Why sell permanent Insurance?

[bobson]

1) Well said . . .

2) So - how do you compare Term with ROP against Whole Life? Someone say - 45 and in decent health - would a combo of say $20k whole life and $200k 30 year term with ROP - or just one over the other - or none?

A "big chunk" would be expensive for a "big face" whole life wouldn't it?

Tom

Talking about life insurance without any facts is pretty much pointless but...

At 45 he may just need and want term. But at 75 when he is knocking on death's door, without term insurance in force anymore he may be cussing out his agent... Maybe he wants to give money to his favorite university. Maybe he started a business in his 60's and his son wants to take over but they don't have enough cash to keep the thing afloat if dad dies. Maybe his old lady is living in a rest home and eating up every dime they ever saved and he'd like to leave a little for Junior and his kids. Maybe he is on the losing end of a battle with cancer and he wants to take his grandkids on a Disney Cruise before he dies... The point is life is full of surprises and only one type of policy doesn't leave you with a surprise.

There is only one way to guarentee a sum of money will be paid upon the death of someone. Whole life is the most flexible guarenteed product availible to do just that.

And don't give me any of this GUL bs. Miss a premium
(or pay it 32 days late) payment and the G in GUL just may stand for Going, Going, Gone.

So I believe most people (the ones I work with) would be well served by converting their term insurance over time to a quality whole life insurance policy.

And in fact with the new PUA riders, many people would be well served putting extra cash into whole life insurance rather then buying AIG stock, Enron stock, Worldcom stock, etc or deepening the pockets of the people that run most of our mutual funds...

 

[myinsurebiz]

#1 - At 45 he may just need and want term. But at 75 when he is knocking on death's door, without term insurance in force anymore he may be cussing out his agent...

#2 - The point is life is full of surprises and only one type of policy doesn't leave you with a surprise.

1) If he makes it to 75 - wouldn't the ROP take care of his Funeral Expenses? Term with ROP seems to offer greater face earlier in life when I imagine it's needed more, than a smaller face whole life policy since WL is more expensive and the smaller face is basically is for Funeral Expense anyway?

2) Could you explain what the "surprise" would be with Term with ROP rider?

Thanks,

Tom

 

[JMO Fan]

Talking about life insurance without any facts is pretty much pointless but...

There is only one way to guarantee a sum of money will be paid upon the death of someone. Whole life is the most flexible guarenteed product availible to do just that.

agreed

And don't give me any of this GUL bs. Miss a premium
(or pay it 32 days late) payment and the G in GUL just may stand for Going, Going, Gone.

Most GUL doesn't work that way. Missing a payment is less trouble in most UL than missing one in WL (which always causes lapse). Pot ... kettle
Many UL will consistently outperform many WL. Be careful out there. Even great par WL has to be in force a long time (with no 32-day late payments) to match solid UL.

It depends very much on the company. I'm a 30+ year life actuary (done WL and UL), and analysis at issue doesn't adequately tell the story. What matters is whether the company will keep up the credited rate on UL, dividend scale on WL.

So I believe most people (the ones I work with) would be well served by converting their term insurance over time to a quality whole life insurance policy.

And in fact with the new PUA riders, many people would be well served putting extra cash into whole life insurance rather then buying AIG stock, Enron stock, Worldcom stock, etc or deepening the pockets of the people that run most of our mutual funds...

Now you're back on track.

 

[bobson]

1) If he makes it to 75 - wouldn't the ROP take care of his Funeral Expenses? Term with ROP seems to offer greater face earlier in life when I imagine it's needed more, than a smaller face whole life policy since WL is more expensive and the smaller face is basically is for Funeral Expense anyway?

2) Could you explain what the "surprise" would be with Term with ROP rider?

Thanks,

Tom

1) But some (many) people die with more than funeral expenses to worry about. That was the point of my post.

2) The surprise would be that he gets a check at 78 for all the return of his term premiums and he realizes his wife is going to need more than just refunded premiums when he dies in 4 years.
- - - - - - - - - - - - - - - - - -

agreed
Most GUL doesn't work that way. Missing a payment is less trouble in most UL than missing one in WL (which always causes lapse). Pot ... kettle
Many UL will consistently outperform many WL. Be careful out there. Even great par WL has to be in force a long time (with no 32-day late payments) to match solid UL.

It depends very much on the company. I'm a 30+ year life actuary (done WL and UL), and analysis at issue doesn't adequately tell the story. What matters is whether the company will keep up the credited rate on UL, dividend scale on WL.

Now you're back on track.

GUL and UL are two different beasts. My point was if you are late by 32 days on many G (g= guarneteed) UL the G disappears. However the non-forfeiture options on whole life make it much more attractive.

I'm certainly not suggesting that UL cannot beat whole life. UL may whip whole life over the course of someone's life. MAY, depending on unknown factors. We know the least favorable way whole life will perform the day you buy the policy.

The flexibility of UL is also it's weakness in my opinion. If interest rates drop, while expense charges go up and the insured's age increases, I believe insured's can be headed for disaster without careful monitoring of the policy. My guess is many UL policies are orphaned and there won't be anybody to monitor them (in fact I bet there are a whole lot of orphaned policies of the wholfe life variety out there as well.) Now if expenses go down, credited interest rates go up and an insured increases the premium he puts into the policy each month, great. I wonder how often people really monitor their UL policy???

The problems with UL just don't happen with whole life. No it isn't as sexy as UL, but with the train wreck this country is headed for based on our personal savings rates maybe sexy isn't where most of us should be? (No, I'm not talking about you John and your 12% average annual returns on your money.)

