@Dougie the "real" return is actually closer to 2% on your premium, as we stated. But can we agree that neither a 2% long-term investment NOR a 20% credit card are good ideas and we should look for something better? Thanks for watching! -- P
It should go without saying, but if you don’t have any dependents or anyone relying on your income then you don’t need any kind of life insurance (assuming you have a net worth sufficient to cover your final expenses).
Even if you invested that $15 every month for 60 years, you still wouldn't reach that at 7%, so I don't even know how they make money. Maybe they are assuming that everyone is going to live 70+ years after you started.
Would it even matter if you didn't have the net worth sufficient to cover your final expenses? The municipal authorities will cremate you on their dime anyway. Not like they'll leave your corpse outside for the vultures lol
@Bryeana Rhodes I mean, sure, you could, but life insurance isn't meant to be a payday for people that survive you. It's meant to provide for dependants. If you have no dependants, you're probably wasting money by buying a policy.
@Bryeana Rhodes If it were really a steal, do you think the insurance company would offer it to you? They do a lot of complicated statistics to make sure that they make a profit on the average investor. Term life is generally worth that penalty if you leave survivors who depend on your income so they can pay off a mortgage or set up a trust fund. But if you don't have that, do yourself a favor an put that $15 into an index fund where it will make you a profit that either you or your survivors can enjoy in the future!
It’s true, but irrelevant. The net amount at risk in whole life insurance is the insurance. The cash value is the savings/investment portion which pays off the insurance (which is why these things endow). If you think about how it works, it’s not lousy at all. It does exactly what it says on the box. What people don’t like is the difference in hypothetical projected returns between an equity fund and a whole life policy. When someone tells you you could earn 8% in the stock market, it’s an excellent excuse to save less money than if your projected return is 2% - 5%. In both cases, the returns are projected but are treated as if they were either guaranteed or “reasonably certain” to happen. That is not the case but once you bring it up, it’s anchored in a person’s mind.
I used to sell insurance for a bit. I started doing it because I wanted to get out of used car sales because selling people cars for more than they are worth felt unethical and the dealership I worked at was all about lies that lead to commission. Leo me tell you, Financial advisors are generally more shady than used car salesman. They tell bigger lies and they ruin people's whole family future just to make a buck
Another name for what Tamera did in this video is BTID: Buy Term, Invest the Difference. Term insurance IS cheaper since there is no investment component (where there are fund managers in place to manage that, and of course there are fees, like in Tia's case). Awesome video, you killed it in the commercial Philip! 🤣
Insurance salespeople are so sleazy. When my wife and I bought this farm 10 years ago, we decided to take out a life insurance policy to cover the cost of it in case I died. We sat down with an insurance agent and she started in on lifetime income, kid's college costs, etc. She recommended over 2 MILLION in insurance! I put the brakes on and said the premium was far beyond what we could afford. Her response? "Don't you want to be sure your family is comfortable?" My Response -"I'm not a lottery ticket. We want this much (much smaller amount) insurance. If you don't want to sell us this much, we're done here." She acted like I was the worst kind of bad husband and parent for not going with her amount. She obviously was trying to play with our emotions to get more sweet, sweet premium money. And that was only one of the parade of scumbags that tried to sell us more than we could afford.
I understand your feeling @farmerboybill I was once that sleazy Insurance salespeople. The reason we got into this mess of selling this product was due to our desperation for cash. After all that, I had decided to leave the industry and do something else and give an honest opinion and to guide others like @Two Cents on how personalized each family personal finance independently!
I hope you told her to get out of your house.....the only thing you need is term! when someone tries to sell a whole life.... RUN!!!! The extra money you have should be invested, saved or whatever! but I wouldn't waste money on whole life!!
I had an insurance agent do the same exact thing to me. Our circumstances are diffrent, but the pitch about taking care of my wife after I'm gone was thrown in the conversation.
Former life insurance salesman here. Only did it for 6 months. Even in training they don’t teach you how bad you’re scamming the people you’re selling to or really what it is you’re selling. They barely teach you the “good parts” of it. Took me a couple of months and getting my friends and family signed up for it that I began to realize what a horrible scam it was. I convinced all of my friends/family to cancel and just get basic term insurance with a different company. I stopped taking meetings after 4 months and actively looked for a different job the last two months. This video is amazing and I’m so glad that they showed easy and simply what a scam it is. Awesome job 2 Cents!!
Devere I only was a salesman for 6 months because unless except for a small percentage of the population, IUL or whole life is a scam and a money waster for a majority of people
Adam Duggan if you think Universal Life (which is a scam) and whole life are the same, you learned nothing about life insurance. The worst part is that people like you just give us a bad reputation. Whole life insurance is the best financial tool (not investment) in this country. If you didn’t do your job correctly it’s your problem, not the industry.
@@luisuribe5457 Wow. There is no indication that would suggest he doesn't understand the difference between IUL and whole life insurance. Learn to read, YOU are giving your profession a bad name. What exactly - other than your premiums - makes whole life insurance "one of the best financial tools in the country"? And you have to agree that in the example put forth in the video whole life insurance makes absolutely no sense whatsoever, right?
Ralph Körner tax advantage, guaranteed contract, liquidity and velocity of money, tax free dividends, death benefit for pennies on the dollar, internal rate of return of 4%. It’s all about a well designed policy, if this guy was selling IULs with those MLM companies is not a surprise that he think life insurance is a scam, I started with them, but if you do your homework you’ll find out soon that whole life policies save many people during the 1929 crash, maybe you heard about J. C. Penney, and you my find out that banks dump billions on whole life policies, do you think they would do that if it were a scam??, life insurance is the best way to transfer wealth from one generation to other tax free.
One thing they forgot to mention in this video is that salesmen and saleswomen for whole life insurance will approach you as a "financial advisor" and then they recommend a whole life insurance policy as part of their investing. When I met up with a whole life insurance agent I was under the impression that he was going to show me how to better my financially position instead of just trying to sell me on something that I didn't really need.
My mom was on the verge of buying Whole Life Insurance, which included an "attractive" payout after some time has passed. I literally only had to make some simple math to realize that it was worthless. Mom didn't buy the policy.
I first heard about this on an investment course from a guy who left FA company mainly because he hated the practices of pushing to sell whole life insurance to everyone. That guy became my personal FA that day :)
This is accurate. I’ve always been an advocate of investing in the stock market because it has paid off handsomely since I decided to invest in it. Great video.
You can’t overlook the fact that it’s paramount not to get greedy but remain invested by careful study, take chances and most importantly remain patient in the market.
@@Halllaand The dangers can be curbed once you invest with a reliable FA. You are pretty hands off other than the routinely monitoring of the market. You can divest as long as you have a trustworthy broker guiding you through your trades. I trade with Clemans and I’ve not had any reason to complain because I’ve been able to make returns from my investments.
He has absolutely changed the game I don’t know if this was meant to be, but coming across comments here, getting paid today for the month’s trading cycle 🙏🙏 Is the premium service here to stay permanently?
Thank gosh this video took a turn towards the end! I was thinking this was in support of whole life at first. Another thing about whole life policies is that your beneficiaries typically won't receive the cash value of the policy if you die during the term (it usually ends at 100 years old, so it's technically not even whole life) and will only receive the death benefit. The cash value goes right back to the insurance company you bought from, meaning you just paid for really expensive life insurance. And one other negative is that you often have to pay interest to the insurance company if you withdraw from your cash value. Most people wouldn't be willing to pay interest to a bank in order to withdraw money from your checking account until it's replaced, so it doesn't really make sense to do it for the cash value portion of whole life insurance either. Awesome video!
This is 1000% the truth. I am licensed to sell accident, health, life and fixed annuities in Pennsylvania. I no longer practice due to a bad overall experience and untrustworthy coworkers. Also, commissions goes for everything that I would sell. Don't let insurance companies push you around make your own choices and take the time to think it out.
