Dave Ramsey advice

[corn18]

Again I stated a simple fact for thought - what if you are still alive at 78 and your investments did not pan out to enough to replace necessary income?

How does life insurance help that? If you had enough money to buy a whole life policy, you had enough to invest much more efficiently than a whole life policy.

The issue I have with whole life is that anyone buying it is buying it for the wrong reason. Buy life insurance to insure your life, not invest. Whole life policies are the most inefficient form of investment ever. Your commission followed by high fees and below average returns. 98% of the people would be better off buying an affordable 30 year term policy at age 50 (I just did) and then invest the difference in the premiums in a very low cost index portfolio. At the end of the 30 year term policy, you will have way more money than the idiot that bought a whole life policy. And if you die before then, then the term life insurance pays out AND you have the money you invested in the index fund portfolio.

I guess we think whole life policies are bad insurance and bad investments. You think otherwise.

Question answered.

[disneysteve]

I have heard him many times before state that he "just bought a new term life policy" etc. Of all people should he not be totally self insured? Seems like a contradiction to me.

Do you know who the beneficiary of each of his policies is? Maybe he bought a policy and made his church the beneficiary so upon his death, they get a nice big donation. For a relatively small cost each month, he can leave the church a bundle of money. I don't know exact rates but let's say that for maybe $100/month I could leave my congregation $1 million if I die in the next 20 years. I think that would be an incredible gift, far more than I could otherwise afford to give them. How much would it cost to do that with a whole life policy? 5 times as much? 10 times as much?

Just because he is buying term policies doesn't mean he's doing it because he needs to to provide for his family.

[Gailete]

When I married hubby and for all practical purposes took over the financial side of our lives, he had several policies. One was a very expensive whole life policy that either he misunderstood the agent, or the agent lied, or a combo of the two, but what he told me about the policy was beyond belief. That after a certain point in time it's death benefit value would be going up and at a certain point he could cash the policy in before he turned 65 for a big bucket of cash. Did I mention that this was a very expensive policy? He also had a disability policy that was costing way too much with a pay-out max of ~$400/month! A year's worth of premiums for that was way over one month's pay out.

When it was all said and done, we canceled the whole life and the eventually the disability policy. We just couldn't afford them whether we wanted them or not. We did however by a term life policy for $250,000. He had his medical for the policy 2 days before he went into a.fib. and landed in the hospital without a penny's worth of health insurance. He had passed the health insurance, so we had had the policy now as of Thanksgiving for 16 years. Our first Thanksgiving, we had a bad blizzard, and he was in the hospital.

At this point I have 4 years plus ~ 7 months before the term ends, so I am working to get the mortgage paid off before the term life ends. It runs less than $600/year and some years we can barely afford it. We could have never kept up with those other policies. That is part of what you must look at. Most people can understand a need for insurance, but they understand even more a need to eat and keep a roof over their heads. Insurance just isn’t affordable for all.

[Fishindude77]

I'f you are 60-80 years old and still paying on your house and don't have much in the way of investments set aside, then life insurance should be pretty far down your list of worries and it would seem sill to be paying for it.

[Petunia 100]

This is my last post - BUT BEFORE I GO - answer this question based on your statement above. WHAT IF the mortgage is not paid off (which statistics show most 60-80 year olds it will not be).

WHAT IF the personal savings and investments did not work out the way you though they would?? Many many people are in that situation.

Based off of YOUR ADVICE AND DR what if you bought only term insurance and it runs out when you are older?? Where does THAT leave your spouse? I can tell you from PERSONAL experiences over many years - it leaves those left behind in a horrible financial situation.

I have been in the insurance business now for 39 years. I have sold a ton of term insurance over the years - it has a time and a use. I have also sold permanent insurance that saved many surviving spouses financial hardship at older ages. This is the REAL WORLD and I have lived and worked in the real world for decades.

So guys like you and DR throwing out generalized advice and statements for "one size fits all" is dangerous at best.

ADIOS

Adios.

[Captain Save]

How’s those commissions on permanent life vs term?

Commissions on term are higher than whole life... despite what you've heard. I know you take these things as fact but it's wrong ...

[Captain Save]

Whole Life policies are wrong for 98 percent of the population, yet 98 percent of the financial professionals out there are actively peddling whole life policies.

