What does BG think about Life Insurance?

[tyven]

Opening a whole life insurance policy just to use it as a savings vehicle is foolish. There are a million better savings products. None of them offer a death benefit tho.

[Cream Soda]

Bicycle insurance on the other hand is something I could probably use lmao

[Seraph]

Whole life is far from a joke. It just needs to be applied to the right situation. For instance, it would be asinine to put term insurance on a newborn. My company offers a 15 pay (pay for 15 years. after that you pay nothing for the rest of the policyholders life and you keep the policy). For a newborn with $50,000 benefit (lowest option for 15 pay) it is $45/month. So over the entire policy it's $8100, but that newborn has a guaranteed $50,000 life policy forever. At age 18 there would be $6266 of cash value built up into the policy that could be used for college expenses, a car, etc while still having that $50k benefit. Say this newborn lives a healthy life and is set to retire at 63 and they didn't touch the cash value from the policy. At age 63 that cash value has jumped to $26,213 and again, still have that $50k benefit.

Now, I can see some thinking any life insurance on a child is stupid and that's because no one expects a kid to die. However, in the case a tragedy happens would parents really want to worry about the cost that also comes with having to bury a child? And if that child lives a regular healthy life then the parents are able to pass along something incredible to their child that they get to keep forever.

If you want to save for college for your kids, open up a 529 account. Much more optimal. Let's say you are actually saving for college:

Payment total: $45 * 12 months * 15 years = $8100

Actual return: $6266 - $8100 = -$1834

You just lost almost two grand over two decades because you wanted to combine money goals. If anyone was down over 20% over almost 20 years in either bonds or stocks they would be devastated. You would have been better off just putting the money in the bank over 15 years, at least you wouldn't have lost any of it.

[tyven]

If you want to save for college for your kids, open up a 529 account. Much more optimal. Let's say you are actually saving for college:

Payment total: $45 * 12 months * 15 years = $8100

Actual return: $6266 - $8100 = -$1834

You just lost almost two grand over two decades because you wanted to combine money goals. If anyone was down over 20% over almost 20 years in either bonds or stocks they would be devastated. You would have been better off just putting the money in the bank over 15 years, at least you wouldn't have lost any of it.

why do you insist on comparing the secondary function of one product vs the primary function of another?

[Zetanio]

We should be reminded that this is insurance. Not an investment for returns.

[Kalmado]

Opening a whole life insurance policy just to use it as a savings vehicle is foolish. There are a million better savings products. None of them offer a death benefit tho.

Exactly. Whole life is a nice perk where it builds some cash value but has that death benefit. No other product provides that.

I'm personally over the moon about the return of premium since if you do pass your beneficiary is taken care of (if you're insuring yourself correctly), or you get a nice fat check if you do not use it. A lot of people would say they could take that monthly payment and put it somewhere better. Here is the catch, and this is where it's on the person and not the product, can that individual 1000% guarantee they will take that payment and apply it to that savings, cd, whatever for 30 years and never touch it? I'd be willing to bet 90% couldn't make that guarantee (if we're being honest with ourselves). This is exactly why my wife and I are budgeting $225/month for return of premium policies. My father passed at 59 from a heart attack and never had any heart problems previously. Most people still have mortgages, cars, etc at that age and I want to guarantee my wife is taken care of should I pass that early.

[Kalmado]

If you want to save for college for your kids, open up a 529 account. Much more optimal. Let's say you are actually saving for college:

Payment total: $45 * 12 months * 15 years = $8100

Actual return: $6266 - $8100 = -$1834

You just lost almost two grand over two decades because you wanted to combine money goals. If anyone was down over 20% over almost 20 years in either bonds or stocks they would be devastated. You would have been better off just putting the money in the bank over 15 years, at least you wouldn't have lost any of it.

If that person then dies at age 25 would the bank they deposited that money in pay out $50,000?

[Seraph]

why do you insist on comparing the secondary function of one product vs the primary function of another?

Because the person pitching it couldn't resist trying to appeal to the "savings for college!" angle. The purpose of the product gets muddled in the sales pitch, which is exactly the goal. I already said term insurance has it place. People here are getting defensive because they either sell insurance, or got suckered into buying mediocre policies.

If you are really worried about your kid dying when they are 25, offer to pay for a term policy for them when they are in their early 20s, and pay WAY less money over the next 25 years using that strategy.

[Kalmado]

Because the person pitching it couldn't resist trying to appeal to the "savings for college!" angle. The purpose of the product gets muddled in the sales pitch, which is exactly the goal. I already said term insurance has it place. People here are getting defensive because they either sell insurance, or got suckered into buying mediocre policies.