@Erik , bruh, 24k p.a. is a very good wage in Czech republic. That's why many Czechs go to Eastern Germany, because it's cheaper and salaries are higher. Even in Sachsen 🙂
I sold life insurance for a year. I spent the summer researching what type of return you can expect and what type of competition is out there. A couple points -it is nearly impossible to get accurate data if you are the public. I am convinced they design these policies so you do not research them. -Only two companies that I know of sell whole life insurance that I could consider to be honest and pay a REAL dividend. 99% of companies that do sell this are scamming you. -The 99% of companies who sell Whole Life quote a huge dividend like 10%. BUT they take out expenses of the company from YOUR dividend. Most companies pay that 1-2% you were talking about. -Lastly it is Tax free if you the consumer pays for your policy. Not tax deffered which is only if a business pays for it. Oh! One last point. Having some whole life insurance is good for market dips when you are retired. But please talk to a financial advisor about this. Overall great video and you got the main points!
@@stewartcharles I worked for Northwestern Mutual and they paid the highest only matched by USAA. But your representative is a huge component of this as well. You can easily get taken advantage of.... Its very complicated but something you should look for is Additional Premium. There is a lot of circumstances but if your whole life policy does not have additional premium you may be taken for a ride. Whole life policies come with large commissions however additional premium is almost nothing and is beneficial for the client. Look for it as a gage for trust. If you really want to get into it nearly all whole life policies should have a plan in place to hit that limit before it turns into a MEC or modified endowment contract. Make sure it MECs before you retire. You shouldnt have to worry about life insurance payments when you are pulling from your investments. If you want more info let me know. I no longer work in the industry so I do not have any conflicts of interest
Alex Howard Thanks for the response. I asked because I was curious in what you've seen. I've actually been a financial planner at NM for about 10 years now. I'm a little surprised to hear that USAA's IRR was matching NM or beating any of the other major mutual companies. I agree that it depends on the advisor (I made a recent comment on this video). The piece about average rate of return being at 2% is not even the case for average mutual companies.
I totally agree, the advisor has to set up a policy that will pay him less if he does Additional premium (we call it OPP or paid up additions) and that maximizes the clients’ money and reduces the commission. You must have a trustworthy advisor to get these rare policies.
I'm someone who believes in the buy term invest the difference mentality, but whole life can be a decent option for people who don't have the discipline to do that. i see it as a if you struggle to save your money and like to spend it all, go whole life. if you can properly financially plan, go with term
You guys are actively changing peoples' lives for the better. I hope you think about that if you have a rough day. Thanks for sharing your two cents with us.
I'm sad you guys didn't mention the difference between a Fiduciary and a FInancial Adviser! A LICENCED FIDUCIARY must ALWAYS act and recommend IN YOUR BEST FINANCIAL INTEREST, NOT THEIRS.
My licensed fiduciary recommended an whole life insurance policy. It was technically in my benefit as 2% is better than 0 or negative returns and it is a "tax advantaged account". They did reveal they made commission on it, but only after I specifically asked. I had to do my own research to realize there were many pitfalls, among them, if I ever stopped paying my premium (I had an unstable income), I'd end up mostly just paying for insurance. That was bad for me, because I had no dependents and the policy was meant to be purely an investment! A "licensed fiduciary" is at this time, just another tool to help make the sale. It is not any protection for the consumer. I've only done a cursory search, but I could not find any instance of a licensed fiduciary being brought to court and being significantly penalized.
I saw a financial advisor 5-ish years ago at Northwestern Mutual, and he sold me a whole life policy. I just did whatever he recommended. He said it was good for when the market is down during retirement, and it was the right time to start one since I was young. I’ve been having my doubts lately though. Thanks for the video. I’ve been debating whether to cancel the policy and put the difference in an index fund. The sunk cost fallacy has held me back, but I’m leaning more toward cancelling.
@@no.7711 Actually is was socialism that made the college degrees price skyrocket. Or do you think that if was government didn't make loans they would cost this much?
0:03 - The name of the movie is My Name is Trinity. It is a Bud Spencer and Terence Hill movie, and they are famous only in my country which is Hungary. It was surprising to see here :D
Actually it's an italian Western movie. The main actor (Terence Hill, the one slapping super fast) is still active and nowadays plays a priest in an italian tv fiction (Don Matteo)... Anyway I was surprised to see it here too!
I subscribed to you guys channel a few months ago, and I always loved your information! Today when I saw the title of this video I was very intrigued. As an insurance agent my self, I felt that this video is where I could test you guys knowledge, and see if you really knewwhat ya’ll were talking about. I have to say I AGREE with this video. I always educate my clients before I offer them any insurance, similar to the educational approach of this video. I will make sure to show this video to my associates and clients. Keep of the good work. This channel and Dave Ramsey’s are my favorite Financial RU-vid channels!
Thanks Dimensions -- you're one of the few insurance agents that wasn't peeved by this one! I also sold insurance for years, and I know ALL the arguments of why WL "isn't a scam". Our job is to educate, and offer as unbiased a view as possible. Glad we didn't get the facts wrong, thanks for watching!
Every time you say "whole life" and "investment" in the same sentence, I cringe. It would result in an insurance producer losing their license in most/all states.
I went to a free financial ''class'' (a few hours for a couple of days only) and they went on and on about life insurance and almost 0 info on other forms of investing... I was disappointed, to say the least. -.- Thank you for clearing this up for us all
Yes! I used to pay all my bills ahead. I sat down with a financial lady at church and she told me some things I didn’t want to hear. Basically if I can’t budget my normal bills On my month to month income I would hurt myself paying bills with tax money.
How about adjust your W-4 with your employer so that money comes to you in your paycheck each week? Why would anyone give an interest free loan to the government when they could use that money to help fund their 401k or Roth IRA?
I use to work for one of the top insurance companies and sell Whole Life and Term as well. And this video nailed it! I would receive 100% commissions for Whole Life, and almost nothing for Term. This lead to several unethical practices of the majority of people pushing only Whole Life even when that was not the best Financial advice for the customer. I quit after 6 months because of these unethical practices. The best thing you can do is talk with Financial Advisors who do NOT receive commissions, but work only on a hourly rate.
My wife and I just did term until our house is paid off incase one of us died and had to take care of the kids we wanted to be financially secure. Took the extra money and throw it in investments every month instead, no need for whole life, once kids are old enough and homes are paid off its no longer needed really.
I got convinced to sign up for whole life when I was like 20 years old. The agent did not mention that a portion of my monthly payment was not going into the investment aspect, but rather to fees. He made it sound like the entire payment was going towards an investment account. Sure, ignorant of me to think that, but he made it sound like it was a no-lose deal, so I bought it. Cancelled a year later when I saw my first annual summary and how much was going to fees.
David Tran this is a foolish cancel depending on the company. Whole life insurance is like owning a house you pay the mortgage/fees upfront and you end up with liquid asset in the end. With New York Life for instance you pay fees for about four years coming from your premium and once that clears it goes towards the cash value and death benefit growth. Basically you bought a house at full price and then sold it at a third of the price a year later. Not smart
Travis Nelson i think the agent must have done a poor job explaining that. But the investment piece is there. It’s a guaranteed growth and it should have been apparent in the illustration that the CV would take a couple years to accumulate.
This video would have helped me 2 years ago before I got a pushy "financial planner" that practically forced whole life insurance on me. After a lot of work I managed to cancel it. Hopefully this video can help other people make more informed decisions than past me.
Wow, this is amazing! Thank you so much. You guys rock. I was very tempted to get whole life insurance when I sat down with a financial advisor. I thought about through the whole (no pun intended) process and thought to myself that I could just use the extra money that I'm saving with my current term life insurance policy and just dump it in a mutual fund. Now, thanks to you guys, it looks like I made the right decision. Thank you!!
