Life Insurance Question (Page 2)

brynn - 2010-05-20 9:37 AM

 I agree that there are some times when whole life insurance is good/necessary for estate planning. But I would say for 95+% of all people, whole life insurance is a waste of money. I don't know a whole lot about the benefits of using a whole life policy because I'm not that wealthy yet so I've never had to look into it! Maybe someday though! I do listen to Dave Ramsey and he says generally the same thing, that it can be used but it should be after all other avenues are used (maxing out contributions to ROTHs etc.). ETA: Also wanted to add that I have seen people who are kinda rich, but not super rich, try to use whole life insurance policies as investments/estate planning. They pay hundreds of thousands of dollars in premiums each year for policies worth millions of dollars...then they get freaked out because their COI is so high (literally thousands of dollars each month) that it is depleting their "investment" much faster than their "financial adviser" (who makes thousands of dollars of commission every time his clients make a premium payment!) told them. They stop paying premiums, and within a year or two their policies are worth zero and lapse...and they lose all the money they "invested". So...just be very, very careful. It's so important to have a good financial adviser that knows what he is doing. It never hurts to get a second or third opinion. Google your FA before you give him any money...that alone should tell you if there are complaints against him.

Sharyn5 - 2010-05-21 11:59 AM

Because those left behind will have to pay the estate taxes...which is why life insurance is a good vehicle for loved ones having to still maintain the lifestyle they are accustomed to, after their loved one dies. Life insurance isn't taxed...and if say a stay at home mom hasn't worked in ages, and her wealthy husband dies...she'll have to pay the estate taxes and liquidate the assets just to live...she needs liquid income, and life insurance will give her that. I say ''her,'' but that's just one example of why someone wealthy would need it. Most other vehicles will be taxed or tax deferred.

rcav8r - 2010-05-21 8:54 AM If you are wealthy, then why do you need life insurance? Just because?
I plan to be comfortably well off when my term life runs out. By then, I'll be paying long term care (not disability) insurance (aka nursing home insurance), but at a higher price than term. That protects my assets.

crusevegas - 2010-05-21 2:09 PM

If you coule get a $1.00 for 50 cents would you do it?

brynn - 2010-05-21 12:41 PM But it's not really getting $1.00 for 50 cents. It is, if you don't look at the time value of money. Example: It costs me $77 per month to purchase a whole life policy worth $100,000. I am 27 years old. Let's say I live until the average death age, which I think is like 76 or 77? So that's 50 years. If I pay $77 per month for 50 years, that is $46,200. And then my beneficiaries get $100,000 when I die. Not a bad investment...except that if I invested that same money at 10%, in 50 years I would have over a million dollars. Even if they had to pay 50% income tax on that, they are still $400,000 ahead than they would be if all they got was my $100,000 life insurance policy. I'm just sayin'! But to each their own.