Whole Life Insurance?
Answers:
Reason why people would buy life insurance is because they don't have much money saved. If the husband or wife dies, what financial impact would they have on the family if they didn't have life insurance? I believe no one should get whole life insurance. Why? For one, its expensive for most people. Second, cash value has a low rate of return. Third, if you ever wanted to take money out of it, you have to borrow it. And finally, if you die someday, you may lose all the cash value.
If they want life insurance, they should stick with a 20-35 year term insurance and work with the life agent to find out how much coverage they really need. Financial experts say people should get coverage of 8-12 times of their annual income.
While they have life insurance, they should also focus on building wealth. People should consider opening an IRA account (if they haven't already) and invest into mutual funds. If people invested $200/month and their portfolio does an average rate of return of 12%, they could potentially accumulate almost $200k in 20 years. In 30 years, it could be $706k. In 35 years, it could be $1.3 million.
Is the portfolio going to get 12% every year? Absolutely not. On some years, it may be 4%. Other years it maybe 16%. But on long run, it can average out to 12%.
If you were able to accumulate half a million to a million in 20-30 years, would you still have life insurance? If no one is dependent on your income in 20-30 years, what would your reason be for having life insurance?
I have always sold term insurance and help clients invest their money. Did you know you can invest as little as $25/month into a mutual fund? I also look into other areas to help the client free up some money so that they can save more.
Never buy whole life it is a scam that is weighted toward the Insurance sellsman and company.
Instead, purchase 8-10 times your income in Term Life. So if you make $40,000 a year purchase $300,000.00 to $400,000.00 in Term Life.
Then invest the money you would have spent in Whole Life into a good Growth Stock Mutual Fund or Funds.
anyone interested in borrowing against the policy... really universal life policies are cheaper and more popular and the death benefit is guaranteed where the whole life policies arent.
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Well, the cash value part is irrelevant - whole life is NOT the best savings or investment vehicle.
It's really geared towards people that want the policy to pay their estate taxes, when there aren't liquid estate funds to do the job, so the estate can be passed on to the heirs without having to be sold. Classic example: The family farm - the land is "assessed" and a high value, but the income just supports the family - if the owner were to die, the kids would have to sell the land to pay the taxes, and no more family farm.
The person that buys whole life insurance is someone that wants permanent insurance with guarantees. The premium, face amount and cash value in a whole life policy are all guaranteed. Dividends paid by a mutual company are not guaranteed and are paid over and above what is stated in the contract.
i think it is not fair
This type of policy performs best in the guaranteed cash value column. If you want cash accumulation in your life policy (a moderate to aggressive position) and you need guarantees (a conservative position), this is for you.
If you have a permanent life insurance need, but also want to save or invest, I would also check out a guaranteed universal life and manage your own side fund. Depends what you're trying to do.
Remember that any dividends can not be guaranteed and they are based on the experience of only one company.
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