5:34 I have one small question about these numbers. The final value of their policies should neither of them die is as shown in this timestamp. However, Tia's policy never expires so that death benefit of $500,000 is guaranteed to be paid as a result. Hence, if say both of the sisters die at aged 70, then wouldn't the $500,000 death benefit payout bump Tia's life insurance value to $774,077 vs Tamera's $619,780, making the whole life policy quite worth it for their dependents or descendants?
I could be wrong, but I believe the cash value is given to the insurance company upon your death. Your beneficial will still receive the entire death benefit though, the 500,000
Can you make a part 2 that goes into borrowing from this Whole Life Insurance rather than a normal bank? Say they both take the same loans out that are the average loans that people take. And then include the age of average death to see how the return on the $500,000 fits in since 1 expires. Maybe even start from age 30 and go to 80ish. And also show a chart of when investment in 1 overtakes the other (if at all)? That would be awesome.
Borrowing money from yourself and paying interest is never a good idea. Any money borrowed plus interest is taken off the face amount in the event of a payout of the face amount.
I’ve been a Dave Ramsey follower for eight years and am now completely debt free including my home. I like your videos. They explain both sides to each topic. Keep it up.
I made a call to Dave Ramsey about this. The video is called Aunt and Uncle $5,000,000 mistake. I couldnt talk my aunt and uncle out of it, but showing a video of Dave Ramsey talking to me about it sure did. One thing you forgot that I think is important is people with whole life think their dependents will receive the cash value along with the policy. Thats false, the insurance keeps the cash value, they only get the policy.
I've been looking for life insurance for myself recently and talked to an agent who was adamant about whole life and said she even had a whole life policy herself. I could tell it was a total sales pitch but decided to hear her out, and it was basically everything that was stated in this video - premium never changes, you'll be covered your ENTIRE life, dividends.... But I'm glad I did my own research beforehand, because when I reinvest the difference, I know it'll be worth more than the whole life policy in the end, AND I feel like I'm on track for a retirement savings so I don't have to depend on a whole life insurance policy. Great video!
I am a licensed financial advisor and I don’t have a whole life policy on myself nor would I ever recommend this to a client. If an agent/advisor offers you a whole life policy, run the other way.
You wouldn't recommend this to a client because you don't understand the value of building capital, you don't think long-term, and you have faith in markets that are heavily manipulated and prone to crashing, as well as a currency (the US dollar) whose value is being inflated away at a record pace. Maybe if you took the time to do any research at all on whole life, you would have a different perspective, instead of dismissing it out of hand.
@@theAppleWizz You clearly have no idea how cash value life insurance works. You shouldn't speak from ignorance. Also, if you think that the market and real estate will always go up, then you don't understand why that is happening or why it is unsustainable. I suggest you educate yourself before making these ridiculous claims.
@@moriendus bro this a whole video on why whole life is a stupid idea. This is why people like Warren Buffett buys out gullible people at 80 90. If you can’t handle a 30% market drop just say that but that does not mean the cash value is anything more than just a marketing ploy. Just so you know the insurance company has been investing your money and making 10x what you will ever get.
@@theAppleWizz This video has factually incorrect information and therefore draws invalid conclusions from that bad info. It also doesn't address how someone can actually use the cash value in the policy. I know that the cash value isn't a "marketing ploy" because I have cash value and have financed things in my life with it. I can tell you don't understand whole life insurance because you think the insurance company is "making money off of me" and you fail to understand that a MUTUAL life insurance company is owned by the policyholders. If the insurance company makes money, then I make money as an owner of the company. This is what dividends in life insurance are. As I said, you need to do actual research on the subject instead of listening to the fake gurus who made this video because they either lied or just didn't know what they were talking about as they just made blatant factual errors.
@@heinaye3594 Hein Aye we bought it for my mom and me when I was very young. It was a cash value whole life insurance. Turns out the premium was very much higher for me as well as my mom. If I would have taken the term insurance then my coverage would have been very high as compared to the coverage whole life insurance provided. To my knowledge, plans we were offered were all the ones which would give you the money back with some interest over the years (cash value) and the salesperson told us that it was an investment and we would get back high return and we should buy it because of money that we will be returned was way higher.
@@dhavalchheda1626 ahhh gotcha. Sounds like it was a dishonest insurance salesperson. In general though, you can lock in a cheap premium for whole life when you're young and you can potentially stop paying premiums in your 30's or 40's with paid up premiums.
True. With an MLM, look at how the money is made. If it's made by selling products, you might be okay. If the real money is made by getting people to sign up and pay membership fees, training, or buy large amounts of inventory up front, then it's likely a racket.
As a CFP(R) professional myself, I would agree with most of this video FOR THE INTENDED AUDIENCE otherwise there are a few problems. I don't like that this demonizes what should be a healthy part of some people's financial lives. Also a mark was severely missed with the investment returns comparison - with one being after tax and the other before, also an "average return of 7%" can mean so many different things in application when considering sequence of returns. Insurance sales really can be sleazy but when you have a good CFP(R) guiding you it can be 180° difference and be the absolute best thing for the person's scenario. That's my two cents. Lots of respect for Philip and Julia
Hey Brigham -- thanks for the respectful approach and your thoughts. As a CFP myself (not bothering with the trademark, lol), I don't think you're right about that. Assuming you have ANY gains in your WL above basis, the gains are taxed in both. Worth noting, a DB would be tax-free with the WL, but then your cash value vanishes -- poof! A huge problem w/ WL as an investment we didn't even touch on. 7% is a pretty safe long-term growth assumption for someone in their 30's investing for decades down the road, don't you agree? See you in the comments soon! -- P
Back in time, when they offered me this kind of insurance, I kindly refused because I didn't trust a legal entity to own my money for such a long time... probably wrong reason, but definitely right choice :) Thanks Two Cents, I just stumbled upon your channel and I love it!
I never really understood life insurance before. The way Dave Ramsey explains life insurance and what it's supposed to be for helped me grasp the concept
@@astroman30 not only that, the rising cost of insurance eats into your cash values. The speculative illustrations that they use to sell UL are misleading, you need IN-FORCE illustrations to see just how bad the policy truly looks over time
Awesome Keep it going! The whole life insurance idea is to hedge against any debt recurring especially in your mortgaged property. It is rendered useless if you are debt free! Heck if I were to protect my family, I'd rather invest in a medical policy with the insurance company!
@@littlegeo1 simply put a protection against your house debt. If anytime that your life is gone, the debt will be passed down to the next person to payoff the debt. That term life is a partial protection to payoff that debt in cases of anything happen to your life.
But term and invest the difference can and does work for people. One thing I’ve noticed in my short career, is that my younger clients all say whole life is terrible and they would rather buy term. And then the older clients will say they regret buying term and wish they bought more whole life lol. That’s not to say whole life is the only or best insurance to buy, but it is an interesting observation to think about. I guess it just proves that one size does not fit all.
I had a couple of friends who had been trying to sell me VUL. I think they believe in the product (and yeah commissions too) because in order to become an agent, they had to have one themselves. I I have to decline over and over because I don't take advice from people with conflicts of interest. If financial gurus with nothing to gain says term and invest the rest, then yeah, that is what I am going to do should I have a dependent in the future.
Becoming a financial advisor in the next few weeks here. Michigan. I definitely make sure to do my research on term life insurance. I love this and it motivates me to not only learn but make sure I’m doing what’s best for my clients. The money will come if I’m putting their needs first.
Liscensed financial advisor and insurance agent here. You're onto something with the commission bit, like a lot. But I would also point to policies for young people and children. The premiums are often inexpensive the younger you are. That's why I would have loved to have heard a bit on the insidious side of "grow up" policies for small children/babies. Personally I think whole life can be a viable option for retirement in the right set of circumstances for the right person under the right balance of premiums to payout. But undercutting that, usually it's not.
