Whole and Universal Life vs Term life. Are they a ripoff?

It's depends on your philosophy about investments. Whole life and universal have a lot of costs and commissions built into them. But they also have tax advantages. Buying permanent insurance can also force saving discipline on a policyholder, since their insurance "bill" is due each month.

Another advantage for permanent insurance is for estate planning, something Dave Ramsey will ironically need to do for tax purposes.

Overall, Dave is right that it's best for most people to buy term and invest the difference. It's important to find a financially reputable insurance company with very good rates. The less you pay for term life insurance, the more there is left to invest the difference.

Permanent life insurance policies are only good if you can afford them. Most people can't and that's why they appear to the public as a ripout. They are actually fairly good investments, however, most people can't afford to keep them long enough to reap the benefits.

Whole Life works better the younger you buy it.

I am a strong proponent of WL for everyone (of course, if they can afford it).

Whole had many benefits. The main one being it flexible. Most people will have a dozen unexpected/unrealized/unknown events happen in their lives over the next 30 years that will alter their financial landscape.

*Buying a new house
*Taking out a second mortgage
*Getting a big promotion
*Getting fired
*Starting your own business
*New dependants (children and/or parents)
*Disability
*Natural disaster
*Having a child with special needs

Those are but a few things that can completely change where your financial train is rolling. Whole Life offers the solution to the questions:

*What if I need insurance longer?
*What if I need to replace more than just my income at death?
*What if I start to worry about how much I will leave my kids?

You get what you pay for, and Whole Life (if bought through the right company), is a tremendous financial tool.

Dave Ramsey has probably saved a ton of marriages through his debt management system. However, he misses the mark on WL. And as Dan aptly mentions, he is going to need some major estate planning down the road, and he'll wish he'd bought Whole Life earlier.

Hope that helps.

BTW, I would to see these mutual funds that are average 12%, and will continue to do so.

Hello my name is Fadeelah, I watched Suzie Orman on the Oprah show and she stay away from whole life insurance and I have whole life insurance for me and my children and grandchildren. my question is why stay away i don't understand.

Celebrity financial advisors have some advice that is great, and other advice that not for everyone. You will never have a time in your life when you will not want to impact someone or something positively if/when you die. Term insurance works out if nothing in your life will change over the course of those years in which you own it. However, you need flexibility with your financial plan, and Whole Life offers that.

Term and Invest the Difference strategies usually end up being Term and Spend the Difference strategies.

Even if you can stick to the plan, you have to do extremely well to warrant beating the tax free death benefit afforded by WL.

Talk to the people who are getting ready to retire....those whose lives have changed either by divorce, refinancing of a house, buying a new house, an unexpected pregnancy, a parent who had to move in, etc., etc., etc........

They will tell you they would have loved to have bough WL thirty years ago. You need to think long term, which most people cannot do, and which is why most buy term.

BTW, even if someone talks you into a term strategy, the WL policies on your grandchildren are excellent investments.

Hope that helped.

Suzie Orman thinks the same way and she worked for Primerica, which is essentially Citibank. So it would make sense that she wants you to buy term and invest the difference, since then Citi can use you and your money so they can try to make up for over $55 billion in write offs.
The first step in buying a life insurance policy is checking the company behind the policy.
There are four major rating companies that rate all insurance companies in the country:
Standard and Poor's
Moody's
Fitch
A.M. Best

These reports are not free, but any company that you are dealing with should be proud to tell you their ratings, that is if they are a good company, with a sound financial sheet and a surplus. The surplus is Very important, what this means is how much money they have in their "rainy day" fund. This is the fund primarily used to pay death claims. So it is important that they have a very well padded surplus, in cases of mass tragedy when many claims have to be paid at once. This surplus also represents what the company is doing with your money, are they investing it wisely so that they will be there for you 20, 30, 50 or 70 years from today.

The company that I have my policy through is New York Life. They have the highest ratings from all four of the rating companies. They also have a surplus of over $14 billion.

Standard and Poor's AAA
A.M. Best A++
Moody's Aaa
Fitch AAA

They are also a Mutual Company which means that they are owned by me, a policy holder. So...when New York Life makes money, I make money. The opposite of a Mutual Company is a Stock Company, what this means is that the owners of the company are share holders, not policy holders. This is quiet a conflict of interest in my opinion because a stock companies interests are not in line policy holders interests. These companies are MetLife, AIG, Hartford, and Prudential to name a few.
This is quite opposite from New York Life, since they are a Mutual company their one and only concern is making sure that they are there, strong and solvent on the day where my family will need them the most. They do not take risks without making sure that it is in the best interests of the policy holders.