If you are really worried about your kid dying when they are 25, offer to pay for a term policy for them when they are in their early 20s, and pay WAY less money over the next 25 years using that strategy.

25m non smoker 30 year term would be $9,000 in premium for $100,000 policy (lowest benefit allowed). If that person does not pass by 55 they have nothing and have to re-qualify and the cost will be a lot more. The example of the 15 pay whole life guarantees for life a $50,000 benefit that the person never has to re-qualify for. So how is your option better?

And you still didn't reply to

If that person then dies at age 25 would the bank they deposited that money in pay out $50,000?

[Seraph]

25m non smoker 30 year term would be $9,000 in premium for $100,000 policy (lowest benefit allowed). If that person does not pass by 55 they have nothing and have to re-qualify and the cost will be a lot more. The example of the 15 pay whole life guarantees for life a $50,000 benefit that the person never has to re-qualify for. So how is your option better?

And you still didn't reply to

The policy doesn't have to be 30 years. You are also assuming the person is paying for the ENTIRE 30 years (so lets say to age 50?) when in your example they died at age 25, so you are deliberately mixing apples and oranges here. Also, in your own example, the payout for term is $100000 instead of $50000, so 5 years of paying term premiums instead of 15 years in the initial plan for double the final payout.

Is there a case where your plans possibly comes out ahead for some people depending on very rare situations? Maybe, but I really think you are trying to win an uphill battle here. I get it, people sell insurance to make money, and some people want to pay that money to offset risk. Sure. Just don't come out swinging by implying that it is some amazing financial investment strategy when it really isn't. It is a risk mitigation tool for which you pay a premium for, plain and simple.

[Ksandra]

Fucking lol.

Don't be dumb. If something sounds too good to be true, it probably is. Insurance companies are just as sleazy as banks. But are magically are better at investing and willing to give much higher returns? The policy my father got was rather normal when he got it.

Get into a car accident, your car insurance goes up. Get a heart attack, your life insurance goes up. They made a fuckton of money that way.

Now if regulations changed that, good. But let's not pretend for one second insurance company CEOs were magically like, "Well, I guess I am just going to take a huge pay cut!" That means they found another way to get that money. So, explain to me where they now get that particular money. Seriously. Because I want to follow the money and see where we get screwed over.


Also, Kal, what happens if someone can't make a payment? Because as much as I would love to say we are finally settled and gtg, my husband is in a field of constant layoffs. And so that could become a very harsh reality for us.

[Kalmado]

The policy doesn't have to be 30 years. You are also assuming the person is paying for the ENTIRE 30 years (so lets say to age 50?) when in your example they died at age 25, so you are deliberately mixing apples and oranges here. Also, in your own example, the payout for term is $100000 instead of $50000, so 5 years of paying term premiums instead of 15 years in the initial plan for double the final payout.

Is there a case where your plans possibly comes out ahead for some people depending on very rare situations? Maybe, but I really think you are trying to win an uphill battle here. I get it, people sell insurance to make money, and some people want to pay that money to offset risk. Sure. Just don't come out swinging by implying that it is some amazing financial investment strategy when it really isn't. It is a risk mitigation tool for which you pay a premium for, plain and simple.

For the last time, no one here is implying it's some great financial investment strategy. That is your statement alone. We've already shown why life is important and I've refuted how whole life is extremely beneficial. You're at the point of putting your fingers in your ears. The examples given are what I work with. I'm sure there are 25 year terms out there, but I don't have it so I can't quote it. Also, there are minimum standards and my 20 and 30 year term start at $100k.

And to be crystal clear, I don't sell insurance. I give people solutions for risks and help them understand what they are buying or turning down.

[Zetanio]

Don't be dumb. If something sounds too good to be true, it probably is. Insurance companies are just as sleazy as banks. But are magically are better at investing and willing to give much higher returns? The policy my father got was rather normal when he got it.

Get into a car accident, your car insurance goes up. Get a heart attack, your life insurance goes up. They made a fuckton of money that way.

Sleazy = charging riskier customers more money.

Ok.

[Ksandra]

Sleazy = charging riskier customers more money.

Ok.

Uh no. Sleazy in general. But I am learning towards you are just trolling to be a dick. So I'll pass responding to you.

[Kalmado]

Don't be dumb. If something sounds too good to be true, it probably is. Insurance companies are just as sleazy as banks. But are magically are better at investing and willing to give much higher returns? The policy my father got was rather normal when he got it.

