I age, I will be forced to dramatically lower the coverage of my term life policy.

My whole life policy is much smaller than my term life policy. The current premiums of my whole life policy are a little larger, however. Over time, my whole life policy has many benefits. Twenty years from now, my whole life policy will be the cheaper of the two and the larger pay-out of the two. Since the policy was purchased before the onset of illness and it is a whole life policy, the premiums never go up. In old age, my whole life policy will be my primary policy.

The difficulty incurs when people do not think about life insurance intil late in life. If you are 60+ and have never had insurance, there is no good choice. A whole life policy should be started by age 40 if you want it to be able to do anything in the future and is useless if you are already advanced in age. A term life policy will never protect you when you are elderly and sick.

My suggestion, from experience, is one of each--and get them early in life. Term life is a great choice when you are young. It is incredibly cheap for large amounts of coverage and you'll adjust it down over time as the premiums go up. Whole life, when you jump on it when you are younger, can be affordable, especially with the knowledge that you have a term policy to back it up in the early years. The pay-off of whole life is in the late years when you can only afford a small portion of your term policy and your whole life policy is fully matured.

My wife and I delivered a baby girl with Downs Syndrome last year. We are in our late 30's, and now need to be able to leave enough money for her to support her after we pass (we are setting up a 3rd Party Special Needs Trust to provide for her beyond any public benefits from SSI and Medicaid).

So, knowing that we will need our estate to leave at least $300K to the Trust upon my death (either from me directly to the trust, or more likely my wife outlives me, I leave the $$ to my wife, who would then leave it to the trust through her estate)... what is better: Buying WL now to guarantee a payout if we live to 60 or 70, OR Investing what we would have put into WL and using the investment returns to fund the trust, and try to maintain some term insurance if we are lucky enough to live to 60 or 70? Isn't term pretty expensive at that point?

We are pretty disciplined savers, and are decent investors.

I just wanted to point out that Dave Rasmey owns a life insurance company which only sales Term Life, so of course he would tell you not to buy a whole life policy. To all you primamerica lovers did you know that primamerica didn't even made the top 100 mutual funds last year. lol What company did I see in the top 5 State Farm. So you know if you are a termite you can always buy a term policy with State Farm and buy a mutual fund. My father has been an agent for 30 years and has never seen a term policy pay out. He also has bought a half a million dollars worth of whole life. So my father probable has put in $80,000 and the beneficaries are going to get probable $700,000. I'm sure when us kids get the money we will probable think my father has made a mistake. The internal rate of return on cash value averaged around %4.5 over the life of the policy. The death benifit payout Internal Rate of Return is probably 8%. So what does that mean. Since my father was so generious and that he wanted to build wealth for my family and to leave a legacy. If he bought a term policy and invested the rest in order for him to come out with the same amount of money in the event of his death, he would of had to consitently get an %8 return in the stock market. The Stock market paying more like -3% right now. At least a whole life or even better a limited pay life have a guarantee. The past decaide we have had two stock market crashes. The last time gasoline hit $5.00 a gallon it brought the market down. Well it is almost $5.00 to the gallon again. Even Donald Trump has said it. I talk to a financial adivisor who sales mutual funds and I ask him what he sales. He said he sales index funds and the reason why their is a guarentee. I asked him what is the guarentee and he said 0% lol. All these financial genious on here tell me how I can get a %12 guarentee the rest of my life. To sum it up Permanent Life insurance is the best way to leave a legacy for your family. So to all you who love your family and want to build wealth for your future poserity permanent life is the best way to go. I also wanted to point out that my parents will a have right around 3 million dollars by the time the time they are 80 years old. With that kind of wealth and my parents buying whole life. I would probably listen to the wealth builders of are generation.

Let me compare two options below and tell me what you guys think of this.
I just got married and we are planning to start investing.
I was recently offered for Whole Life insurance products with 7.4% interest rate. It has fixed interest of up to 15% and down to 0.00%.
Knowing that I don have much to lose (0% fixed), and also qualify for death coverage, and my earned income through interest will note be taxed. He showed me the projections of my plans, and for the first 10 years, cash value is a bit less than what I have actually put in as premium. However, after 10years, cash starts to increase significantly, and tax free when taking money out as well.
Versus, for the mutual fund, I really think it will be quite hard for me to hit 12%. Let say even i may able to make a little higher than 8%, tax will be deducted, so for me, it looks like whole life insurance is better plan.
Could anyone tell me in this case, why whole life insurance can be bad? I honestly do not see what is really bad about it compared to mutual funds...
Losing money for first 10 years is understandable, because during that time, I am still qualified for the death money. and it is really a little amount.

Hi
I dont know much about life insurance but my parents told me to look over their life insurance statements. They have a 10 yr universal life insurance for 100K (each) policy. pays $291 a mth for both of them, they have been paying since 2004 and today their cash value is a bit less than $8000 (can't remember exact amount).

My questions is, my mom told me their insurance agent whos also a good friend of the family told her, after her 10 yr is up, she stops paying the monthly premium but will get the $100,000 whenever she dies. Is this true? My husband said theres no such thing, basically if you stop paying your premium, you are not covered?

with paid up additions over the long term your death benefit increases 3-4 times faster than the cash value. with the mutuals earning cash value IRR's of 4-5% long term, it makes whole life an asset worthy enough to add to a portfolio of stocks, bonds , real estate and commodities. this works the best the younger you are of course. if you get a $500k policy and pay do a 20 pay on a 30 year male, he pays about $15-16,000 a year for 20 years. with todays dividend rates, with extremely low interest rates today, if they stayed down here, then the policy owner would see about $1mill cash value and $2 million death benefit at 65. That does not seem like a waste to triple your cash tax deferred and quadruple your death benefit in the same time frame. Dying and having family get $2 mill from $320,000 put in. versus getting 30 year term at 30 for $2800 a year or $84,000 in total and if you don't die at 60 it would cost $12-13,000 a year to get more term with 15 years or almost $200,000 more.

