By Dr. Jim Dahle, WCI Founder
Whole life insurance is frequently inappropriately sold to doctors and high-income professions. These are the top questions about whole life insurance I get by email, by blog post comment, on the WCI Forum, and in daily life.
Should I Buy Whole Life Insurance?
Probably not. For most cases Doctors should buy term life insurance. Whole life insurance does four things:
- Provides a death benefit in case you die while someone else depends on your income, but it is a very expensive way to provide that protection.
- Provides a death benefit when you die even if no one else depends on your income, such as in your 70s or 80s. This is unnecessary insurance.
- Accumulates a cash value that you can borrow against. While there are a number of uses for this cash value, it is generally inferior to other options that can accomplish the same purpose.
- Whole Life Insurance has some unique business and estate planning uses you are unlikely to need.
Still not convinced? Well, at least ask yourself these questions about whole life insurance (and go through the flow chart) before committing to buy.
My Insurance Agent Thinks You're Wrong About Whole Life Insurance. Why Is That?
Insurance agents receive their training primarily from their insurance company, and that training is mostly in sales, not financial planning or investment management. They have no fiduciary duty to you and receive huge commissions if they successfully convince you to purchase a policy. A typical commission for a cash value life insurance policy ranges from 50% to 110% of the first year's premium. So if you buy a policy with a $4,000 monthly premium, the agent was paid something like $25K-$50K to sell it to you. In short, you cannot trust the recommendation of an insurance agent about whether or not you should purchase a whole life policy.
Why Is Whole Life Insurance a Bad Idea Most of the Time?
Whole life insurance advocates (usually insurance agents) often describe “ideal” policies that pay lower commissions and have slightly higher returns than other policies. However, my readers and I seem to run into “non-ideal” policies about 99% of the time like these crummy, inappropriately sold ones that seem designed to maximize the agent's commission. There are generally four main reasons why whole life insurance is a bad idea:
#1 You Have Better Uses for Your Money
So many of the docs I run into who own whole life insurance owe on credit cards, student loans, or a mortgage. They might not even know about retirement accounts available to them such as a Backdoor Roth IRA or a Stealth IRA. They probably aren't maxing out their 401(k) and perhaps haven't even established an individual 401(k) for their moonlighting gig. Sometimes they aren't even getting their employer match on their retirement plan! Their children's college plans are also probably woefully underfunded. In short, they have something else with a better return and better tax benefits available to them. As my income rises through the tax brackets, I keep thinking I'm going to run into a situation where cash value life insurance makes sense for me. But even with a 7-figure income, I still seem to keep finding better uses for my money! What are the odds that a doctor with an average doctor income doesn't have a better use? Pretty low, unfortunately.
#2 Whole Life Insurance Has Low Returns
If you buy a whole life policy today while you are in your 30s, and hold it until you die, over a period of 50 years you should expect guaranteed returns of 2% per year and projected returns in the 4%-5% range on the cash value. Your actual return is likely to be somewhere between the guaranteed and the projected returns. Remember, the dividend rate is NOT the return on your investment. If I'm going to tie my money up for 5+ decades, I expect a better return than 3%-4%.
#3 Negative Returns
The poor returns on whole life are heavily front-loaded. Most policies won't even break even for 10-15 years and due to surrender fees, you may not even get anything you paid back on a policy you surrender after just 3-4 years.
#4 Life Changes, but Whole Life Insurance Doesn't
Purchasing a whole life policy is a life-long decision, like marriage. This is not something you decide on in 20 minutes with an agent masquerading as a financial advisor. You should at least put as much time and effort into purchasing it as you did when you purchased your house. Although you can purchase a “10-pay policy“, it is much more common to commit to heavy premiums for 30+ years. Unfortunately, life changes, and what seemed like a good idea when you committed to it, no longer seems so. Unfortunately, this usually means that the policy ends up performing even worse than the original illustration.
#5 Life Insurance Lapse Rates Are High
Not convinced? Would the fact that nearly 80% of people who purchase a whole life policy (meant to be held for your entire life) surrender it prior to death bother you? It's true.
It takes 5-15 years for a typical whole life policy just to break even to where your surrender value equals your premiums paid (not counting the time value of money or inflation). If you count inflation, some policies never break even while most take decades to do so. This brings to mind an important question:
How many people are still holding their policies after 5, 10, 15, or 20 years?
