Is buying whole life insurance a good idea or a waste of money?
Answers:
For majority of people, its a big waste of money. Why? You have to spend lots of money to buy a small amount of coverage. For example, if a 30 year old bought a $100,000 policy, it may cost him $1000/year! If he bought a 30 year term instead, it may cost him only about $200/year!
Why? Because whole life insurance is a level term to age 100 with a savings plan attached to it. If you ever wanted to take money out, you have to borrow it and pay a loan interest on it. They have a slow growth of around 2%. If inflation is at 5%, you are losing purchasing power. If you die someday, the beneficiary only gets the death benefit but the insurance company keeps all the savings.
I have always sold a 20 year to a 35 year term insurance to clients. Its cost effective and the client can afford the right amount of coverage. At the same time, I help them start an investing plan to build wealth for retirement. Mutual funds (well, the ones I offer anyway) has a historic rate of return of 12% in the past 25 years. Is that better than 2% in the whole life policy?
If the client dies during the term, the beneficiary gets death benefit and all the investments. If the client outlives the term, then the client needs to evaluate his/her needs. Do they still need life insurance or as much coverage in 20 to 35 years from now?
Depends - what's the GOAL?? Whole life doesn't meet my personal goal most effeciently.
First define your GOAL, then select the product that meets it best.
depends how old you are
you can get it as young as 16..and it will grow a LOT of you invest in it properly
my dad just bought life insurance for me, i just turned 16...
:)
im gonna get a lot of money from him when he dies :)
it will help your kids out a lot in the future
Usually a waste, but it depends on your specific circumstances.
If you have a family history, or something that may make you difficult to insure in the future it could be worth considering.
The guaranteed cash values are hard to beat, but the circumstances that I've seen where someone really needs guaranteed cash value IN a life policy are few and far between. But, hey, that might be you.
Talk to a local, independent agent. Even if you want permanent life insurance, there are other options to consider.
I'm not a big fan of whole life insurance.
If you want a permanent life insurance policy consider a universal life policy.
It's really what you want your life insurance to do for you. Term insurance is cheap and you can get a ton of coverage for minimal costs, but understand that the term will expire one day and the coverage will be too expensive by then to purchase more term. A lot of people don't realize that insurance companies offer term insurance to last up until the insured is 80 years of age. With life expectancy growing the way it is and health advances, many people find themselves at the end of their life with no coverage at all, because they put it all into term. (By the way: 98% of term coverage never pays a benefit) The smart thing to do today is purchase whole life insurance built to cover final expense charges for the projected price at the future age between 75-100, (you can decide on that yourself) based on an annual inflation rate of 4%. Use term to cover major debt such as a mortgage or school loans or even calculate what you would need for proper income replacement. That way, when you turn 81 years old and all of your term insurance is gone, you still have your final expense whole life plan that has grown in cash value and is close to equalling the death benefit and may even have a nice side fund of dividends for you. All in all, a mixture of both is the smart way go about life insurance.
Suzie Orman would have a field goal with this one, whole life policies are a waste of money no matter what the circumstances are. The person above "Do the right thing"is correct, whole life insurance as well as any type of cash value is a ridiculous concept based on concepts of archaic companies that only want to make a profit. go term and invest the difference, mixtures of the 2 are dangerous and unsettling. term insurance is important as insurance goes, its cheap and you can get more, and yes it does have an expiration, however, what mmost big companies dont tell you is the theory of decreasing responsibility.
meaning, in the early years there are young kids and debts and mortgage balances while at the same time low savings. so life insurance, or renting a "bag of money:" is important because a loss of income would be devastating. but in the later years, kids are grown, debt is lowered, mortgages are paid off and so life insurance isnt needed so much as retirement income. so that is where the savings comes into play, basically buy term and invest the difference in a savings vehicle that can deliver way more than any "guaranteed" savings a cash value policy can deliver. it is basic math and compound interest.
whole life is a waste of money as is unniversal life and variable universal life. i know from experience.
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