Get into a car accident, your car insurance goes up.

Get a heart attack, your life insurance goes up.

This only happens at renewal. This does not happen during the term of the policy. Ask ten different agents and they will verify.

They made a fuckton of money that way.

Now if regulations changed that, good. But let's not pretend for one second insurance company CEOs were magically like, "Well, I guess I am just going to take a huge pay cut!" That means they found another way to get that money. So, explain to me where they now get that particular money. Seriously. Because I want to follow the money and see where we get screwed over.

I don't disagree and the lifeblood of the insurance industry, those of us out here working with the people, say the same. It can definitely be frustrating.

Also, Kal, what happens if someone can't make a payment? Because as much as I would love to say we are finally settled and gtg, my husband is in a field of constant layoffs. And so that could become a very harsh reality for us.

With my company, it's typically 60 days to pay before the policy terminates. Or, if it's a policy with cash value, the available cash value would be used to make the premium payment. And I do understand where you're coming from. When my wife and I talked about it we said no matter what we'll budget $225 (no kids, not a ton of debt, etc). Every household will be different with what they can afford and that's where a good agent will help with those decisions.

[Zetanio]

Uh no. Sleazy in general. But I am learning towards you are just trolling to be a dick. So I'll pass responding to you.

So the whole industry is sleazy because of your dad's experience and your biases.

Would you like an explanation of life insurance, car insurance, health insurance or what?

[Seraph]

For the last time, no one here is implying it's some great financial investment strategy. That is your statement alone. We've already shown why life is important and I've refuted how whole life is extremely beneficial. You're at the point of putting your fingers in your ears. The examples given are what I work with. I'm sure there are 25 year terms out there, but I don't have it so I can't quote it. Also, there are minimum standards and my 20 and 30 year term start at $100k.

And to be crystal clear, I don't sell insurance. I give people solutions for risks and help them understand what they are buying or turning down.

Bullshit. You talked about using cash value of the child policy towards college here:

Whole life is far from a joke. [...] At age 18 there would be $6266 of cash value built up into the policy that could be used for college expenses, a car, etc

So you don't sell insurance, you are just paid to show people insurance options ("solutions for risk")? Sounds like double talk to me. Who has their fingers in their ears now?

[Ksandra]

I don't disagree and the lifeblood of the insurance industry, those of us out here working with the people, say the same. It can definitely be frustrating.

Do you have an answer to it? Unless I misread, the point of the thread was for you to have a better understanding of people's reluctance towards life insurance, but that doesn't do you much good if you don't have an answer to those. So, how did insurance companies offset the lost of profit once the regulations came in? When Obama set the credit debt regulations, banks switched to insane overdraft fees to recoup. So, insurance must have done something else. What was it?

With my company, it's typically 60 days to pay before the policy terminates. Or, if it's a policy with cash value, the available cash value would be used to make the premium payment. And I do understand where you're coming from. When my wife and I talked about it we said no matter what we'll budget $225 (no kids, not a ton of debt, etc). Every household will be different with what they can afford and that's where a good agent will help with those decisions.

And that's a full stop for me. Honestly. Yes, I get it. Lending Club is not going to give me a huge payout if someone dies, but I am averaging a 14% rate on returns right now through them. And I get to control how much money I put into it, and where the money is going. All the while, it's pretty straight forward on how Lending Club is making money off of myself and others. They are still making money off of money, but they aren't doing it through crazy hidden tactics/policies.

And most importantly, if something happens and I can't put in any extra for a little while? nbd. I'll still get my payments back as it goes. While it has its own set of risks, I widely diversify the money I put into it. And I find it to be a lot less risky.

We only have so much money to allocate towards investment. We're not rich. I'd rather take that extra funds and put it to something I see a direct benefit to. In order to invest in life insurance, I would be cutting back on my other investment. And that's not worth it to me.

[Zetanio]

They raised rates on literally everyone because they were forced to offer plans to risky and shitty customers, thereby polluting their total pools of policies. My rates went up by 50%. They are going up another 11% next year.

The cost of offering policies to the bottom 10% of customers ruins everything as their healthcare are far far higher than the remaining 90%.

This is why life insurance for smokers is SO much more expensive than nonsmokers. You are GOING to cost a fucking fortune.

[Kalmado]

Bullshit. You talked about using cash value of the child policy towards college here:



So you don't sell insurance, you are just paid to show people insurance options ("solutions for risk")? Sounds like double talk to me. Who has their fingers in their ears now?

Where do I say financial investment strategy again? Oh that's right, I didn't.