Luckily, this data is tracked by the Society of Actuaries and is demonstrated in the chart below.
If we use an 11% lapse rate in year 1, 9% in year two, 7% in year three, 6% in year four, and 6% in year 5, that means that 1/3 of folks have surrendered their policies within just 5 years, long before breaking even. If we continue on to 10 years (using a 5% lapse rate for years 6-10) then we're down to an overall lapse rate of 50%. Using an annual 4% lapse rate for years 11-20, the overall lapse rate is 60% at year 15 and 70% at year 20. By year 30 (using a 3% lapse rate for years 21+), about the time of retirement for someone buying one of these upon residency graduation in their early 30s, 77% of those who purchased their policies no longer own them.
How Do Insurance Agents Convince So Many Doctors to Buy Whole Life Insurance Inappropriately?
Insurance agents need to feed their kids and send them to college, too. So they have developed some extremely well-honed sales skills to sell these high-commission products. Unfortunately, many of the techniques used to sell these policies rely on myths about them.
Debunking the Myths of Whole Life Insurance
Most of the time, the agents aren't even lying. They actually believe these myths, which makes them even more effective at selling.
- Whole life insurance is great for pre-retirement income replacement. No. It's too expensive.
- Whole life insurance is the best way to get a permanent death benefit. No, Guaranteed Universal Life is half the price.
- Whole life insurance provides a great investment return. Nope. Negative returns for the first decade, and only 2-5% if you hold it for 3+ decades.
- Insurance companies are great investors. No. They're buying the same stuff you can buy, but inserting an extra layer of fees.
- Whole life insurance is a great asset class. No. There are 10 reasons why it isn't a great asset class, not even as a “bond replacement”.
- Whole life insurance is a great way to save on taxes. No. Its tax benefits pale in comparison to retirement accounts. All loans are tax-free.
- Whole life insurance protects your money from creditors. True in some states, but not others. Retirement accounts generally provide better protection.
- You need whole life insurance for estate planning. No. Most doctors won't owe estate taxes or have estate liquidity needs.
- Whole life insurance is a great way to pay for college. No. 529s are better. You want higher returns and you want them in the first 18 years. Hiding assets in life insurance cash value isn't going to help since your kids aren't going to get much aid anyway.
- Whole life insurance is a luxury you want. No. A luxury you want is probably a Tesla, a second home, a boat, and maybe a kitchen upgrade. As purchases go, whole life insurance might be the least likely one to increase your happiness.
- Whole life insurance lets you spend down your retirement assets more efficiently. A Single Premium Immediate Annuity does this more effectively. Heck, even a reverse mortgage does this more effectively.
- Whole life insurance is a great way to buy expensive stuff. No. Cash works just fine for that, no whole life policy needed.
- Really rich people or businesses buy whole life insurance so you should, too. This is irrelevant. You are neither “really rich” nor a business. Buying whole life insurance doesn't turn you into either.
- You should buy whole life insurance when you're young. You probably don't need it at all and never will. It is no better an investment at 20 than at 50.
- Waiver of premium riders provide disability protection. Disability insurance does a better job.
- You should exchange your old policy for a new one. Probably not. The low returns are heavily front-loaded. An older policy usually performs better than a new one. But the agent gets a big commission if they can talk you into exchanging.
- Whole life is the only way to pass money to heirs tax-free. Not true. Almost all assets are passed tax-free thanks to the step-up in basis.
- With whole life, there is no way I can lose money. Nope. Not only will you lose money if you surrender in the first decade or so, but state insurance guaranty corps only back relatively small policies.
- Life insurance should not be rented. Wrong. Just like a home should be rented if you're only staying for 2-3 years, a life insurance policy should be “rented” (i.e. term) if you only need it for 2-3 decades.
- Banks own life insurance so you should, too. No. Just like you're not a very rich person or a business, you're not a bank, either.
- Corporate CEOs own life insurance so you should, too. No. Again, you're not a corporate CEO. You actually need a reasonable return on your money.
- Banks failed during the Great Depression but insurance companies didn't. Not true. 14% of companies did fail.
- After-tax, whole life insurance returns are better than bond returns. Misleading at best, but generally just false.
- Whole life keeps assets off the FAFSA. True. But irrelevant to most docs whose kids won't get any need-based aid either, and most need-based aid is just loans anyway.