Love your channel 2cents. I am glad there is at least one other pro-whole life insurance policy person here. I got a whole life policy mainly because of the protection if gives you from creditors. I work a job where there is a decent chance I am going to get sued one of these days. Earning 7% on zero dollars = zero dollars at the end of the day.
Jedidiah Young for the right person whole life is a good option, typically the younger you are the more time you have to pay into it, when I worked with it we never treated it as an investment, more so as a savings plan. People get fussy with slow growth when it can be a stable asset that takes a long time to grow.
@@danielshen5349 it has to be for the right combination of cost/reward. Term life as a strategy means you might be rewriting policies frequently (once every 10 yrs). Cash value is not the main selling point it's a secondary strategy. The main thing I see is locking in a good rate and helping people get set with their financial future. It's not a silver bullet but it's a good tool.
Yes it is. I have designed children policies that often are difficult to keep from MEC’ing just because the returns are so high early and cash value accumulation is also high. I like to always illustrate the ACTUAL rate of return, and when designed properly you get high 4% low 5% close to MECing. A 1000/mo (150k total contribution) 15pay starting age 1 gets 2.5mil in retirement at age 65. If they wait another 15 years at age 80 they will have 4.5 mil. At this point it makes more sense to have annual cash value surrender/loan of about 100-125k/year (65 to 70), !tax free! which is not a bad retirement, even accounting for inflation. It is in fact several times more than what you’d get from a similar contribution from Social Security. The highest return policies are 5-pay but it also requires a lot of free cash, this is why the wealthy park some their money on these for their children. But again it’s life insurance with living benefits. Not a replacement for investments.
@@MasterFallenHero It also largely depends on the company offering the product. I was surprised at the average return of 2%. Mutual companies pay more into the cash value. I also think its not made to be compared to the market. It's a lower return with less risk. I think it's safe to say that with an expected higher return, you can expect a higher risk. They should have compared this to a CD or High Yield Savings account
I have objectively studied the numbers and have tried to explain to so many people that whole life is not the way to go however I am left with a lot of frustration :(. Even with videos like this, people make their own choices with how they spend their money
When I went to invest my first ever savings of around 2000$ I was sold a ULIP plan which had a lock in period and it was 2000 per annum for 5 years!!!! I was naive with no financial education!!! What you’re doing is very important and I genuinely thank you for it
great advice guys, put all your money in stocks, live through volatile years, lose money in retirement in the down years - clearly you don't understand the value of having 'some' money in whole life - you already own bonds, why not improve on that return?
I’ve been working in the insurance industry for several years and started with a life insurance company. What I find shameful is “experts” using their personal opinions to sway people one way or the other. This was not an objective view. It was merely another opinion that as usual fell short of the full picture. Both term and whole life insurance serve their purpose depending on the circumstances. The reality is not everyone can afford to buy term and actually invest the difference. The other issue I find ridiculous is only acting as if there’s only the options of term and whole life insurance. There are multiple types of term insurance as well as permanent insurance that consumers should be educated about. In the end, a decision should be made based on the circumstances including but not limited to affordability, age, health, family situation (do you have small children?) assets, liabilities, and final expenses. I often recommend a combination of both depending on these variables. Bottom line, speak with someone who can offer more than opinions based on their own views and experiences. Find a trusted advisor who’s has the ability to understand you personal circumstances and advise accordingly with your best interest in mind.
So a new advisor myself in the insurance industry, my question to you is this, what about persons who are not investing savvy? There are very many persons who would watch these figures, agree its a scam, NOT invest in stocks, save in a bank and withdraw when non essentials go on sale and never allow their monies to grow only to reach a stage where there is absolutely nothing to fall back on. And if I sound like the typical advisor, by all means call me out, it's how I grow to better assist persons with their financial plan, using the tools in equipped with, and not just believe what I've been trained to and currently studying. Also, as a long time follower before getting into this industry, I always wanted this topic to come from you guys so it would be nice if you touched on endowments and annuities as well. What are your thoughts then on medical and health insurance? Would appreciate your research :) And as a response to the horrible experience below, not all of us are greedy, and if this person was not tailoring to your needs then yeah, good call backing off. But there are honest persons out there. As with any commission based sales careers, you'll get persons who do it solely for their own interest and others who actually try to meet the specific needs inspite of the commissions. I've heard persons selling perfumes that will get you a jobs, so... Yeah.
I dont think it's wrong to pay someone else to help you if someone isn't "discipline", but i think the problem is that people aren't equiped and informed to make good financial decisions. Typically insurance agents aren't clear about these, which make it more difficult. If you take the scenario in the video, at the end of 30 years there's a difference of over $300k. That's roughly $10k a year. This might over simplify it, but would you rather pay me $10k a year for thirty years, or get help/pay someone a (hopefully reasonable one time) fee to get you setup with an brokerage account and auto invest into index funds. This is a set it and forget it option that shouldn't take more than half a day. Is the value of these packaged insurance/investing solutions worth it? For some, yes, others, maybe not... but at least people can make clearer financial decisions for themselves. Also, i dont blame insurance agents and Financial Advisors on these type of things, it's not their job to teach people on how to make good financial decisions. I believe it is for people to take responsibility on equipping and educating themselves, that's why channels like this one get my thumbs up!
I’m an insurance agent and this is the kind of video that some of my prospects run across before they get to me. First of all let me set some things straight. There are sleazy scumbag insurance agents that are trying to sell anything they can no matter how good or bad that particular product is for the client they are selling. The that happens normally is because the agent is new, incompetent , or just a flat out lying curr dog. They are selling what ever makes them the most commission. Those guys/gales don’t generally last more than a few months to a year. These are the agents that give so many of us a bad name. I care about the long term effect on my clients. I have written policies on people when they retire and now 20 years later I’m writing policies on their children who are retiring. That doesn’t happen when you lie or screw over your clients. This is the one thing that drives me crazy about people in the video and Dave Ramsey to whom has been mentioned many times in the comments. Every bit of the statements in this video are absolute facts. This is great if people are purchasing life insurance at a young age when they are healthy and middle class. What about the scenario these two and “Dave Ramsey “ are not considering. There is a large segment of the population that buys the term and spends the rest. They spend it on cars, entertainment, gambling, alcohol, drugs, and many other wasteful no return on their money items. Then they are approaching 65 or they are on disability and haven’t saved a dime. Now they are living on a very small amount of income. If they die they don’t want to leave that burden to their family. Then they call someone like me and they’ve listened to “Dave Ramsey” or these guys in this video and they want to buy term insurance. They don’t have a lot of discretionary money. They don’t own a home. They live pay check to pay check, but yet they want to leave their children $100,000 or more when they die. Then I have to give them a reality check. They smoke like a train and they are 120lbs overweight. They take 15 medications one quarter of which are narcotics and they expect $100,000 of coverage for $50.00 a month. I spend more time bringing these folks back to reality then actually selling them a small whole life policy. Which just happens to be the very best product for that person. Term life, universal life, variable life, and the dreadful whole life are all great products, but only when sold in the right scenario. The information in this video is accurate, Dave Ramsey is correct, but they are considering all aspects of our society. There are just certain segments of the population that are not going to prepare for the future very well. When they get to that place where their earning power has diminished, their health has deteriorated, but they still need to prepare so they don’t leave that burden on their family. I sell all kinds of insurance heavily leaning on Life Insurance, but I sell the right product to the right client at the right time. People see video’s like this or listen to “Dave Ramsey” and they think if they buy Whole Life they are getting screwed over. I’ll tell you this, I’ve never once had a beneficiary upset with me because I sold their family member a small whole life policy. They were just glad they had something rather then depending on a chicken dinner or gofundme page to take care of those final expenses. Also, anyone that sells whole life insurance or any life insurance as an investment is doing it wrong. P.S. The reason Dave Ramsey says whole life is a terrible thing to buy is because in his early days before he was the big “Dave Ramsey” he world for A.L.Williams pedaling policies. A.L.Williams now Primemerica preaches to its agents and its clients “ Buy Term and Invest the Rest! ‘ that’s where his idea comes from, but it’s very short sided and not very well thought out. Don’t get me wrong Dave Ramsey is a smart guy, but on this one he’s not taking into consideration 80% of Americans. 80% of Americans spend more than they bring home everyday and are kicking that can down the road. Just my two cents. 20 years selling all kinds of insurance. I’ll tell you the truth even when sometimes it’s gonna sting a bit. You’ll be better off for it and your family will be damn happy I healed up that mirror and showed them their reflection and they saw who they really were. God Bless has
I've been wrestling with this for the past month. I've had a whole life policy through Northwestern Mutual for the last four years, and this video and conversations with friends have made me start to rethink it. I met with my financial adviser from NWM earlier this week to talk through it. He said of course he'd do whatever I said regarding the policy, but he wanted to talk about why I'm rethinking it. His main argument in favor is that it's a shelter from bear markets during retirement. He acknowledged that it doesn't grow as efficiently as an index fund or something similar, but he said the savings from pulling money from the cash value instead of a market-related fund in retirement during a bear market can be huge. He showed some graphs and sent me some materials to read over. It's all pretty overwhelming for me. I'm digging in, but I don't feel like I have the background to make the decision. Is there any validity to that argument? I don't have an dependents, so the insurance component doesn't mean much for me. I've already maxed out my IRA and am putting money in a brokerage account, so this is more of an extra thing he recommends as protection during a recession. Any advice on how to validate the accuracy of the bear market shelter stuff and how to determine if that's worthwhile?
