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Inappropriate Whole Life Policy of the Week

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  • The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4389
    Joined: 05/13/2011

    I’ve forgotten to update this for a few days. Here’s this week’s addition:

    Sadly, my husband and I are 2 years into our very large whole life policies with NWM Our premiums over the past two years combined are about $200,000! Does it make sense to cancel the policy now after paying such high premiums.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #38371 Reply
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 5900
    Joined: 01/12/2016

    I’ve forgotten to update this for a few days. Here’s this week’s addition:

    Sadly, my husband and I are 2 years into our very large whole life policies with NWM Our premiums over the past two years combined are about $200,000! Does it make sense to cancel the policy now after paying such high premiums.

    Click to expand…

    OMG!

    NWM is obviously a predatory company, their name comes up again and again. 200k?! Thats outrageous. Is it totally impossible to bring a suit and argue you were definitely not adaquately informed, etc…Just doesnt seem right.

    #38412 Reply
    Avatar artemis 
    Participant
    Status: Physician
    Posts: 534
    Joined: 12/02/2016

    I’ve forgotten to update this for a few days. Here’s this week’s addition:

    Sadly, my husband and I are 2 years into our very large whole life policies with NWM Our premiums over the past two years combined are about $200,000! Does it make sense to cancel the policy now after paying such high premiums.

    Click to expand…

    OUCH!  $100k per year in premiums?!  How can even the scummiest insurance agent justify selling that policy to anyone other than Warren Buffett?

    I just hope the couple in question doesn’t let the Sunk Cost Fallacy trick them into keeping those scummy policies.  Better a $200k loss now than guaranteed financial exsanguination over the course of their future careers.

    #38413 Reply
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 5900
    Joined: 01/12/2016

    True of course, but just terrible overall.

    #38426 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4389
    Joined: 05/13/2011

    Here’s another one:

    Do you have someone that you can recommend that I speak with about
    whether or not to cancel our whole life insurance policy? I was
    reluctant to purchase it when we did at the end of 2006, but my
    husband’s family friend was selling it and my husband thought that it
    was a good way to diversify our investments.

    We are contributing almost $1800 a year total for two policies (a
    $100,00 policy for my husband and a $50,000 policy for me). The cash
    value currently for the two policies is $11,000. So if we cash out
    now, we are $7000 in the hole over the past 10 plus years which kills
    me. Continuing to pay into it, though, seems frustrating as well.

    Does everyone understand yet why this industry pisses me off so much? Agents and proponents come on here and talk about these optimized policies and their benefits, but when I run into docs, this is the crap they own and why. 10 years and a cumulative -30% or so return.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #38429 Reply
    JoeCaponeCHFC JoeCaponeCHFC 
    Participant
    Status: Insurance Agent
    Posts: 26
    Joined: 01/11/2017

    Always remember to check your agent’s FINRA BrokerCheck page.

    https://brokercheck.finra.org/

    If the agent has investment licenses you might just find their profile on BrokerCheck and you might also find disclosures against the rep for inappropriately selling whole life insurance, annuities, and other products to clients. BrokerCheck is essentially a customer complaint service that allows people to have some recourse if something is done wrong.

    In medicine you guys have the state license board. For financial people there is FINRA.

    Such a shame that this post could probably feature 5 inappropriate WL sales per week and still have more that do not get listed. Nice job WhiteCoat!

    Buy term life and invest the difference.

    Joe Capone, ChFC®, LUTCF
    [email protected]
    insuringincome.com
    (781) 285-7231

    Instant Term Life Insurance Quotes - insuringincome.com/instant-life-insurance-quotes
    Physician Disability Insurance Quote Roll - insuringincome.com/quot

    #38438 Reply
    JoeCaponeCHFC JoeCaponeCHFC 
    Participant
    Status: Insurance Agent
    Posts: 26
    Joined: 01/11/2017

    That stinks. Sounds like you tried.

    Well, some of these guys and gals walk around like they are CFA PhD financial gurus. They carry investment licenses and really just look to angle whole life. Hoping that they get themselves tripped up from selling variable annuities inappropriately just like they sell whole life.

    FINRA does care about VAs sales thankfully.

    I have found many reps on BrokerCheck that I know are whole life bleeders that have disclosures for VAs. You see settlements where some are forced to pay back 50k and more! Nuts.

    At least if people can see those disclosures they can maybe steer clear of these folks. Problem is there’s just no way to know – unless people talk about their specific experiences on the web and they name names.

    Joe Capone, ChFC®, LUTCF
    [email protected]
    insuringincome.com
    (781) 285-7231

    Instant Term Life Insurance Quotes - insuringincome.com/instant-life-insurance-quotes
    Physician Disability Insurance Quote Roll - insuringincome.com/quot

    #38445 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4389
    Joined: 05/13/2011

    This one came in by email from a doc actually trying to decide what to do with his UL policy. He’ll listen to any advice you have.

    Here’s my story- What should I do?