- Term life expires without paying anything. True, but that's a feature, not a bug. Just like you don't want to use your auto, health, or disability insurance, you'd rather not use your term life insurance.
- Whole life insurance is the perfect investment because it is safe, liquid, tax-advantaged, creditor-proof, and offers a competitive return. Four partial truths and one big whopper there.
- Insurance agents are just people trying to feed their family. So are time-share salesmen. Doesn't mean you should buy what they're selling.
- No 1099 income with whole life. That's right. Because there's no actual income, nobody sends you a 1099. Just like when you borrow against your home equity or your car title. You need some serious tax paranoia to buy into this argument.
- The White Coat Investor is just a doctor. When you run out of other arguments, just go ad hominem. I'm sure that will be effective.
- After maxing out a 401(k) and Roth IRA, isn’t whole life insurance the only tax-sheltered option left? No. It isn't. And that isn't the right question to be asking anyway.
- The estate tax exemption could go down. It could also be eliminated. Base your plan on current law and adjust as needed.
- Whole life insurance protects from nursing home creditors. Not really. Nor is this a feature white coat investors should need even if it were available.
- WCI doesn't understand the opportunity cost of NOT using whole life. Yes. He does. He still recommends against it for most.
- Buy whole life insurance for the long-term care rider. If mixing insurance and investing is a bad idea, why would mixing two types of insurance with investing be a good one? Do all you can to self-insure for this possible need.
- We don't say to put ALL your money into whole life insurance. If it isn’t a good idea to put a significant chunk of your portfolio into an asset class, it probably isn’t a good idea to put any of your money into whole life.
- Yes, we have a few bad eggs but most of us are ethical. If there were only a few, why do 3/4 of doctors who buy whole life insurance regret their decision? This is an industry-wide issue with selling this product inappropriately.
- You should buy insurance to preserve insurability. No, you shouldn't. You can't really do it, and even if you could, the multiplied risk (inability to buy life insurance x early death) is too low to insure against.
More information here:
Debunking the Myths of Whole Life Insurance
When Is Whole Life Insurance a Good Idea?
Obviously, there are a few rare exceptions where a whole life insurance policy can make sense. Being a doctor isn't one of them. These generally include some specialized estate planning and business purposes, as well as asset protection for someone willing to give up higher investment returns in exchange for the asset protection.
Some financial advisors think there are some situations where very high-earning doctors can benefit from investing in a variable universal life (VUL) policy instead of a taxable account. The basic idea is that the insurance costs will be lower than the tax costs in the long run. Whole life insurance may be a good idea for you if all or most of the following are true:
- You’re in the highest tax bracket now
- You'll be in the highest tax bracket in retirement
- You’ve bought a GOOD VUL packed with good investments like DFA or Vanguard funds you would invest in anyway
- You’re committed to holding it your entire life
- You will have no trouble making the premiums (consult your crystal ball if necessary)
- This is money you plan to completely spend in retirement
- You cannot invest in an extremely tax-efficient manner in a taxable account, and
- Neither the government nor the insurance company changes the rules significantly over the next 6-7 decades
Insurance agents these days are heavily pushing indexed universal life (IUL) policies, probably because people have caught on to the fact that whole life insurance and VUL aren't usually a good idea and the additional complexity of these policies can be used to confuse the purchaser in new ways. Despite the additional complexity (good luck actually understanding what you're investing in here), you generally give up so much of the index return in exchange for the guarantees, these policies are likely to have the same low long-term returns as whole life insurance policies. Just say no.
He doesn't need Whole Life and neither do you
What Do You Think About “Banking” Using Whole Life Insurance?
I think there are worse things you can do with your money than “Infinite Banking” or “Banking on Yourself.” However, the concept is dramatically oversold as some magic alternative banking system. If you're going to borrow to buy things like cars during your life anyway, then this works out okay. Make sure if you want to do this that you get a policy actually designed to do this well.
What Is the Best Way to Buy Life Insurance?
Your life insurance needs should usually be met with a 20-30 year level premium term life policy purchased from an independent agent. Here is a step-by-step guide showing you how to buy life insurance and how to figure out how much life insurance you need. Contact one of my recommended insurance agents to get a quote today.
Should I Buy Whole Life Insurance on My Children?
No. You shouldn't. Here are six reasons why, but you should only need one—no one is relying on their income. Start a 529 instead.