@@NateGreensides Thanks for the input! From what I understand from what my FA told me and what the Whole Life paperwork says, after age 65 I quit paying the premium. From there there's a guaranteed cash value and an estimated cash value based on estimated dividends (which my FA says is slightly low-balled). The insurance payout includes a base amount plus cash value, so what gets paid to my beneficiary includes a guaranteed amount plus part of my remaining cash value, as I understand it. My FA mentioned annuities and other options that work for bear market protection as well, but he recommended the whole life policy because of the dividends and the tax benefits. He also said that this policy is different from a lot of the whole life policies out there. He said that most of them are crap, but this type of policy is the OG whole life, not one of the newer models. I don't remember what terms he used specifically. What he said made sense to me, but I'm still thinking about getting a second opinion from a fee-only FA.
@@NateGreensides Thanks for the insight. I do not live in CA, but this is helpful for informing my conversations with my FA. According to my paperwork, the premium will never go up. I also have a document that shows what the policy looks like each year. The insurance payout column starts at the base amount and increases as the cash value increases. That's what my FA meant by the two being combined. I'll ask for clarification, though. The annual premium column stays the same until age 65, when it goes to 0. There are two cash surrender value columns, one that is guaranteed and another that adds in potential dividends. The guaranteed column is always slightly higher than the total premium paid column, but it continues to increase even when the premium stops at age 65. The cash value column with potential dividends is significantly higher (almost double) the guaranteed.
I've been putting around 500 a month for over 5 years now. With covid19 my unemployment was stuck and I had the plan pay for itself for a month. I've taken out quite a few loans on the policy and it's been quite helpful. I now have a son and it's good to know that even if I never pay back the loan the death benefit still pays a large sum minus the loan amount. Buying into stocks fluctuates a lot and buying these days when the market is up (falsely imo) is quite risky. Overall I'm happy that I'm doing the policy and also have other investments that have higher risk but I can count on the policy.
I can’t speak to the individual integrity of your FA, but he has a personal relationship with you, knows your needs, and can be held accountable for his advice. Those other sources can’t. I recommend sticking with your FA if he’s trustworthy and gets good results.
I had my financial advisor suggest a whole life insurance policy, when I was a teenager. I was setting up an IRA with my measly minimum wage earnings from my first job at Dominos Pizza at 14. And my local financial advisor, after setting up my IRA, suggested life insurance, I said, "Bro, I'm a teenager, why do I need life insurance?!" He explained it builds a cash value and because I was so young it would be very inexpensive. So here I am at almost age 40, and I'm paying less than $30 a month for my life insurance policy, and will be for the rest of my life. I am very pleased with the performance of the cash value, and extremely happy that my whole life insurance policy is cheaper than what I could buy a crappy term policy for at my age now.
I've seen companies show that the death benefit increases along with the cash value. And what about the direct recognition vs the indirect recognition when it comes to borrowing from a policy?
If you've been in the industry for a decade and you can't refute misinformation like this, then quit. That it's on PBS, is shocking. They're just simply not correct in a number of ways, it just not this simple, if it was then everyone would be the same, all companies would be the same, all products would be the same, there would be no need for the heavy regulation that insurance companies and the agents that work for them MUST adhere to, at least I'm Canada. The information is at best incomplete, definitely misleading, but it suits a narrative and fear based/bias based "newsyish" faux journalists seem to get more views. Of course they make nothing if you don't watch.
@@sjonas8777 I actually work with our legal team on compliance and regulations. You live in Canada....much, much different. Before you go insulting people you should know the subject matter at hand. But assholes like you feel the need to pipe up on EVERYTHING you disagree with on the internet. I would normally wish anyone well, but you can fly a fucking kite. Insurance is very complex, and I suppose it is unfair to expect someone of your likes to understand it. But this was a very comprehensive presentation meant to give people the basic principles of the different kinds of policies so they can be a bit more informed on their own. Agents are in no way required to explain the differences - they just get to earn the commission. Enjoy your miserable life trolling good people on the internet!
@@lizswank7239 you say I'm insulting, yet I never swore nor did I put people down or call them "trolls", rarely do I comment and certainly even more rarely in a negative way. If you are indeed in compliance then you would realize, basically am saying exactly what you said that insurance is a complicated business, and that this simple video does not do it justice. You will think whatever you think, and you're overreacting continues to make me glad to be Canadian, if you ever come up, I will treat you and your spouse to dinner then ,I will meet the real you and have good conversation about things we can agree on, there is likely many more of those than you would believe.
I was in the mortgage business for awhile and 98% of the time, reverse mortgages do NOT make sense for the client. There are far better ways to utilize debt if you absolutely have to.
Thank you thank you thank you for this video. I'm a consumer bankruptcy attorney and I have so many clients who have been hard-sold super expensive whole life insurance policies that they really don't need. One thing that surprises a lot of my clients is that life insurance is not meant to insure against your death, it insures against lost income relied upon by dependents in the event of your death. That's important because a lot of people without dependants don't actually need any life insurance. It tends to blow people's minds when I tell them this. Thanks for spreading financial wisdom to the masses.
🤣 bankruptcy attorney??? You mean you charge a fee to people who already can't afford any more??? Are you 4REEL???? Hello again Izzy, I sell life insurance and when people are criticality injured, get chronic ailments or are terminally ill and in need of a check I give them one through life insurance. Not your scam that just slaps on another fee for them. Ouch you're not ready for the heat 🔥
@@logged67 I offer people debt relief under the US Bankruptcy Code approved by Congress and overseen by judges appointed by the president of the United States. They typically pay me about $2000.00 to wipe out thousands and thousands of dollars of debt. They don't need to be as smart as life insurance salespeople to understand that it's a good deal. I don't know if I can take the heat, but I know that you haven't turned on the oven.