    In 1993 when I was starting private practice I was referred to a “financial guy” by some of my older colleagues.I needed Life and disability policies as well as investment advice. I was 33 years old, married with a mortgage and 3 small children.
    After several meetings, he enticed me into purchasing a Universal Life Policy for 2 million dollars from Pacific Life describing it as a retirement tool since I was maxing out my retirement.
    The discussion was that I would pay 20,000/year and eventually use it during retirement.
    After putting in about 150,000 over 10 years or so, my children were starting college and the investments which were in growth stocks had grown considerably., I stopped making payments.
    Over the last 10-15 years, the policy is in place and in fact has increased to 3 million dollars coverage.
    Despite the ongoing coverage and lack of any payment,It still has the same balance of about 150,000 dollars. The investment income still matches the policy withdrawals.
    I am now 61 and all the children are almost self sufficient. Should I reduce the coverage to allow it to last longer and leave some legacy to children and wife or take the money- ? tax implications, and run- perhaps buy a long term care policy
    Have no debt or mortgage but high overhead with a vacation home. Have 3 million in retirement despite sending 3 children to private college, 2 to medical school and one to DPT school with no loans.
    Look forward to recommendations.
    Annonymous MD

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #38476 Reply
    Avatar RadDoc6876 
    Participant
    Status: Physician
    Posts: 80
    Joined: 03/25/2016
    Does everyone understand yet why this industry pisses me off so much?

    Click to expand…

    Maybe write an article called “Whole Life: An Exit Strategy” similar to your Back Door Roth tutorial??  You could lay out steps people can follow to determine if they are indeed locked into a bad deal (probably they always are given the nature of these things but you could go through the calculations) and discuss options for correcting the situation.  One big unknown would be the lawsuit legal remedy which could be a lot of hassle but may be worth looking into.  I think part of this is the buyer’s remorse aspect–personally I could not live with myself knowing I had been suckered into a predatory deal and then allowing that to continue.  I think I would cancel it and take the loss just to be free of it.

    #38479 Reply
    Avatar RadDoc6876 
    Participant
    Status: Physician
    Posts: 80
    Joined: 03/25/2016
    Earnest refinancing bonus
    There are at least two companies (maybe more) that are contacting trainees through the residency/fellowship programs at this institution,

    Click to expand…
    I’ve never been one for industry-sponsored lectures at dinners relating to pharma/products/medical devices, and financial planning dinners feel like they are an extension of the same concept insofar as they are using food to get you to buy-in to using their product(s).

    Click to expand…

    Right–and why are we allowing these companies to identify names of residents/fellows so that they can conduct predatory marketing?  Is it permitted to disclose personal contact information for physicians are your institution?  Maybe alert your hospital ethics committee to this–granted it’s not a patient issue but I agree it falls under the same heading as the (un)ethics of drug-company marketing and should be prohibited.

    #38481 Reply
    JoeCaponeCHFC JoeCaponeCHFC 
    Participant
    Status: Insurance Agent
    Posts: 26
    Joined: 01/11/2017

    raddoc6876, I am with you. I talk about this here and there. There are insurance agents running around the halls of every hospital, dental school, and medical school and nobody does anything about it. Residents purchase from these people because they are there and they seem “legit”. Most claim to be independent when they are anything but independent. We moved 100% to the web a couple of years ago because of this.

    When we talk to people that are unwinding things they have done (purchased inappropriate whole life), we tell them to call the Program admins to tell them what happened. The programs need to know. Most of the people are running around the halls because people think they “seem nice” and nobody has asked them to leave. Maybe they also sponsor an event here and there.

    The internet and sites like this help to stop some of it but it will never go away unless the institutions institute rules like they have with medical device and drug reps. People will then get their insurance and financial products via the web where they stand a chance to “get a fair shake”.

     

    Joe Capone, ChFC®, LUTCF
    [email protected]
    insuringincome.com
    (781) 285-7231

    Instant Term Life Insurance Quotes - insuringincome.com/instant-life-insurance-quotes
    Physician Disability Insurance Quote Roll - insuringincome.com/quot

    #38488 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4389
    Joined: 05/13/2011
    Does everyone understand yet why this industry pisses me off so much? 

    Click to expand…

    Maybe write an article called “Whole Life: An Exit Strategy” similar to your Back Door Roth tutorial??  You could lay out steps people can follow to determine if they are indeed locked into a bad deal (probably they always are given the nature of these things but you could go through the calculations) and discuss options for correcting the situation.  One big unknown would be the lawsuit legal remedy which could be a lot of hassle but may be worth looking into.  I think part of this is the buyer’s remorse aspect–personally I could not live with myself knowing I had been suckered into a predatory deal and then allowing that to continue.  I think I would cancel it and take the loss just to be free of it.

    Click to expand…

    You mean like this one?

    How To Dump Your Whole Life Policy

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #38500 Reply
    Arkad Arkad 
    Participant
    Status: Physician
    Posts: 111
    Joined: 07/27/2016
    Splash Refinancing Bonus

    I was no financial genius back when I started practice 20+ years ago but fortunately my senior partner gave me one piece of advice that he told me to never violate. He said never do whole life. I have probably made some mistakes over the years but I am glad I never made that one. Whenever I met with a financial person the meeting started with a warning that we would be done as soon as they brought the subject up. I couldn’t believe how many still did but they were probably equally surprised when I would tell them the meeting was over when they did.

    #38918 Reply
    Liked by Zaphod, Lithium
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4389
    Joined: 05/13/2011

    I haven’t updated this in a little bit, but it’s not for lack of material, just lack of time. Here’s one from the forum today:

    I currently have an IUL with annual premiums of $12K. Current total premiums of $36K and a cash value of $29K. Stupid tax of $7K. Unfortunately I apparently did a 1035 exchange from a VL in the amount of $78K for a total premiums paid of $108K.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #41117 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4389
    Joined: 05/13/2011

    From an advisor working with WCI readers:

     

    This is my third whole life quagmire in a month. One I am working on today has been paying $4K in monthly premiums in lieu of student loans and her company 403(b) with a match. Since it is a VUL we are considering filing a suitability charge to see if she can get some or all of her premiums back. These people would not even think to question their policies if they didn’t read your blog.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #41118 Reply

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