How Can I Know If I Should Cancel My Life Insurance Policy?
First, get an in-force illustration. Next, either hire an unbiased person to analyze it or analyze your life insurance policy yourself.
How Do I Cancel My Life Insurance Policy?
If you have decided you no longer want your policy, you may want to consider some options other than just surrendering it, especially if you have a significant difference between what you paid in premiums and its current value. Here is a guide to help you get rid of your whole life policy.
I hope this post provides a worthwhile, easily-shared resource for those wondering whether they should buy a new whole life policy or get rid of a policy they already have. As I always tell whole life advocates—if you understand how the policy works and are okay with the significant downsides, buy as much as you like. But typically, once a doctor or other high-income professional understands what they've bought, they regret the decision to buy.
What do you think? Why do you think whole life insurance is pitched to so many doctors? Why do so many of them buy it? Comment below!
If you are a resident or medical student FTLOG do not buy one of these policies. We lost tens of thousands when we got rid of it and were sold a grossly inappropriate policy for our needs. Hopefully you can benefit from our failures. Buy term. And WCI, sorry to induce more hate mail. 🙂
This is a great post that quickly summarizes a lot of your prior whole life posts.
That said, I now feel the VUL policy i bought as a resident was the smartest financial move I’ve ever made….
Because without buying that very inappropriate and costly junk policy, I would have never taken the initiative to seriously learn about finances – a decision that has already saved me much more than the VUL policy will ever cost me, ha!
That is a great perspective! My wife and I got set up with a VUL a couple of years ago. She was a new partner at a law firm. All of the firm partners used the same financial advisor and more or less blindly trusted him. He had all of them set up with high value VUL policies so of course we jumped on the band wagon to get in on this “amazing investment opportunity” too. Well, as we got the quarterly statements our balance was going down even though the stock market was on the rise. The more we looked into it we realized the high fees and horrible funds he had us in. It cost us a few thousand dollars to get out of the policy. But our experience with the VUL was definitely the catalyst that inspired us to learn more about our finances and eventually brought us to the online personal finance community and got us hooked on FI/RE! Now we are on plan to reach FI in just over six years!
Whole life policy works person while he is alive because of growth and knly tool to beat inflation and provide protection. With (5% or 6% tax free return if you take loan)
Term is protection only for certain time
Ul is no growth but protection
WL is protection and Growth
Rest it depends on inividual situation.
🙂
If you think 2% guaranteed and 5% projected if you hold it for 50 years is “growth” there are lots of growth investments out there.
Yes. What abt protection/safety. In case some disability happen whose gona help at age 75 or 80.
Its cents on dime.
Let me know if some investment have following feature.
1 growth
2 protection
3 no tax lisbility
4 safety
5 liquidity
6 option to levrage my money.
This is a blog targeted towards physicians and high income professionals. Assuming we save 20%+ for retirement, assuming we buy term and invest the rest, almost all of us expect to be FI by 75/80.
We’d get there a lot quicker if WLI snakeoil salespeople didn’t interfere as often. And yes, the investments within my Roth 401k and Roth IRA offer all that.
How do i knowabt investments in ira 401 which offer “all that” features.
Please
http://bfy.tw/BF5H
You don’t know about an IRA and you want to pitch whole life to me?
You should really consider a new job.
I do know IRA.
And i think ***Insure, Invest and Retire is a smart technique.
I in IRA in individual not insure!!!!!
I really appreciate your input.
I expect to be disabled by age 75/80. That’s what my retirement portfolio is for. It will provide growth, protection, safety, liquidity, the option to leverage my money, and more money after tax than what I’d get if I had bought whole life insurance instead of a real investment.
I actually sell private health insurance & just purchased a $3 Million dollar LIRP with my life insurance guy. I love the help it gives me tax wise since i am 1099 being a health insurance agent. Im planning on getting another 3-4 million of LIRP in January.
Glad you like your policy.
I agree with you, best stupid financial decision I ever made.
Fantastic article. I encourage all doctors to read WCI’s series of articles about whole life insurance. But the details can get a little overwhelming and confusing, so here’s the tl;dr version: just say no to whole life insurance. Buy term life.