Yes, there are certain atypical situations that a whole life policy would be a viable option, just like there are certain situations that I need to give myself an enema.

not true at all . just google whole life insurance and read through the financial adviser's blogs.. trust me they will tell you what you want to hear.. the money looks better in their AUM .. nothing wrong with that as long as they're providing a good service that you find valuable.. but the hypocrisy ...

[disneysteve]

Commissions on term are higher than whole life... despite what you've heard. I know you take these things as fact but it's wrong ...

Can you post a link to that info? It goes against everything I've ever read or heard

If it's true, then why do insurance salespeople so aggressively push whole life? Why not push the product that would make them the most money, especially since the term life is also far, far, far more appropriate for their clients?

[disneysteve]

Commissions on term are higher than whole life... despite what you've heard. I know you take these things as fact but it's wrong ...

From lifeant.com:
Products such as variable universal life insurance, variable insurance, and universal life insurance usually have the highest profit margins for the life insurance company, and therefore pay out the highest commission rates the the agents.

Whole life insurance is considered the “bread and butter” product of most life insurance companies, and agents are well paid for selling a whole life insurance policy. Usually a term life insurance policy carries the smallest commission, not just because it is the least expensive kind of life insurance for clients to purchase, but it also (usually) has small margins for the life insurance company. Life insurance agents are not getting rich by selling term life insurance unless they are selling it in massive quantities.

From nerdwallet.com:
Since the commission paid is a percentage of the premiums, agents have an incentive to promote pricier policies. This could be a reason for them to recommend more expensive permanent life insurance policies over cheaper term life insurance, even if the commission percentage were the same.

Life insurers do sometimes pay higher commission percentages for permanent policies, increasing the allure to agents.

From careertrend.com:
The first-year commission paid to independent agents for whole life insurance can range from 70 percent to 120 percent of the first year’s premium.

The commissions paid to agents for term insurance policies typically range from 40 percent to 90 percent of the first year’s premium

[Captain Save]

Can you post a link to that info? It goes against everything I've ever read or heard

If it's true, then why do insurance salespeople so aggressively push whole life? Why not push the product that would make them the most money, especially since the term life is also far, far, far more appropriate for their clients?

The only way I can post that info is if I post my commission schedule.

The vast majority of insurance agents ended up failing out of the business ..if they were doing what was in their best interest that would not be the case. I think the popular number that gets thrown out ther is above 90% of them fail.


There are numerous type of life insurance agents out there. They will typically talk about what they know. It all depends on how you were brought up in the industry.

One obvious problem with life insurance agents is that the education before you start selling could be a lot better.

Here are the 3 types of life agents
1. Big Mutual company agent - They will be taught to sell whole life
2. Mortgage protection agents - they will be taught to sell term insurance
3. Final expense agents .. - they will be taught to sell Burial insurance/Final expense a.k.a Simplified issue whole life

Nowadays you also have your Telesales/online agents who mostly sell term insurance and more and more are starting to sell final expense online.

each type of these agents will sell what they know. And of course there are some within the group who will learn beyond what they are taught.


As far as what I get paid: If I sell you a whole life policy .. I will most likely sell a policy from the big mutual agency out there. There are not a lot of them out there. My highest commission is 80% of the base premium.

1. that is lower than the majority of my term (most term policies I sell pay me 90-110% of 1st year premium.
2. The base premium of your whole life policy is not your Total Premium. The more your policy is designed to accumulate cash, the lower the base premium. Most of my WL policies are designed that way (except for the small policies) .. the base premium will hover around 30% .. The rest of the premium is paying Paid up additions ( the commision on that is 5% or less)

I repeat I get paid 80% of 30 % of the premium that you pay + 5% or so of the rest.

Same goes for UL .. the more it's designed for cash the less I get paid. It's usually about 30%. They usually pay slightly higher than WL and slightly lower than term . They are typically offered by the Term focused companies out there.

I should note that Term usually pays no renewals but WL does.

Final expense usually pays higher than term. most are about 100-120%. Those policies are designed for low income people who have no savings and are 60 and over and looking for burial insurance ... health is typically subpar. It is a version of whole life, but not the whole life that most people talk about when they argue back and forth.


