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Under what circumstances would you recommend a client purchase Whole Life over other forms of life insurance?
Whole Life Insurance
- Thread starter bluemarlin08
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In every circumstance where the client can afford it.
The UL cheerleaders and the BTITD - LEAP guys and the FIA boosters will differ with me... and that is fine... but dollar for dollar, pound for pound, risk to reward, WL is (still) the "best," safest, and most flexible financial product out there for the vast majority of people (read the italics again... it means "not everyone.")
(G)UL is a close second (if not done at "target").
Term is a scam... but often all people can afford and is better than nothing.
NO... you don't put an entire portfolio or nest-egg into WL (or any insurance product) but perm insurance should be part of everyone's financial program.
I'm a bit over 60 and have been investing for longer than most of you guys have been on the planet... and I've seen a lot of markets over the years... up, down, and the 70s sideways mess... and even with inflation, people who took some WL 30 years ago and are now looking at retirement have a lot more options and are in a much better position than many who relied on their 401 or their equities broker to get them to where they wanted to be at this age.
You asked. I answered. Hit me with your best shot.
The Jackass
- 14,809
Al - I need 1.5 million for life - I'm 41, great health and live in the 21113 zip. My wife does not work. Can you work me up a rate for perm life?
- 2,908
Couple examples for consideration:
-When a client wishes to have permanent insurance to settle their estate, to leave to family or church, etc regardless of whether they die at age 60 or 100. The fact that there are many misinformed decisions to do this does not mean that it is not right for many with full disclosure, suitiability analysis and deference to the fact that they are the client not us.
-When the client wants a final expense plan which should be a whole life policy although some are not. Only side note there, is that I think that there are more instances where the client should go for a small amount of underwritten whole life rather than the simplified FE plans. Particularly if they want amounts closer to 50,000.
-Where the client wishes to build cash value, has full disclosure, extremely low risk tolerance, and decides to do or is essentially just seeking a kind of return of premium scenario down the road by cashing out. Again this requires discipline on the part of the agent to not put clients into this where other options may be better and more affordable but it also requires discipline to understand that once the client has been fully informed, they are the client, not you.
Complete agreement not expected here.
-Where the parents are the owners of the policy for their grown children as a gift. Often that is the kind of insurance that they have always had and trusted so that is what they want for their kids, assuming full disclosure and no funny business about hyper-inflated projected cash build up.
Often it is a good decision. Often it is just an okay decision but the one that they want or will accept versus going without. And often it is a bad decision. Have to listen to the client.
Winter
- 9,744
It's very interesting (albeit inconsistent) that someone who has positioned themselves as the "anti-Christ" of insurance companies has taken such a large gulp of their whole life kool-aid.
To make a statement such as "term is a scam" is not only ludicrous, it reveals a true naivete about the life insurance business.
Caveat emptor to potential clients...
- 2,908
Some of your comments make a case for the conservative investor being in annuities rather than mutual funds over the long haul. That is not necessarily an argument for whole life since you do not have to retreat into a whole life policy just to get safety of principle and a modest return, especially since much of your premium payment goes toward a jacked up cost of insurance underlying it all.
I do however agree with the point that a diligent, disciplined investor making regular contributions to even a so-so retirement plan of any sort (where the principle is not at risk) can do well over a thirty year period.
Winter
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If one is looking for guaranteed death benefit, and that means comparing the guaranteed benefits in a WL, compared to a ULNL, one gets more bang for the buck with ULNL. I do a fair amount of estate planning and use to use WL for liquidity, but can't justify when comparing guarantees to guarantees.
G
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Define "temporary needs?" So after 20 years and the term runs out, there is no "need" for any life coverage? How do you know? Have you had your term plan lapse? There won't be a mortgage or "living expenses" or education expenses, or need to save for retirement after the term lapses? And tell me, exactly what percent of term ever pays a benefit?
OK, your car and house insurance hardly ever pay a benefit but you have no choice when you insure them. With insuring your life you HAVE a choice.
I tell my clients to think like a banker. Never give out money to a financial product without the express intention of getting it back. (The corollary is to never borrow money on something that gets worth less... like a car.)
Unless you absolutely can't afford it, why buy term... a wasting asset, when for a few bucks more (at age 20, 30 or 40) you can buy a good UL or WL or even ROP which is going to give you some real value for your money... as opposed to just pissing it away.
Term insurance is sucking-candy. It looks good, has a nice wrapper, and it is cheap and you can get it anywhere. It dissolves in your mouth and it's gone.
A good UL or WL is the candy machine. It keeps making candy.
I tell my good-looking female clients: "Two choices. You give me a dollar and I'll give you a kiss... and leave. Or you can give me five dollars and I'll give you a kiss and I will come back tomorrow and give you six dollars. Pick one."
Maybe it is just coincidence but in all my 60 years I've never known anyone who regularly paid into a WL or "accum" UL who retired broke. But I know lots of people who put ALL their "faith" in the markets and who are going to work until the day they die.
I worry about you young kids out there... 25, 30.. who don't know what you don't know about investing, markets, returns, risk, reward, human nature, and all the bad s--t that can happen over a lifetime... and you... with damn little life experience are going out and advising people on how they should "invest" their money. Yeah, that makes a lot of sense to me!
Until you have had a spouse and a home and a job and have lost a job and had someone be very sick, and made money in the markets and lost money in the markets, and have been though a few recessions and have been to a funeral or two and know real fear as well as real happiness... you are not qualified to go out there and sell life insurance... because all you know is the textbook.... and life is NOT a textbook.
You want to listen to some 30 year old "kid" sell the fad-policy of the day (this week is it indexed life) be my guest. With few exceptions, I'll take the guy who has "been there" and who understands that term is basically a scam (like title insurance, IMO.) Each to their own... no wrong answer... do what you want.
This I am sure of. When I recommend perm over term, I'm doing the best thing for the client. That does not mean he always (can) buy it... but I never SELL term insurance. I allow the client to buy it after they have convinced me that they won't do what is in their best interest but instead do what their neighbor or friend or brother-in-law has done... which was BTITD. I've learned a long time ago "Don't fight the tape." (There is probably only 3 people in this venue who know where that saying came from... or who have ever seen "the tape"... and no it is not video tape!)
The Jackass
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I am not savvy enough to know what ULNL stands for. Are you talking about a GUL without significant cash value build-up versus a traditional whole life policy or?
Educate me please.
Winter
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