Thanks for the article! Wish I had known about your website 5 years ago. We are currently getting term in place to get out of our VUL. While we meet most of the exceptions under #5 above, what I didn’t see on that list was the ability to max other forms of investment first. I’m assuming that’s a given? With a job lost (Hey! Crystal ball! Why didn’t you show us that?) we not only can’t afford to contribute to other investments or student loans, but can’t afford the expensive monthly premiums! Yikes! Appreciate you sharing the information WCI – maybe save some people from our mistakes!
Yes, that’s definitely a given. If you haven’t maxed out your 401(k), Backdoor Roth IRA, your spouse’s accounts, your HSA, maybe a defined benefit/cash balance plan, paid off your student loans etc you should do all of those before even thinking about it.
I know this is an old post but I’ve been reading lots of your post on investment strategies recently. Thanks for all your info. My question is seems like if you max out every retirement tax deferral option and invest 20% as you suggest and I make 200k-250k even at modest rate of return say 6-8% avg or so, if I start pulling lets say 50% annually at 60yrs old and live off of 100k which will be more with 3% inflation of course and if my house is paid by then and I start social security at full retirement age or 70…,, Won’t i still have to consider RMDs and wouldn’t that still put me in the hightest tax brackets since I won’t have any deductions other than charity etc. . The calculator I used showed upwards of 6mil to 7million all deferred at 70 1/2 which means I’d have to take well over 225k and upwards until I die right? If the market is down…,pulling that amount out for a few years could really take a chunk out of my portfolio in a bare market. I have a back door roth also but what about those who can’t start one due to income retrictions. I did a 5 year paid up whole life with money I had sitting in cash. Got over 3% not tax free tho on the deposit which at time sounded better than just sitting in saving and it paid my premium for me. The way it was designed I had all my money back by the 6th year, so to me it was a win win. Now I don’t have to worry about my term policy increasing after 20 years. Will still owe on my house and have child in college by then. I think of it like my emergency money on steroids now. My Advisor says I can use it as a buffer asset if the market drops and pull from my policy instead of from investment accounts but still get dividends.
So if I put so much in tax deferred accounts and I don’t do an immediate income annuity then I’m gonna have to still do the RMDs right. So what I’m I missing?
Not everyone seems to have the same risk tolerance. I wish everyone would preface their advice with that. I know so many people like me who are confused. Seems like their are Pros and Cons to every financial product and concept out there, but really no need to push things on people that aren’t a good fit. Just find the ones that are.
Do you know how big your RMD has to be to get you into the highest tax bracket right now? Assuming no other taxable income, married, and the standard deduction, you need an RMD of at least $624K. At age 70, that implies a tax deferred account of $17.3M in today’s dollars. If you expect to have an IRA in that neighborhood, then I would recommend doing a bunch of Roth conversions. And remember those brackets adjust up with inflation each year.
Look, if you’re putting 20% of your income into retirement and want to buy whole life insurance with money above and beyond that, you’re going to be just fine. I wouldn’t do it, but it’s your money and your decision. If your advisor is profiting from the sale of the policy, you don’t really have an advisor by the way, you’ve mistaken a commissioned salesman for an advisor. Better get some objective advice elsewhere before buying.
I can smell the hate mail being prepared as we speak ☺️
Gonna do a cash balance plan at work and the tpa wants people to buy whole life within the cash balance plan.
I won’t do it. I told others the same. Curious your thoughts.
You need a new TPA.
Blanket financial advice and diagnosis without a full study is dangerous. Many decisions that seem mathematically valid on on micro level are not when viewed practically from the macro. However, you are correct most insurance, investments, retirement plans, loans, legal documents, real estate investments, etc. are sold as something they are not.
@Bob – I assume you mean that the marketing of WL by salespeople that do not take time to understand my individual financial needs and compare WL to all of the other easy, safe, reasonable alternatives at my disposal that can be far superior to WL are indeed the ones committing “blanket financial advice and diagnosis without a full study” – right?
The real problem is that the salespeople can act concerned and pretend to understand my needs, but they NEVER bring up the superior investment potential, asset protection, etc that my Term Life and 401k or TSP provide.