As part of my union benefits at work a small insurance policy of $5,000 was included. When I filled out the information for that I was forced to have a meeting with an agent to get my policy set up. The whole time she was trying to sell me whole life insurance. I have no dependents and no one who is reliant upon my income if I passed away suddenly. Whole life insurance for me isn't a good fit, and likely will never be since my only dependents are generally going to be of the canine variety . The agent kept trying to push it to cover funeral costs. I watch Ask A Mortician, and know I could easily do a direct cremation for less than the $40,000 she was trying to claim I needed, the $5,000 should cover that just fine. As someone in my 20's being sold a policy for my possible early death trying to sell it as a big ticket party type expense just felt annoying and sleazy.
When exiting the military. We were required to take classes about applying for jobs etc. One of the “teachers” literally told us to get Whole Life Insurance because: “you’ll get the benefit at age 72, with term you get nothing at age 72” Luckily I saw the difference in premiums and dodged that bullet
Nice earrings! By the way, what happens if I don't get any life insurance and stick to just index funds until old age? My dependents can use the value of those funds when I'm dead to cover their needs, anyway, right, so there's no point for insurance?
Thanks! I take my earring game seriously. And you're correct. Your family can do whatever they want with your estate. But life insurance can basically tide you over until the time comes where your built-up wealth means you're self-insured and your dependents will be fine. We're personally not there yet because we're young, and so since we have a kid, we have term life for the next 30 years, by which time we probably won't need life insurance anymore.
SamianHQuazi The point of insurance is risk management. If you live to old age, then yes, your plan will work. If you don’t live long enough for your investments to grow, then your dependents are in a tough spot if you don’t have any life insurance.
@@TwoCentsPBS i like you guys stuff but this one is very one sided and not good enough research. I'm a cfp and i have whole life... Wait for it.... For the investment, not life insurance. Not for everyone but even if i don't make commission, which i don't now. I still wouldn't single out whole life only cuz it's whole life.
One thing I guess you guys are missing that Tia still has death benefit of $500k against Tiamera who has nothing as a death benefit to protect the beneficiaries. So basically Tia still has approx $774k while Tiamera has approx $650k. If Tiamera decided to continue with new Term policy at the age of 70, she might need to pay lefty monthly premium. Also, for me and my wife, we both pay $1800 annual whole life premium and we are 29 years old. We would need to pay it until next 20 years which would be total $36000 each and we are getting $41000 cash value at that time (death benefit is always there). Cash value would increase as the years pass on and beneficiaries are protected by death benefit. What do you think about this scenario and did we make good choice to go with whole life insurance against the term life insurance? Amazing video and keep it up!
I cannot tell if this was simply done by people who don't understand Whole Life returns, or simply done in bad faith. I'm going to assume the former. The average whole life return of 2% factors in companies with poor returns or do not give dividends at all, and does not represent the best companies out there. Imagine if you compared a Tesla Model X to a Fiat Panda and then took the average and claimed that ALL cars suck. That's not "running numbers" - that's nonsense. That's proof there's some terrible whole life products out there, not proof that they're all terrible. Your big time places like Mass Mutual, New York Life, Northwestern Mutual, etc, have averaged a dividend in the neighborhood of 6.5% for their entire lifetime. Additionally, most of these places have disability waivers that will make your payments if you're disabled. So imagine if you got disabled and can't work anymore. Is someone going to keep paying into your index fund, and give you an additional 6.5% (on average) every year, tax free? No? Additionally, Wade Pfau ran the numbers. He's a PhD in Econ from Princeton and studies this for a living. When using the cash value as a buffer asset, there can be a really important place in a retirement portfolio that significantly changed median retirement outcomes. www.onefpa.org/journal/Pages/FEB19-Investigating-the-Role-of-Whole-Life-Insurance-in-a-Lifetime-Financial-Plan.aspx
As much as I want to believe the former, it’s probably the latter. They def throw off that “woke” millennial vibe, riding the bull market wave. I doubt they’ll be doing this 20 years from now. Heck, over the last 20 years, we’ve seen a CAGR on the s&p 500 of about 6.5% before taxes and investment fees. So this charade of 7% or 8% from the markets is going to end. There’s no research showing we know what the future returns will be.
@@teamsmizmo5200 Right. Even if we assume 8%, having money grow at 6.5% that cannot decrease in a down market is a huge advantage in a portfolio, because you can use the cash value to live off of, to prevent selling your securities in a loss. By allowing them to recover, you don't have to worry nearly as much about portfolio depletion in the long term.
@@Marcustrismegistus That still doesn't solve the issue. The premiums will be higher, the cost of insurance goes up annually until the cost of insurance is exceeds the level premium. Then the Automatic Premium Loan Rider kicks in, eat all the cash value and the policy lapses even before the client can blink...
@@SpasticRocks may be true if it’s level cash value meaning the cash value can never exceed the life ins amt. if it’s increasing cash the life insurance grows bc the cash value exceeds the amt your covered for. I own a couple of indexed life and they’re pretty much on track to what illustrated at 8%. These policies can later be switched to level death benefit when you take out money for retirement or what ever you need lowering the cost of insurance.
@@Marcustrismegistus Question is how much is the monthly premium? I'm sure the cost is 6-8 times of term. Buy Term and Investing the difference yourself would yield better, if not more ideal results. You may be getting 8% returns, however how much of that is eaten up in fees? For the average person in the US, they don't have insane estate planning needs, so Cash Value policies make no sense for them. Most of the information I'm sharing is cause I'm a licensed agent and there's plenty of books that share the same message. I'm not bashing against the product. It has its uses for certain people, but in the interest of most people, selling them a whole life policy that they don't understand and overpay for is not the right thing to do. This is why most people don't trust insurance agents or companies!
@@SpasticRocks my premium is pretty low since I got them when I was around 25. They used to say big term and invest the difference and before in the 80’s and early 90’s sure. You can pretty much use a dart throw it on the wall and what ever stock it landed on you can make 12-15 returns. The fee part maybe true on whole life but not IUL. The total cash value I’m supposed to have by 65 is 4-5 times more than what I invested with cost and fees. If I buy term and invest the difference, let’s say I buy a term rn to cover my exp, wages, kids school etc. I’d prob pay $120 for 1 mil coverage. If I get it now at 34 at a 30 year term. I invest the difference, where am I gonna get 8%. I’m only getting that on the iul bc it has a cap and a floor strategy which I don’t loose money and caped at 15% return. On investment if I make 10% and have it on risky investment the total fees are around 3%. Total return 7%. If I loose 7% the next year, guess what? They still charge me the acct fees, agent fess, etc. -3%+ -7% return = 10% loss. Let’s say I accumulate a measly 1million by retirement. My term expired. If I want to transfer wealth guess how much my premium is going to be? 1,500 a month. Bc as you said yourself? Cost of insurance goes up as mortality goes up. I’m have couple of securities license, life and health in different states. I’m sure you’re very well educated in the subject as am I. I’m a Certified Financial Educator and just have to pass the certification to be a Certified Financial Planner. I’ve been a professional at this for almost a decade.
It’s very simple. Will you need life insurance for your whole life? You shouldn’t! Life insurance is to insure yourself when others depend on you. If you’re the breadwinner and/or your family depends on your income, you should be insured. But do you plan on having others depend on you for the rest of your life? When you retire you probably won’t need life insurance since you should have a retirement fund to take care of you and your spouse. your kids might already be out of the house but if they’re not they too can benefit from your retirement savings.
One financial advisor made the argument to me that with a standard index fund, because of fees at whatnot, you’re real annualized expected interest per year is like 4ish percent over long periods of time. And therefore recommended the insurance policy. I noticed that over the last 30 years, there was a 7.8% annualized average boost in the snp 500 (but this might be higher than it should be because were likely nearing the end of a cycle); how much of this is lost to fees?
Invest in Vanguard and their fees are incredibly low. There is probably somewhere with insanely high fees, but clearly this person was just giving you advice that would help themselves.