The company is over 163 years old, have insured americas greatest legends:
Babe Ruth
J.C. Penny
Suzan B. Anthony
Colonial Custard
and 11 U.S. Presidents
In-fact Calvin Coolidge, pushed a button in the White House that was linked to an American Flag that unraveled at the grand opening of the New York Life Insurance Building in New York City (1928)

Just think of that, 163 years old, New York Life was crossing civil war lines to deliver death claims. They paid EVERY claim during the panic of 1856, the crash of '29 and throughout the Great Depression. They have also paid a dividend to whole life policy holders for 162 years straight.

In today's world it is hard to trust anyone, but when you find a company that is build on such integrity and values it is hard to not spread the word. Check them out if you are looking for long term promises that you would like kept.

I applied for life insurance for myself and my husband. I was told by my agent to put the child rider on my husbands. He ended up being denied and mine was completed. Now I can't add a child rider to my existing policy so our children are not covered. My agent now wants me to do either whole life or universal life for them, he is pushing the universal life more. It seems like more then I can afford right now. What is the best thing to do to get them covered?

Children don't need life insurance. That is waste of money. No one is dependent on their income.

It is not that someone is dependant on the childs income / it is a head start. If they are below 18 they should not need a physical exam. And the policy will have "account value" at age 65 that is very nice for retirement. Plus they wont have to qualify for coverage when they are older and possible unhealthy.
National Agents Alliance
htt://naablast.us

Buy whole life from New York Life. They pay a dividend which goes to your cash vale. The product is called custom whole life, best whole life insurance policy in the business. They are A++ by all four rating companies, but yes it is expensive. The average return on investment is 6-7% with no taxes on capital gaines if policy holder dies with the policy inforce. This product is the best for estate planning

Orman was born on the South Side of Chicago, Illinois, in 1951 to Russian-Jewish immigrants Ann and Morry Orman.[6][7] Orman came from a working class background and has said that she did not "grow up with money."[6][8] She was an undergraduate at the University of Illinois at Urbana-Champaign, from which she holds a B.A. in social work. In 1973, she moved with friends to Berkeley, California and lived for three months in a van on Hearst Avenue. She soon became a waitress at the Buttercup Bakery on College Avenue. In 1980, a longtime customer gave Orman a loan of $50,000 to help her fulfill her dream of opening her own restaurant. Orman invested the money at Merrill Lynch, but four months later was broke again, after she was swindled by her stockbroker.[9][10]

Knowing that she couldn't make the money back as a waitress, and having started learning more about finances and investing, Orman returned to Merrill Lynch and entered their training program to become an account executive. She discovered through her training that her stockbroker had committed an illegal act and she thus sued Merrill Lynch. Suze received the entire $50,000 back plus interest and was able to pay back her former customer. After she completed the training, she was hired by the firm and remained there until 1983 when she left to take a position as a vice president of investments at Prudential Bache Securities. In 1987, Orman resigned and opened her own financial planning firm, the Suze Orman Financial Group, in Emeryville, California. She acted as director of the firm until 1997, when she stepped down as her writing career took off with the publication of her second book.

1. I don't see anything about Primerica/Citibank?
2. There are other products out there for estate planning other than Whole Life Products.
3. Go to any major fund company's website and you will find fund lifetime performance(10yrs+) on an annualized basis to be higher than any whole life policy cash values(which recommended to be held at lest 15-20 years)
4. The dividends paid on your whole life policy are for overpayment of premiums. Meaning your insurance company charged you too much in the first place. Its like getting a refund for overpayment into your escrow account on a mortgage.
5. Babe Ruth and all the others mentioned were wealthy, not working class people.
6. If you work with a financial advisor, not an insurance agent you will get the same response you hear from Dave and Suzie. Who have no financial gain in you purchasing term and investing the difference.
7. Whole life for kids is the worst investment. I know my parents had one for me. Luckily my grandparents set up an UGMA/Education IRA for me at about the same time. I was able to cover my college expenses, Masters, with my Education IRA, the $3,200 in my whole life policy after 20yrs well it went into an IRA.

I am 65 and my husband is 72 yr old. Our trusted friend and State Farm Insurance agent convinced me to buy Universal Life Insurance a few years ago. He converted my 10-year term life insurance policy (premium was $279/yr for $100,000 coverage) to a Universal Life Insurance Policy for $100,000 coverage - NEW PREMIUM $2,616/yr. What a dope I was to fall for his sales pitch that Universal Life was really an investment I would get back. I spent nearly $10,000 in premiums before I realized I had been duped. If I had stayed with my original Term Policy, I would have spent less than $1,000 and I could have invested the other $9,000. In the end I recovered about $4,000 so I LOST about $5,000. Dave Ramsey is right. Universal Life is a RIPOFF.