I mean in any and all blanket advice be it for health, finance, lifestyle, family, etc. The problem is this either/or, black/white, extremely rigid, binary advice, views, marketing, etc. Insurance companies are battling for control of your assets with banks & brokerage houses. They have been for decades. Insurance companies were well ahead from the 30s to at least the 60s. In the 70s rates were so high that fixed income was big. The stock market only became marketed as a panacea in the 80s with the advent of mutual funds and the 401(k). Brokerage/investment companies have had 70+% of the assets under management ever since. Buy term & invest the difference marketing and extreme 401(k) promotion have furthered that. Early adopters of the 401(k) are now retiring and with the current retirement dilemma they have not worked out as hoped. The problem is the same as it is with insurance. They are sold as something they are not. 90+% of agents/advisors have no idea how to properly position these assets. The reason is this is how their companies teach them how to move/sell product. Make the quickest easiest sale possible. Not how to coordinate all aspects of a financial life together. Life insurance and investments were never meant to fight with each other or be either/or. Investments are theoretically good a growth and life insurance companies are no good at growth but good at actuarial science and guarantees. They do different, complimentary things. They make up where the other lacks. They enhance each other and open up options and contingencies that would not be possible as stand alones. The problems people want to hear what they want to hear….not the truth.
I agree life insurance companies are no good at growing the assets of their policy holders.
I also agree with you that there are plenty of issues with brokerages and banks and commissioned salesmen in the investment industry.
Blanket advice without full study of an individual’ situation is not necessarily dangerous if the issue is profound. For example, I’m quite willing to tell people not to smoke, even if I know very little about their health situation. Sure, smoking can help you lose weight and reduces the likelihood of postoperative nausea, but it will be a vanishingly small minority for whom the benefits outweigh the drawbacks. “Don’t buy whole life” is to finance what “don’t smoke” is to medicine.
i may be misreading Bob, apologies if so. but this seems like a mantra i hear over and over from financial professionals. when faced down by facts about their bad advice they fall back on “individual plans” and “what’s right for one person might not be right for another.”
arthur hit the nail on the head, WLI is like smoking. it’s something you shouldn’t start if you haven’t already, and something you should quit if you have. to extend the analogy to the WCI limit, if you’ve smoked your whole life and you’re 80, screw it, you might as well enjoy it while you can.
if i had a nickle for every one of my residents who got one of these “individualized plan” emails from a FP i would have about $2.00.
And interestingly enough for all those peddlers if WLI snake oil, every individualized financial plan shows a “need” for WLI!! How convenient!!
Please show the equivalent scientific studies that show that certain forms of life insurance are as pernicious as smoking ……and if you can’t see the irony here your blind zealotry may be a problem.
Although I am not familiar with any population studies on the harm of WL, there are plenty of mechanistic analyses demonstrating harm, including those done by Dr. Dahle on this site. Interestingly, the Council for Tobacco Research spent over 4 decades trying to argue against any link between smoking and cancer by funding sham research and claiming that opposing research was flawed and didn’t account for variables in individual subjects. Sounds a lot like the zealotry of WL salesman to me.
well Bob it’s pretty rare to do peer reviewed studies on how financial products affect people. first of all you have inclusion/exclusion issues and your endpoint is tough to define.
obviously no one is saying that WLI is going to cause you die of lung cancer. the issue is that it doesn’t do what the salesmen say it does and that you can accomplish all the features of it with other, less buggy products.
let me ask this question of you, do you believe in WLI so much that you waive your commission on the product when you’re dealing with a skeptical customer?
I am so impressed that you’ve spent all this time learning the ins, outs, and truths about a product that is clearly not appropriate for you or the vast majority of us. I read enough about it cash value life insurance as a resident to know I didn’t want it, but that probably totalled less than an hour.
A five-minute read of this article should answer the question for most, although it’s always wise to seek out additional unbiased sources. What you’ll find if you’re not careful are biased articles from those in the industry. Those with no skin in the game consistently advise people to stay away.
Cheers!
-PoF
Just out of curiosity how do you know what is appropriate for whom? Is that how we diagnose patients?
I agree. People should seek out the truth with their own research on accurate sources. The article unfortunately makes assumptions that may or may not be anywhere near accurate in an uncertain future.
I’m not sure how the diagnosis metaphor applies here, Bob.
If we’re going to apply medical jargon, I would refer to whole life insurance as a treatment plan. For most people, it’s a treatment plan that is more costly and has inferior outcomes to alternative treatment plans that accomplish the same goals.
Now, it’s true that there are unscrupulous physicians who might recommend a more costly treatment plan when they stand to benefit financially, even when a lower-cost alternative may indeed have similar results, but I believe they are the minority. Many of us are in salaried and / or employed positions where we will not benefit much or at all by prescribing one treatment plan over another. The same cannot be said for those who sell life insurance.
