Since the Beginning of Time...Term Vs. Whole Debate

This can be a rabbit hole and I know it's not cookie cutter; but, as a newer agent (with my Series 7 & 66, Life & Health, hopefully CFP soon) with a mutual company, I need the real low down on the Term vs. Life argument.

I have yet to hear compelling discussion between two intelligent, experienced people from both camps. It's always the Dave Ramseyites speaking in their own comfort or on the other side, the R. Nelson Nashites doing such.

But, there's so much clutter on both sides. From what I've looked at on historical records on both accounts and some of my own experiences--Term Insurance popularity really picked up in the 70s based on sells. Permanent has lost some luster do the higher premiums and distrust of the financial industry (Yes, the cash values go forward--but people have become leery of trusting the historical returns, dividend charts, costs, etc.).

That being said, can I just get some feedback to help my own planning. If I have an ideal client with the ability to save a good portion of their income (let's say $1000/mo. after maxing a Roth, doing their employee match at work, having an emergency budget established)...if I want to maximize their money efficiently while creating diversity and future leverage--should we be looking at doing a heavily overfunded permanent plan (pros/cons?), term plan and invest elsewhere (pros/cons?), or should we be doing a mixture of both?

I'm open for all to give some good feedback. And like I said, pros/cons on both sides would be greatly appreciated!

Thanks!
 
That being said, can I just get some feedback to help my own planning. If I have an ideal client with the ability to save a good portion of their income (let's say $1000/mo. after maxing a Roth, doing their employee match at work, having an emergency budget established)...if I want to maximize their money efficiently while creating diversity and future leverage--should we be looking at doing a heavily overfunded permanent plan (pros/cons?), term plan and invest elsewhere (pros/cons?), or should we be doing a mixture of both?

I'm open for all to give some good feedback. And like I said, pros/cons on both sides would be greatly appreciated!

Thanks!

Your paradigm is already wrong right there, and that's why you're having cognitive dissonance around the whole thing. Permanent life insurance, when properly structured, goes into the priorities pyramid like this:

1 - Emergency Savings
2 - Permanent life insurance (properly structured - perhaps blended with term)
3 - Qualified Plan Contributions, but only up to company match
4 - IRA or Roth IRA

You see, you have PLI AFTER all of that on the order of priorities.

Why should PLI be earlier? Liquidity and future spending needs. Otherwise, if all your money is locked away from you, requiring IRS hardship provisions or eligible for a 401k loan, or taxes and penalties... most people would rather just accumulate more debt to solve their spending needs.



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I've already been through the ringer with an engineer in Texas on this forum. Your advantage, is that you've been through CFP courses... although they are EXTREMELY LIGHT (if not non-existent) on any kind of economic benefits of permanent life insurance.

http://www.insurance-forums.net/for...m/tips-buying-permanent-insurance-t87445.html
 
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I agree with DHK. The way you are phrasing this question already has a bias. You are doing a rate of return only comparision. IF ROR was the only thing no body would invest in the SP 500 index fund at zero costs because any emerging markets or microcap or private equity fund would beat that over 40 years. You need to look at how permanent policy behaves in a diversified portfolio with various risk factors and all the 2 tailed events that could possibly happen.
For most middle and upper class, there is a need to have both perm and term in their portfolio. They accomplish different things.
 
I am just going to give you one scenario, the one that I personally use. I have 5 kids, as each one turns 18, I purchase a whole life policy on them as the owner. Premiums will never be cheaper, there aren't too many places $200 a month can give me so much flexibility. When we retire my husband and I can take loans against it if we need to, we can transfer ownership to them, it's a nice way to transfer assets, we are also guaranteeing they will always have a policy in place even if they suffer an illness at 25. Add in paid up additions and it is a nice vehicle for us. Plus I get most of the money back in commission the first year. You can get a lot deeper on even more benefits on this scenario but since I am mostly just a PC agent that sells a little term I just cover how it works for us in this one scenario.
 
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