The whole purpose of life insurance is to offer financial protection in the event of the policy holder’s death. It is best not to look at it primarily as an investment plan. Term life policies purely offer death benefits during the period of the term. There is no cash value on a term life policy. Some term life policies will offer you refund on the sum of premiums paid, after the term is over.

I work for AccuQuote and this is my personal opinion. Many prefer an investment advantage to their life insurance plan, but this should be considered an added advantage to a life policy, and not primarily viewed as an investment. It’s the age old comparison of apples with oranges. A whole life policy accrues cash value over the years. It will definitely not give you the same kind of investment returns as mutual funds or shares but neither can investments in mutual funds or shares give you the kind of death benefits a life insurance plan would? How many years of investment would that take?

Universal life is similar to a whole life policy except that the policy holder has more control over the investment component. Universal life is usually chosen by people who are market savvy and want to use their life insurance as a combination of life insurance and investment. This kind of policy is subject to market risks.

Denise
Disclaimer: I work for AccuQuote and this is my personal opinion.

I don't put horse shoes on my cat.

I don't make my horse "go" in a litterbox.

Both strategies have merit, the real key is selecting the plan THAT BEST FITS YOUR CLIENT. Period.

I advocate whole life, but if someone is dead set on the dave ramsey approach, I'll help them out (and in 95% of the cases, sell Whole Life to them later when they finally realize they need it). Life Insurance is about more than death benefit.

Anyway, I feel my job is to provide the client with as much information as possible, to give them my opinion, and then let them decide what route to take.

First, I am no expert. However, I would like to echo some of the points made earlier. There is no doubt whole life is expensive and so to is universal life. The annual premium for a 35 yo male is about $16,000/year for WL and $10,000/year for universal for million dollar policies. This is a lot of money! But down the road, if you live to 70, there will be a tremendous amount of cash value in either type. However, if you need 10x's annual income for adequate coverage for a death event, and you earn 180k/year, the WL and Universal policies would fall short unless you had at least 15-20 years of premium paid. I think every head of household should have 10Xs annual income, but you can have more than one type of policy.

I have four policies, 2 term and 2 whole life. I can convert the term to WL at anytime as my overall wealth grows.

Other benefits are both estate planning mentioned above/tax benefits as well as protection from creditors.

Finally, for professionals, limits on disability insurance are around 25k/month. A whole or universal policy has a disability clause that your premiums continue to be paid in-full until age 65. This will provide ongoing wealth accruement, something you will lose with only having 60% of income once you are disabled, assuming the best possible scenario with disability insurance.

A person is 12 X's more likely be disabled than an untimely death

Some interesting information. True, the buyer should beware. I was hoping for a good resource of information in order to make a wise buying decision. I noticed Wayne in America is full of critical remarks but offers no positive information. Wayne in America, is there anything meaningful and positive you can offer as an alternative or an insight?

Wayne - who peed in your cornflakes today?

First off term has a place in people's life especially when you are just starting off with a young family when coverage is critical. I think the desired form of insurance though is Whole Life. It is not perfect and yes insurance companies make money (all businesses must make a profit otherwise there is no business!). People also overlook that with Whole Life your money is not tied up. Think about a mutual fund (or any stock market instrument) and realize that if there is a correction it may take years to get back to "0" and your funds were never available. Also Mutual Funds only became popular in the 80's (mainly due to the 401k), and they do not have a long track record as an industry of good returns (funds open and close all the time, managers leave etc., by the way I am talking 30+ years). Life insurance is a contract and I like contracts (it means the company promises something in return)! Mutual funds promise absolutley nothing at all! Finally if you don't like Whole Life, and think the stock market and mutual funds are the way to go, then keep drinking the kool aid junior. You'll probably being asking me for a handout when your 65+.

I think everyone needs to remember to take Dave's advice as a WHOLE. his thinking is you have term life insurance for about 20 years b/c you want to cover all expenses and take coare of your family if you should die during their childhood years. After 20 years.....they SHOULD be living on thir own and making a living and yo uson't need to support them. Your house will be paid off (b/c he recommends a 15 yr mortgage) and you will have an emergency fund of 3-6 months of expenses if anything should happen. The money you have saved investing the difference btwn term and whole has earned you a nice nest egg and so if you die, it isn't a catastrophe that it would have been yers earlier when you had many more things to cover with your income. Alos for those of you who think whole life pays you everything that you have paid in premiums, think again. If you die, the insurance company oinly pays the policy value. not all the cash you paid into it. Have some discipline and invest the difference. Also, take what Dave says as a whole, not picked apart.