 

[moonlightandmargaritas]

I found the man who'd sent in the lead card. I told him why I was there. He said, "You're too late. My wife died Saturday."

He said, "My mom had a term policy that expired just last year. Is there anything we can get out of that for her funeral expenses?"

#2 - Stay the hell away from term. It's like the warranty on my dishwasher. As soon as the warranty expires - so does it.

You are placing the blame in the wrong place.

It's not the insurance's fault. It's the fault of the person that didn't renew or replace it!

 

[DarrylVK]

Check this out. I sure hope James is lurking.


Riscario Insider: Does Warren Buffett "Buy Term and Invest The Difference"?

Thanks, Good link, good read.

 

[Guest]

Thanks, Good link, good read.

Thanks, if you liked that, you will probably also like this one:http://www.assurity.com/images/WholeLifeArticle0108_Consumer.pdf

 

[xrac]

Here is another reason to sell permanent life insurance:

Barry J. Dyke, author of The Pirates of Manhattan found that the majority of employee assets in the huge $4.5 billion Federal Reserve System 401(k) dodged most of the stock market meltdown by having a majority of its assets invested in stable-value life insurance products.

According to a third quarter 2008 Federal Reserve report and a Deloitte audit, which covers 22,000 employees at the Fed, more than $3.15 billion or 69.7% of the $4.5 billion 401(k) Thrift Plan for the Employees of the Federal Reserve System is invested in its Fixed Income Fund. This fund is exclusively invested in stable-value group annuity contracts from major U.S. life insurance companies—not volatile mutual funds.




Federal Reserve 401(k) Dodges Stock Market Meltdown With Stable-Value Products, Author Finds - International Business Times -

 

[Mac1958]

Buy term and invest the difference?

A few facts, at least as I see them:

1. Most investors do not "beat the market".

2. Most mutual funds do not "beat the market."

3. According to the Vanguard website, its huge S&P 500 Index fund has returned a total of -1.01% (as of 12/17/2008) over the last ten years. And a majority of mutual funds have done even worse.

4. A participating Whole Life policy would have paid significantly more than that over the last 10 years, with little to no risk, headaches or sleepless nights. Tax-deferral would have made WL's an even better net performer.

5. No agent worth his or her salt would try to cram any client into any kind of policy unless it was appropriate for them.

6. The commission an agent makes, or the profit an insurance company makes, are absolutely irrelevant if the client is getting good value from their Whole Life policy.

7. I've met many people who are pouring money into stocks with no life insurance, no LTC, no DI. Foundational products such as insurance and conservative growth aren't sexy, they aren't exciting, but they're crucial.

8. If it's a good fit for the client, a participating Whole Life policy can be an excellent, low-risk foundation for a client's overall insurance/financial picture. This foundation can then allow the client to make more aggressive stock and mutual fund investments. But, first things first.

My two cents, worth every penny...

...

 

[BiggitySwat]

Buy term and invest the difference?

A few facts, at least as I see them:

1. Most investors do not "beat the market".

2. Most mutual funds do not "beat the market."

3. According to the Vanguard website, its huge S&P 500 Index fund has returned a total of -1.01% (as of 12/17/2008) over the last ten years. And a majority of mutual funds have done even worse.

4. A participating Whole Life policy would have paid significantly more than that over the last 10 years, with little to no risk, headaches or sleepless nights. Tax-deferral would have made WL's an even better net performer.

5. No agent worth his or her salt would try to cram any client into any kind of policy unless it was appropriate for them.

6. The commission an agent makes, or the profit an insurance company makes, are absolutely irrelevant if the client is getting good value from their Whole Life policy.

7. I've met many people who are pouring money into stocks with no life insurance, no LTC, no DI. Foundational products such as insurance and conservative growth aren't sexy, they aren't exciting, but they're crucial.

8. If it's a good fit for the client, a participating Whole Life policy can be an excellent, low-risk foundation for a client's overall insurance/financial picture. This foundation can then allow the client to make more aggressive stock and mutual fund investments. But, first things first.

My two cents, worth every penny...

...

Completely agree with you. I also dislike the idiots online who keep writing these "one size fits all" articles extolling the virtues of buying cheapo term and investing the rest into the Vanguard S&P Index fund (because it is no-load and has very low management fees). Americans and people in general have to understand that being a cheapskate doesn't always pay - especially when it comes to personal finance.

Good points on #7 and #8. I have a Series 7/66 and a gigantic securities product portfolio to offer my clients - but I will rarely, if ever, offer them any security before knowing they have sufficient insurance first (life, health, sometimes DI). I strongly believe that insurance, especially life, is the foundation for any solid financial plan....and it makes no sense to own securities without the insurance to protect them.

#6 - I also cannot understand clients and even other agents who complain about commissions being "too high." Life insurance agents need to make a living too and be rewarded for their product knowledge, customer service, client care and licensing. I find those who complain about being commissions and fees to be those who want "something for nothing" - ie. cheapskates and cheats. I for one don't mind paying a huge commission to any salesman as long as he/she takes care of me, provides a great valued product and continues to provide service for the future.

#1 - According to Primerica, your "invest the difference" standard American common stock fund should be enough to cover the cost of the cheapo term policy - or not. The philosophy does not take into consideration market volatility, unexpected reasons to liquidate shares, and the tax consequences of paying for capital gains distributions and dividends if not held in a qualified account. Many agents touting BTITD don't understand this at all given their lack of knowledge in taxation.