Whole Life Insurance Pros and Cons

First, I feel the need to provide context for this post. 99% of our clients want to use cash value life insurance as an asset class. Which means people need to distinguish whole life insurance from indexed universal life insurance.

Yes, there are other products.

But none that we feel are worthy of consideration.

Which is better?

What are the pros and cons of each? Why would a person use one versus the other?

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There is no Whole Life vs. Term Insurance Debate

An aspect of the financial services and insurance industries that has always bugged me is this notion that there is some sort of debate over which life insurance product someone should buy.

To set the stage, the discussion generally notes the differences between term life insurance and whole life insurance (mostly harping on “price” paid for premium) and then makes some esoteric argument about why one is better than the other.

The truth is and has always been, that there is no debate between whole life and term insurance products. They serve two completely different purposes and are bought for very different reasons without a lot of (maybe even dare I say…any) overlap.

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Whole Life Insurance Lapse Rates

Whole Life Insurance Lapse Rates

If you spend anytime around a traditional life insurance agent/broker discussing which type of life insurance you should own, then you’ve undoubtedly been told to opt for whole (or universal) life over term life insurance. And one of the most commonly used statistics to build the case for owning permanent life insurance over term life insurance is the fact that less than 1% of term life insurance policies ever pay a claim.

Sounds like a waste of money to pay all those premiums to an insurance company knowing there’s a 99% probability that your policy will expire before you do…right?

In fact, the old follow-up point to presenting this statistic to a prospect was to note somewhat glibly, “of course it’s so cheap, when you design a product to almost never work you can pretty much give it away.”

No manipulation in that statement at all (can you feel me rolling my eyes?).

So much time is spent focusing on the slim odds of a death benefit payout probability that most people forget to ask the naturally obvious follow up question:

What percentage of whole life insurance policies pay a claim?

This statistic isn’t widely quoted by life insurance agents, and I’ll propose a theory later on that might shock a few people.

So what’s the answer? A lot lower than you might imagine.

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031 Caught Doing Good

Caught Doing Good

(Complete Show Notes Below)

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In the 31st episode of the Financial Procast:

Home Equity Loans are Making a Comeback

Minute 2:26

According to recent piece over at MarketWatch it seems some old behavior has come back again. Yep, that's right…people are once again borrowing against the equity in their homes to buy stocks, investment real estate and wait for it…art.

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Thoughts on Term Life Insurance?

Term Life InsuranceA couple of times a month we get a question about term life insurance that I've always found amusing: will you guys write term insurance?

I admittedly chuckle a little bit every time we get this question. I do have to admit, however, that I've not spent an incredible amount of time highlighting this product. Perhaps it's because there's less to say–but then again, there are those who spend a lot of time on this topic. Or, maybe I just have to admit that I'm more fascinated by, and more interested in spending my time discussing the whole cash value life insurance as a low risk asset class thing, but I think I've also allowed myself to appear put off by term insurance by virtue of the lack of discussion.

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Dave Ramsey Term Life Insurance and Why He Hate on Northwestern Mutual

Why is Dave Ramsey Hating on Northwestern Mutual

Today, I’d like to respond to a clip from Dave Ramsey’s television show on Fox Business where he talks about life insurance as being “terrible” and how buying term and investing the difference is a better strategy than using any type of cash value life insurance. Just to clarify before I begin, I agree with lots of what Dave Ramsey has to say about getting out of debt, cutting up credit cards, and putting a stop to out-of-control consumerism.

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Are They Going to Start Taxing Life Insurance?

cash value life insuranceThis one has been around for a while but is picking up steam recently, are they going to start taxing life insurance?

Given the fiscal cliff and the we have an answer no wait no we don't whip saw that has been taking place in Washington, it's no surprise that every fear monger out there has taken a moment to jump on this train. Let's not forget NAIFA and IFA-PAC's constant need to recruit and open up members' wallets by shrilling this one at every luncheon and on every newsletter (they're coming and their coming after us!). We can't always hate them though, props of course, for their work on 151a.

But whether we like it or not we're in a pretty serious financial situation and that means we have to take all theories about how Congress will rob Peter to pay Paul. So, let's discuss why or why not Congress will drill deeper into your pockets and start raiding your life insurance policy for tax revenue.

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The Insurance Pro Blog Get’s in the Zone

Just Text LTE100 and send it to 247 LTE100 Promo Details

All this week I'll be appearing on The Business Insurance Zone with Steve Savant.  Steve and I will be discussing competition aspects of the industry, including the foolish things agents, IMO's, and carriers do to pretty-up their product illustrations at the detriment of clients.  This is a topic the Insurance Pro Blog has focused on in the past.

httpv://www.youtube.com/watch?v=rDKbzvWGLSA

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