I'll need to look into this now! I have a 100k plan with New York life and pay $100 a month. My parents put me on it when I was 18 as a forced savings kind of deal. The thing is they were able to pay my brother's and my college tuition (500k) without taking out loans. They just took out their cash value from their life insurance plans. I was promised after 11 years that my cash value would be greater than my total contributions, which I don't know for sure so I have to check. It seems to look like a glorified savings account with benefits, so it might not be so bad if you treat it as a high interest savings account. Thanks for the info I will definitely look at what my plan truly offers!
I also have a 100k plan through New York and it's a great plan... Your parents were smart and obviously have real experience that contradicts this video
So did you look into that plan? Is your cash value higher than what you paid in? To me it also feels like a high interest savings account. But one that pays out my family when i die tax free. I also have 401k and IRAs, but those will be taxed heavily if I died and they were passed on to my kids. I'm considering a small policy as a tax efficient way to pass on money to my kids.
They could have done the same thing just putting money into a cash account invested in a mutual fund and gotten a term life policy at 20 times cheaper. That is exactly what the video showed happens. Term life is 20 times cheaper then whole life. The investment makes 2% while a S&P 500 index fund will make 7-10% over long term.
@thomasgruver3495 I actually ended it this year. The cash value almost broke even with the premium cost and the additional deposit ($67 prem, $33 addition). After 11 years the cash value was only about 11k and I paid in 13k. If I were to have invested that 100/month in the SnP in the same time frame I would have 22k (real market change). If hypothetically I did get a term life it would be about $30/month for 500k coverage. Investing the $70/month I would have still come out with 16k at the end. Anyways the $100 I'm saving now goes to my investments and savings. I'm only 29 and have no need for life insurance. It only matters if you pocket the difference. If you're not investing it, you may have been better off having the whole life insurance plan. My parents aren't financially savvy, but know the importance of saving money. On their whole life insurance plans they missed out 140k between the both of them if they had term life instead. Honestly they likely wouldn't have invested the extra savings anyway.
@blastman8888 in about 11 years my cash value was only about 11k and I contributed 13k between the prem and the addition. If I got term and invested the difference in the SnP in the same time span 2012-2023 I would have 16k. I didn't even need life insurance at 18, investing the $100/month would have been about 22k now. Anyways I canceled, the insurance agent pushed very hard to have me keep it and tried to get my parents to persuade me. I looked at my parents' accounts, and they missed out on about 140k if they just got a term plan instead.
Sad part of this video is that they left out that Tia has probably around $400-450k of death benefit over the top of the cash value. However, if you buy whole life to have your cash value compete with investments, you are doing it wrong and will be disappointed, which they do address. Lastly, IRR on good WL policies are typically 3-4%. So higher than shown, but do not compare with long term investment returns.
Somewhat accurate. Full disclosure - I've inherited a $100M face-amount of whole life business from my family's practice of over 30 years and I commonly discuss exactly such scenarios that you've provided in your video. Here are some errors/omissions in describing the cash value component of "whole life insurance": 1. There is no explicit COI/rate of return interest on whole life products - unlike a universal life/index universal life policy which has those charges explicitly listed. The guaranteed cash value is equal to the purchased death benefit at age maturity (age 99,100,121 depending on the contract) hence the premium costs are averaged throughout a person's life expectancy. Dividends are only paid as a result of surplus of whatever insurance company is paying them - hence those are not guaranteed either, but that was never explicitly discussed in the video. 2. There is no guarantee in index funds. With Philip being a CFP, I would've expected a bit of a level playing field in discussion of risk - but you can't compare an index fund (albeit over 30 years) to a guaranteed investment (rating contingent) with a non-guaranteed dividend. It would be almost like comparing equities with dividends to AAA bonds - an unfair comparison without considering the risk:reward ratio. If you were to compare a whole life's return to a AA or a AAA bond held for 30 years, that would've been more fair of a comparison. 3. There was no discussion on how loans could work to the advantage of the client. There are quite a lot of caveats for how loans impact policies depending on which carrier you insure with, but generally-speaking, if you were to loan out cash value from your policy, the insurance company would still keep your policy in-force, "collateralizing" your loan amount to your death benefit and continuing to pay your full (or in direct recognition companies) partial dividend. If one were to liquidate their investments, they would be subject to taxes. If one were to borrow against their whole life policy, they would not be subject to taxes. Even if the dividend paid on the loaned portion of the insurance policy were zero, the net cost to loan $100,000 of cash value and let it be deducted from your policy death benefit + loan interest when you passed would still be less than the long-term capital gains. 4. Additional riders on whole life policies such as a waiver of premium, chronic or long-term illness riders, terminal illness rider - all which are not available from an index fund But otherwise, I agree. Most life insurance agents are pretty sleazy, only thinking about their own pockets because they see everyone's financial situation as a nail and they only have a hammer. I personally work in a fiduciary capacity and when organizing a client's financial plan, I will bring up both pros and cons of Whole Life when appropriate and compare it to alternative solutions (such as buying a term product and investing the difference).
This is fire! Thanks for sharing your journey Would it be ok if you can give some advice to someone who wants to get a whole life and use it to its maximum potential?? Thanks in advance
@@Picwajzzz I would connect up with someone in your area - and like what some of the video gets right, always, find someone who acts in a fiduciary capacity. Meaning - make them show you their ADV disclosure...sign a financial planning agreement with them so they are bound by that fiduciary capacity. Having a CFP means nothing if there is no agreement in place...it just means that have the capability of acting in that capacity. Best of luck to you John
@@stupidaznmunkey Thanks for replying. Actually i am in search of people who are nearby with policies so i could see/hear their experience but its been unsuccessful so far. That's why I reached out to you. Honestly half of the wording you said, I'm not familiar with. Ill do some more research then. Thanks
The commission for the agent can be greatly reduced if set up properly, but that requires the purchaser to be very educated on how it works. Infinite banking is as good as it sounds - so long as you do your homework.
@Exoplanet Research Yep. The death benefit is tax-free, while estate taxes can run up to 40 percent. Once the estate tax provisions of the TCJA sunset, we're back down to a much lower exemption. Ouch.
The other thing these guys totally miss is how these policies are actually constructed in the field. For example, hardly any 20 something is ever going to be sold a 500,000 pure whole life policy. It's going to be something more like a $50,000 permanent death benefit and a $450,000 term rider, which allows the policy owner to put a lot more premium in, up to the MEC limit, to build cash value much faster. After x number of years, the term goes away (as does the cost of continuing that term insurance) but the cash value, including a bunch of dividends paid along the way (if it's a participating policy) will support a much higher permanent death benefit than the 50,000... and continuing to earn dividends tax free, which can be withdrawn tax free if you no longer need the life insurance. That and you can exchange it for a lifetime income annuity if you like without having to pay capital gains tax (or ...if it's in an IRA, ordinary income tax). I don't think whole life policies are for everybody. They're frequently oversold. But for people in high tax brackets, with illiquid estates, estate tax concerns, probate concerns,or asset protection concerns, they can be terrific. These are people a lot of 20-something and 30-something financial reporters who never sign the front of a paycheck don't understand, and aren't writing for.
@@jasonvansteenwyk5984 I'm sure the no one watching this video will have estate tax problem tho lol. Very very few do. Even if you're rich enough. Your death benefit is in your gross estate so it'll get taxed at 40 percent unless you have ILIT...