Age 68 and insurance WL 250,000 husband and over 100,000 on me. Seemed like alot then but no much by today's standards. Read all of the above and still alittle confusing. Have children and grandchildren that I would like to leave something decent to.... both husband and I are in good health.
All opinions accepted on affordable insurance that is permanent because I plan to live to 100 and do not want the insurance to end. Thanks.

I think I agree with a lot of the posts here, but there's a lot missing from some of the posts.
I agree in principle with Dave's approach. I see very little value with whole life and universal life from the basic standpoint that they are very expensive, and offer no value if people's incomes change and they can't pay premiums. This is not to say that there may be some exceptions. Also, I like the idea of tax deferred growth that comes with whole/universal life, plus they are good for estate planning purposes. However, I see no value in tax deferred growth that is available at retirement for me to use in the form of a loan.
The one area that I am becoming less convinced of, from Dave's approach, is that the market is a good vehicle for retirement. Mutual funds are ok, but I believe there are a lot of people that have been hurt by the market losses of recent years. These losses destroy any of the fuzzy 13% math that Dave throws out. Truth is what's hurt more people than anything is that you have the financial advisors waging war against the insurance world, and vice versa.
Clients need to know options and need to be educated on how the products work. For instance, I know most financial advisors put their clients through a "risk tolerance" test before they work with a client. This is done with the idea that the more risk you take the greater the potential is for gains. Clients think, "sure i'm risky and I want gains." But do they understand how a loss can affect their financial planning? Probably, not....until the market tanks and they lose 25% or more. I'd say, that most clients have bought into the lie that they need to "expect" gains every year, and they've ignored conservative growth. Especially with the market being the way it is now....I'd rather earn 0% and protect my principle than have it placed in the market.

I think I agree with a lot of the posts here, but there's a lot missing from some of the posts.
I agree in principle with Dave's approach. I see very little value with whole life and universal life from the basic standpoint that they are very expensive, and offer no value if people's incomes change and they can't pay premiums. This is not to say that there may be some exceptions. Also, I like the idea of tax deferred growth that comes with whole/universal life, plus they are good for estate planning purposes. However, I see no value in tax deferred growth that is available at retirement for me to use in the form of a loan.
The one area that I am becoming less convinced of, from Dave's approach, is that the market is a good vehicle for retirement. Mutual funds are ok, but I believe there are a lot of people that have been hurt by the market losses of recent years. These losses destroy any of the fuzzy 13% math that Dave throws out. Truth is what's hurt more people than anything is that you have the financial advisors waging war against the insurance world, and vice versa.
Clients need to know options and need to be educated on how the products work. For instance, I know most financial advisors put their clients through a "risk tolerance" test before they work with a client. This is done with the idea that the more risk you take the greater the potential is for gains. Clients think, "sure i'm risky and I want gains." But do they understand how a loss can affect their financial planning? Probably, not....until the market tanks and they lose 25% or more. I'd say, that most clients have bought into the lie that they need to "expect" gains every year, and they've ignored conservative growth. Especially with the market being the way it is now....I'd rather earn 0% and protect my principle than have it placed in the market.

Term insurance is great when you are young but usually after the age of 50-55 it is better to lock something in for the long term. I would recommend universal life to anyone that can afford it.
I would also tell young people that you need to make sure your term insurance is convertible later in case health issues come up.

Example a 50 year old man can buy $500K worth of term insurance for 30 years at $198.25 per month.
At age 70 (with 10 years left) he decides to convert it to permanent coverage he would be looking at over $1063 a month, running it to age 95. This is when term insurance works out to hurt you.
A universal life policy can run you to just about any age preference:
At age 50 you get a Universal life ending at age:
$500K to age 90 = $263 per month
$500K to age 95 = $304 per month
$500K to age 100 = $349 per month

Pay a little extra now for universal life, or pay a lot later and likely you will be living on a fixed income and probably will not be able to afford it.

I have never run into such a hard decision...term vs variable universal VUL vx whole (WL). I'm a salesperson by trade in an unrelated field and I can smell the commission lingering in front of my Edward Jones agent's nose. He says VUL is best for me, in my mid 40s and fat. Whole might take some of his investment dollars away. Term might take some commission away. I don't know about VUL, but it's what he's pushing. And the fact that he never pushed any product to me before makes me suspicious. In the end, I can't see term for anything more than a bet for a period of time. And WL makes out to be a glorified version of a Roth IRA if I'm lucky enough to outlive my term incurance, which I should only have while I need it. What to do.

I have never run into such a hard decision...term vs variable universal VUL vx whole (WL). I'm a salesperson by trade in an unrelated field and I can smell the commission lingering in front of my Edward Jones agent's nose. He says VUL is best for me, in my mid 40s and fat. Whole might take some of his investment dollars away. Term might take some commission away. I don't know about VUL, but it's what he's pushing. And the fact that he never pushed any product to me before makes me suspicious. In the end, I can't see term for anything more than a bet for a period of time. And WL makes out to be a glorified version of a Roth IRA if I'm lucky enough to outlive my term incurance, which I should only have while I need it. What to do.

i am 48, broke and have 2.1 million in term insurance ( 20 year term that has only 8 more years to go)

if i had bought variable life or whole life... my premiums would be cheap and i would have lots of money.

i am high rate insurance now so its going to be expensive.

i like permanent insurance.. yes, it would have been a bit more expensive when I was younger, but man would I be happy now..

term and invest the difference is BS .. No one ever invests the difference!

I am a client not a life insurance rep..