Buy Term, Whole Life is TOO Expensive.....or is It?

[thecorp]

Been a financial advisor for almost 10 years now. Read Dave Ramsey, agree with some of this stuff, but I've just sipped the Kool-aid; haven't gulped it.

Personally, I have a 30 year $2.5m term policy on myself. Looked at whole life, but didn't really see where it made sense for me. I have many people (mostly young couples) that ask me about whole life.

As mentioned above, I'm an "investment guy". Insurance has always been second nature. I feel that term will always be the lead in for most couples, but I would like to be able to say, "Whole life insurance makes sense when.......".

It's just right now I can't. Hoping some of you could shed some light on the topic. When does whole life insurance make absolute sense?

 

[sman]

Been a financial advisor for almost 10 years now. Read Dave Ramsey, agree with some of this stuff, but I've just sipped the Kool-aid; haven't gulped it.

Personally, I have a 30 year $2.5m term policy on myself. Looked at whole life, but didn't really see where it made sense for me. I have many people (mostly young couples) that ask me about whole life.

As mentioned above, I'm an "investment guy". Insurance has always been second nature. I feel that term will always be the lead in for most couples, but I would like to be able to say, "Whole life insurance makes sense when.......".

It's just right now I can't. Hoping some of you could shed some light on the topic. When does whole life insurance make absolute sense?

I'll just throw one scenario out there since you are an investment guy. How about to cover the cost of estate taxes? Surely you are protecting your clients assets for when they are passed on to the next generation.

I'm sure there will be some other people who will give you other scenarios, but just thought I'd throw this one out (there are other scenario's where it makes sense). Especially since you are a financial advisor.

 

[Norwayguy]

I'll just throw one scenario out there since you are an investment guy. How about to cover the cost of estate taxes? Surely you are protecting your clients assets for when they are passed on to the next generation.

I'm sure there will be some other people who will give you other scenarios, but just thought I'd throw this one out (there are other scenario's where it makes sense). Especially since you are a financial advisor.

Don't even need to get to the estate tax level. How about to cover say 28%-35% of thier qualified account balances. How many of your clients want to pass something on to thier children, grandchildren. Of those clients how many are thinking of passing on retirement account which.

 

[BNTRS]

If you're really want to know, then I'll really go through the motions. But it's going to take a little time to get you up to speed.

First, let's understand what "I'm an investment guy" actually means. You tell me, because on its face I have no idea.

Then tell me this. You went through the purchasing process. I'm going to guess that you are reasonably educated on the topic. So, why was term right for you? What about whole life didn't make sense?

When people ask you about whole life insurance, what do you tell them?

 

[scagnt83]

First, let's understand what "I'm an investment guy" actually means. You tell me, because on its face I have no idea.

It sounds like he is calling himself a "Financial" Advisor when he is really just an Investment Advisor ...

 

[Mattschmidt]

I agree that Whole Life sometimes can be expensive, but have you looked into a Permanent form of life insurance, which doesn't build up a cash value? Often times your clients will need a blend of permanent and Term coverage.

 

[scagnt83]

"Whole life insurance makes sense when.......".

WL makes sense when the client has a need for LI past age 75.
And if they have any decent amount of assets its very likely that they will.

Should all of their LI be WL?... no.
But it usually makes sense to have some of it in some type of Permanent Insurance.

 

[NinjaNic]

My experience has been with the younger clients asking about whole life is their uncles cousins grandpa said it was the best and don't get anything else. The reality is the younger crowd doesn't like the thought of outliving term insurance, and are in a good position for a current assumption UL (due to low interest environment), or GUL. You speak to the cash value aspect of WL, and you lose them.

Give them the $40, $100, and $200 example. You can get temporary term insurance for say $40, or GUL for $100 and it never expires, or pay $200 for WL that also never expires and also have some good cash values you can access later.

I'll explain it as;

Term: this is like dating. You get to keep her for a while but after a few years, she gets EXPENSIVE and has certain expectations (conversion to marriage)

Permanent: you are married! More expensive over the long haul, but you get to "tap that" whenever you want (cash value). If you don't keep her happy, some day she will leave you (lapse).

______________

I offer WL as a strategy to those that are maxing 401k's and other advantaged accounts, as well as offer it as smaller covg amounts in combination to term for the younger folks.

 

[Mattschmidt]

My experience has been with the younger clients asking about whole life is their uncles cousins grandpa said it was the best and don't get anything else. The reality is the younger crowd doesn't like the thought of outliving term insurance, and are in a good position for a current assumption UL (due to low interest environment), or GUL. You speak to the cash value aspect of WL, and you lose them.

Give them the $40, $100, and $200 example. You can get temporary term insurance for say $40, or GUL for $100 and it never expires, or pay $200 for WL that also never expires and also have some good cash values you can access later.

I'll explain it as;

Term: this is like dating. You get to keep her for a while but after a few years, she gets EXPENSIVE and has certain expectations (conversion to marriage)

Permanent: you are married! More expensive over the long haul, but you get to "tap that" whenever you want (cash value). If you don't keep her happy, some day she will leave you (lapse).

______________

I offer WL as a strategy to those that are maxing 401k's and other advantaged accounts, as well as offer it as smaller covg amounts in combination to term for the younger folks.

Good Analogy describing the types on Insurance! I just might have to borrow that!

 

[thecorp]

If you're really want to know, then I'll really go through the motions. But it's going to take a little time to get you up to speed.

First, let's understand what "I'm an investment guy" actually means. You tell me, because on its face I have no idea.

Then tell me this. You went through the purchasing process. I'm going to guess that you are reasonably educated on the topic. So, why was term right for you? What about whole life didn't make sense?

When people ask you about whole life insurance, what do you tell them?

"Investment guy" means I started with A.G. Edwards (now Wells Fargo) and our training consisted more of selling investment products (mutual funds, stocks, etc). I'm a CFP and have since started my own RIA. Revenue is generated through AUM and planning fees. This doesn't really matter for the sake of this conversation, just wanted to shed some light on how my business is currently structured.


Term made sense for me because I felt I needed a significant amount of coverage. Ran some quotes for WL and with the price, didn't see how it made sense.

On a side note, I have looked more into UL policies as a Roth replacement. Don't understand them enough to feel comfortable recommending them yet but considering doing one on myself just to test drive it.