@@ksmoothy28 Expand your thinking. People watching this video are unlikely to have an estate tax problem NOW. However, they may well have estate tax concerns (and asset protection concerns) 25, 30, 40, 50 years from now. After their term insurance has expired, and they have a successful business, a comfortable home, maybe some other rental properties, accumulated stock, etc. And who knows what the estate tax exemption will be then... especially the way younger voters are breaking for Sanders. If that trend continues, we may well have a very low estate tax exemption at some point in the future. Meanwhile, yes, your death benefit would be in your gross estate IF you own the policy in your own name. But people with estate tax concerns are going to use ILITs. Meanwhile, trusts can't own IRAs. So you can't move any wealth in your IRAs, etc. out of your estate. It's trapped there. Don't get me wrong... I'm a YUUUUUUGE fan of term... especially with shorter terms, like 1 year and 5 years. (People selling 10-20 year term on a BTID concept don't quite understand their own system, or they're trying to goose their commissions, too). I'm also a HUUUUUGE fan of index investing. But people in high tax brackets, with successful businesses, significant real estate, real asset-protection concerns, etc. are playing a different ballgame than W-2 folks working jobs... even if some of those jobs pay pretty well. It's a different mindset. A lot of online content and financial journalism doesn't get that. What's good advice for a schoolteacher isn't going to be great for the guy who owns a chain of tire shops, a general contracting company, or a good-sized farm, and vice versa.
So I've been considering Whole Life insurance but not for the investment opportunity, but for the Infinite Banking Opportunity (I invest in other ways). So I really wished you could have elaborated more on whether that aspect of it was a good idea. Would taking out a loan against your life insurance to buy things like cars or other large ticket items be a better source than a standard loan and are there any downsides to it. For me, the whole life wouldn't be an "investment" arm so much as just life insurance WITH a savings account attached. If I'm already putting $500 in savings a month (using your example) wouldn't it be worthwhile to use a whole life insurance as a savings arm instead of an investment arm?
olandir No. If the savings is your money, why would you have to take it as a loan? Buy cheap Term and invest the difference in a Roth IRA. Also with Whole Life there is only one pay out.... either the death benefit and the insurance company keeps the cash or you get the cash which likely has about a 2% return and the policy is canceled. If you borrow from it you have to pay it back with interest either way. If the idea of taking money out of your own savings account and it being treated as a loan with interest seems stupid, Whole Life is exactly that.
its not worth it at all. invest in realestate if you want take a shot at the silverbullet. you can take out loans based on the value of your real assets.
Holy....that is information I did not know. I thought I might get some money after my tern life policy is done but no. Thank goodness I'm learning it now. It just pisses me off because with a little self-control I could have put that money in a savings account and got a better return. I'm also pissed because a few years ago I called to stop or at leased reduce my policy and they said no, to both. Thanks.
THANK YOU THANK YOU THANK YOU for posting this. I have had to do the math for my friends who get tricked into stupid MLM's that sell a new product called an Indexed Universal Life Policy. They do a bait and switch when trying to sell it to you they keep talking about the returns and the lack of risk but they never ever tell you about the commissions and the ballooning price of the policy after a certain time that eats up your cash value. (your video should have mentioned that after 30 years or so the cash value is used to pay off the life insurance premiums a HUGE no no). I can't believe these are still legal or widely pushed
As a new (started last month) financial representative for a full service brokerage, I've ran into the term vs whole debate a lot. I get paid a commission on the policies I sell as well so I am incentivized to sell more expensive policies. I also have fiduciary responsibility and a moral prerogative to treat my clients the way I would want to be treated. I would take less money if it helped my client out more. Which type of client would you recommend would benefit from whole life. I vow to not scam my clients and to treat them ethically and I want to balance opinions from every side.
You didn't mention the worst thing about the whole life policy that Tia bought. Let's say she dies when she's 69 years old. Her beneficiary receives the $500,000 death benefit as agreed, but the $270,000 investment cash value that she built up in her account is lost. The insurance company gets to keep it. This, in my opinion, is criminal.
@@dakotadak100 Semantics. They're owed whatever the agreement says they're owed. I'm not saying they're violating the terms of the agreement, I'm saying the agreement itself is ridiculous. Tia paid about 10 times (or thereabouts; I don't feel like watching the video again) what she would have paid for a term policy with an equivalent death benefit because she understood that there was some amount of money that's hers as some sort of "investment." That's why she bought it; there's no other reason to buy whole life. But when Tia dies, the "investment" is gone. If everyone understood this, no one would buy whole life.
So if I understood this video correctly, term insurance is like a contingency plan on life until one can build enough wealth to cover funeral expenses + dependent costs? So when term life insurance runs out in 20 or 30 years, you’re not insured anymore?
Yes! But if you aren’t disciplined and actually save you’ll be up a creek. That’s why I have an increasing term. I’m insured all the way until I’m 80 if I want to keep it that long. Just in case I get sick or something and wouldn’t be able to buy more insurance when I need it.
Most insurance companies like Massmutual have required sales goals for whole life insurance to keep your job. So advisors are routinely threatened with termination if we don’t sell enough whole life insurance. To get around the conflict of interest and fiduciary standards whole life insurance companies will lobby politicians. It should be illegal to force whole life insurance sales to keep your investment clients and your practice. Only the general agents who technically own the policies that the advisors sell make the money. It’s a scam buy term invest the difference.
I got talked into this scam and lost 5k. I didn't know anything about investing so I was an easy target. After cancelling it, I Invested in Tesla and made 60k the next year. Not a fair comparison, but there are better investments out there.
Watching this I'm surely glad I went for simple life insurance for €40/month rather than (something like) whole life which in my case was "only" €50/month first year but in 40 years I would end up near the €400/month range (and how would I be able to afford that when in 40 years I'd be pensioner? And no I didn't calculate the price further that was enough for me). But the idea of investing the difference seems like a good choice :)
Term life is the same for the whole term-then it can go up, because the original premiums were based on your risk during that time frame. That's why you select a term that lasts until it is no longer needed to pay off debt or take care of descendants-then you drop it.
Oh my gosh I'm so happy this came up in my recommended. I was at a loss for words as to how to explain this to my husband but. Now I can just be like, "watch this! This! Thisthisthis!"
Please Julia this youtube is very generic and takes nothing about the persons needs wants and desires. Did they mention that over 92% of term policies never get paid out as a claim? If this person was a licensed salesperson they would be fined for calling Life Insurance an investment..Just my two cents. Plan carefully. Something is wrong here. If this is what you are using to make BIG decision for you and your family, your making a big mistake.
The problem is assumption. They assumed that people would actively invest the savings (from not buying whole life insurance and instead buying the cheaper conventional life) that they have on index funds or something. In truth people will just spend the saving on frivolous goods.
Hans Erich Pediapco Yours is the most legit state in the comment section. I’m not a cpa or fa, but after decades of investing in real estate, the ability to borrow from yourself to invest AND use the banks money is big over time. But most will either do like you describe or fund a policy and never take a loan unless it’s for something that loses value.
I really wish my 99-year-old (Navy Fighter Ace war hero) grandfather watched this 60 years ago. He OUTLIVED his WHOLE life insurance policy! He had the worst of all worlds - his premiums continued to rise over 60 years to $10k/month last year and he never read the fine print that the whole life policy expires after 99 years of age. He just wanted to guarantee his family would get 1 Million dollars when he passed...he paid more than 1M in premiums alone (not to mention opportunity cost of ANY other investment over 60 years). We bet on him living another year and let his policy lapse, meaning the policy will have zero payout when he passes. It feels illegal and immoral, but apparently ending whole life policies at 99 was common back in the day because they never expected anyone to live to 100. The honorable companies changed the active policies, and the sleazy ones didn't Keep up the amazing work. You two are the heroes we need but don't deserve!
Dean Achelis I think he had a universal life policy. (Market exposed) You can’t outlive whole life. If you do make it to 100, most policies will mail a check in the amount of the death benefit. You need to do some digging. You may have some money owed to you guys.
Then he didn't have whole life. Whole life endows and you get the entire death benefit at the end if you are still alive, of which you would have to pay tax on any gains over your costs basis. Your grandfather most likely had universal life which isn't the same thing, though many advisors try to call if whole life, but it's not.