The financial treatment plan Dr. Dahle and I are more likely to prescribe includes term life insurance for those with families dependent upon their salaries, tax-efficient investing in low cost index funds, estate planning and asset protection specific to one’s state of residence, and avoiding unnecessary fees whenever possible.
Best,
-PoF
Yes, I agree with PoF. In my medical career at every stage someone has tried to sell me such a policy…at least 5 different advisors. This was all with a negative net worth in med school, still negative net worth and putting nothing in retirement in residency and then with over 150,000K in student loans and not maxing out retirement accounts as an attending. They all said the same thing! So Bob, your right, things should be individual but strangely no matter my situation the advice was always the same…because I was or soon to be a Doctor. That was the only common denominator!
the loans add such a clarifying dimension don’t they? mine were relatively cheap (max rate around 5.5%) but my residents today have much higher rates.
so another question for your WLI salesman is “how much better performance can you guarantee me than the 7% I get if i just take this $4K/mo and make loan payments?”
The insurance industry will not be happy about this latest blog. It might be time for WCI to start checking under his car before starting it in the morning.
https://www.youtube.com/watch?v=cQW0s6PrNmI
I was thinking horse head in his bed, but yeah, car bomb would be bad, too.
I have two friends who both have WLI. I tried to convince one not to do it, but his financial guy told him it was great. Plus he was tied in with other products with this financial guy. It just became part of the packet. Doh!
My other friends spends $3000 a month on the policy. That’s insane!
Don’t do it. Don’t buy whole life insurance.
Maybe it would be better to understand his entire financial strategy…..maybe it makes sense on a macro level…..maybe it doesn’t. People (especially wealthy people) don’t buy thing on price they buy things on value. He must think he receives more value than he pays in premiums.
You think $3K is insane? I’ve run into docs paying 2 and 3 times that.
My fellowship program in Arizona was approached by an insurance consulting group (I won’t name names but it rhymes with SmorthBestern Wutual) to do free financial planning for all residents and fellows. My wife and I sat down with the guy who then gave us a Whole Life Sales pitch. We didn’t have much personal finance know-how so we thought all of the cool graphs, personalized tables and “free” consultation that would normally cost $500 was great. And this was one of the “benefits” listed by my program along with a cellphone discount plan, etc, etc. I thought it was blessed by the green light of goodness by my fellowship program.
And then we talked to my father-in-law who got into a Whole Life policy through someone at his Church. That ended up like 80% of other WLI policies and was dumped at a loss. Always glad when I can learn from someone else’s mistake. We stayed clear of insurance salesman masquerading as financial advisers after that.
I really think it would be in the best interests of the states’ medical boards to supply a basic personal finance dinner for all residents and fellows. 30 minutes of basics plus some crappy food could make a world of difference.
Northwestern Mutual is notorious for high pressure…quick “easy” sales. Their products are okay but the culture of the company is very transactional and pushy. Cult-ish.
I actually had the complete opposite interaction in my situation. I ended up buying term life insurance and own-occ disability insurance through northwestern. I met with the guy several times, he was old school keeping some notes on a note card and was very nice.
SmorthBestern Wutual sent its financial advisors, I mean snakeoil salespeople, to prey on our new hires. We forbid them to enter the office now and won’t respond to any requests for financial planning dinners from them.
At some point I’m going to do a guest post on the emails I’ve rec’ed from FPs who I have denied access to my residents.
I think my all time favorite was the NM whole life salesman who told me that he needed to review my slides before I was allowed to give a FP talk to my own residents.
He had stones, gotta give him that.
Terrific post WCI, no hate mail coming from me (and yes, I am an insurance agent).
It is almost like you sat in a “sales training” for whole life, and yes for those that don’t know… that is a real thing. Well done spreading the word on what should raise red flags for people as almost all of those points will be touched upon by whole life hungry agent. I would humbly submit one small addition for consideration; be on the lookout for agents/reps that utilize software platforms where the “solution” ALWAYS (as if by some divine guidance) seems to be a whole life policy.
sad
Yes, I’ve written about LEAP (aka all roads lead to whole life) before:
https://www.whitecoatinvestor.com/lifetime-economic-acceleration-process-leap-a-review/
Those are first year commissions, those big policies pay an additional $2k to $5k every year the policy receives new premium.
commissions are regulated and depending on the policy and premiums what you are saying might not be true.