Term is by far more profitable. it's an in and out sale. You don't go back and forth, traveling showing illustrations .. only for the person to change their minds.

Again, if agents were doing what was in their best interest, they would not flunk out.

[Captain Save]

From lifeant.com:
Products such as variable universal life insurance, variable insurance, and universal life insurance usually have the highest profit margins for the life insurance company, and therefore pay out the highest commission rates the the agents.

Whole life insurance is considered the “bread and butter” product of most life insurance companies, and agents are well paid for selling a whole life insurance policy. Usually a term life insurance policy carries the smallest commission, not just because it is the least expensive kind of life insurance for clients to purchase, but it also (usually) has small margins for the life insurance company. Life insurance agents are not getting rich by selling term life insurance unless they are selling it in massive quantities.

From nerdwallet.com:
Since the commission paid is a percentage of the premiums, agents have an incentive to promote pricier policies. This could be a reason for them to recommend more expensive permanent life insurance policies over cheaper term life insurance, even if the commission percentage were the same.

Life insurers do sometimes pay higher commission percentages for permanent policies, increasing the allure to agents.

From careertrend.com:
The first-year commission paid to independent agents for whole life insurance can range from 70 percent to 120 percent of the first year’s premium.

The commissions paid to agents for term insurance policies typically range from 40 percent to 90 percent of the first year’s premium

Trust me .. I see this all the time and it's totally BS. I have other agent metors who have Term Life websites who I learned from and they spill the same BS.

Also there are softwares out there that will write articles for your blog. I tried it for life insurance and even the software said the same. Maybe they're all using the same software.

as far as lifeant goes .. UL does pay higher premium than WL. but not more than term life.

Nerdwallet are a bunch of bloggers who know nothing about life insurance again they might get their opinions from another financial blogger out there. People are getting paid $25/ an article to fill up the web with fluff content so I would be careful with what you read.

Now the premium on a WL and UL are much higher than a term policy. so some agents might think wow the premium is going to be $500/month but they don't take into account the amount of work and back and forth it takes to close a $500/ premium case. Even people who are truly interested give you the run around... it's much easier for you to get a $50/month case and move on to the next. it's about $500-600 for all these policies.

[Captain Save]

One thing I must agree with is that permanent life insurance is indeed more profitable for the insurance companies.

They operate a lot like a bank having your cash as a reserve allows them to earn yields on that cash so they earn money on fee.. they earn money on lapsed policies and mainly on the yields off the cash reserve.

Term require the same amount of expenses to get someone to sign up. Paying the underwriter..medical records examiner etcc... But the premium is a lot lower.

That doesn't mean that they have to pay the agents more because plenty will go for the big fish.

[bjl584]

There are people in the real estate investing world who use whole life policies with cash value to purchase rental property. Essentially they borrow against the policy and use the rental income to pay themselves back. It's a tool that some investors will use to leverage more properties once they hit a wall with traditional financing methods. This is about the only use for whole life that I can think of.

[Captain Save]

There are people in the real estate investing world who use whole life policies with cash value to purchase rental property. Essentially they borrow against the policy and use the rental income to pay themselves back. It's a tool that some investors will use to leverage more properties once they hit a wall with traditional financing methods. This is about the only use for whole life that I can think of.

- There are people who use WL insurance as emergency cash that earns higher rates than their savings (though I wouldn't put all of it in there)

- During the market crash , when a lot of people lose their jobs, there are people who use their WL savings to weather the storm, without having to dip in their 401k .. pay a penalty... and the best thing about that they were able to recover when the market recovers without having to touch their 401k funds

- There are people who use WL to buy stocks at a cheap price when the market crashes.. they make out on the recovery and the their WL cash they borrowed still earns a dividend.

- There are people who have wL during their distribution years in retirement. Unlike most retirees who feel like they have to move money to cash just in case. They keep their qualified funds inthe market and use their WL during the bad years and while they wait for their portfolio to recover.



- There are people in the housing crash, who use their WL cash to purchase foreclosed and short sale homes at a discount .. again because their WL cash did not go backwards during the crash.

All great reasons to have cash value life insurance on tap.


I can go on.. but I wanted to focus on reasons most people don't even discuss.

[corn18]

Life insurance is not an investment. And if you use it that way, you are extremely inefficient.