[ad hominem attack deleted.]
What I’m saying “might”not be true but it’s true for 95% of the policies sold.
What is fake? Nice straw man. You can have biases confirmed or you can find out how thing really work.
Lol, are you saying that I am wrong about commissions on permanent life products with annual premiums of $24,000 to $50,000? I might know more than you think, I may just be a licensed insurance agent and CFP practitioner. The only argument you’ve made for buying one of these is uncertainty.
I don’t know what you know…nor do I care quite frankly. If you are licensed and a certified failure planner and don’t know the mechanics of financial products that is your problem not mine.
why do i get the sense that Bob has sold one or two WLI policies in his day?
Wow, very interesting indeed! The sad thing is lumping all permanent life insurance products into the quote Whole Life Insurance category. Whole life insurance is a very powerful long term Financial tool when both used and funded appropriately within an overall financial plan. Permanent death benefit becomes a permission slip 4 those who have it on their balance sheet to spend and enjoy more of their accumulated assets then they otherwise could or would, including a high percentage of that as guaranteed income. I am both Securities licensed as well as insurance licensed for 30 years this month. Whole life insurance that is issued from a “Mutual” Life Insurance company (company is mutually owned by the policyholders) with over 150-years of dividend distributions is all I now write and place, in addition to term life insurance for short-term income protection. You have a 98% chance of out living any Term Policy obtained. The cash values of whole life insurance is guaranteed only to to go up and dividends, while not guaranteed, have never been missed. There are many benefits to why true whole life insurance (not variable life, not universal life, not indexed universal life) real whole life insurance from Mass Mutual, Guardian New York Life, will only enhance someone’s retirement income picture when added to the mix in the proper ratio to other investments held. It’s true that a lot of insurance agents are not looking out for the client’s best interest but their own and that is sad and a shame for my industry. All I can tell you is that my clients are very happy that they secured any level of whole life insurance when they did and most wish they had secured more when they could. I wish you all the best…
I know that “permission slip” article. It is a good however simplistic article.
– LEAPer
Glad you found it interesting. I hardly find it sad to lump these all together as they all suffer the same issue- being dramatically oversold by commissioned salesmen masquerading as advisors. The IUL agent says WL sucks, the UL guy says VUL sucks, the VUL guys says IUL sucks….everything sucks but their pet product. Your pet product is WL, so of course you like it. There are agents just like you that say just the opposite. But the main issue isn’t the minor differences between these products, it’s that they’re all inappropriate and dramatically oversold to the vast majority.
Sure, the cash value is guaranteed to go up, just like the purchaser is guaranteed to have less than he put in for years, maybe even decades. Your little sleight of hand/Jedi mind tricks don’t actually work on someone who has actually looked at the illustrations, and more importantly just how much these policies underperform the illustrations.
I’m sure the clients that haven’t fired you yet are very happy about their WL policies, but when they discover what you did they’ll fire you too, and probably surrender the polices you’re convinced they love.
As far as the “permission to spend” argument, I addressed that in myth # 11. It’s a terrible argument. How is having MUCH less money in retirement due to low returns better? It isn’t. The examples agents use when doing this argument discuss something like a million in WL cash value vs a million in investments. But that’s apples to oranges. The real comparison is $1M in WL to $3M in investments. The guy who bought the investments instead of the whole life can buy a SPIA that gives him far more permission to spend and he’ll still have a million (or more) left over. It’s just a bogus argument all the way around, and the fact that you’re using it suggests to me that you’re part of the problem rather than the solution when it comes to whole life.
Look Mr White Coat Investor, I stopped pursuing physicians as a target market a while ago for many reasons. I do big picture long-term retirement income planning which includes asset management, as well as integration of actuarial science, including both whole life (normally fully funded in 10-years) & SPIA’s to optimize a plan. Not very easy for anyone to hand over $1M to an insurance company without permanent death benefit to back up the asset transfer and ultimately replace the asset. You can rant all about myths and such, there is no one size fits all and the answer is always “it just depends”. I work with smart, successful business professionals, and those who are open to look at everything and how it all works together I can best serve. It’s not an “either/or”, it’s an “and”. I’m not going to get into it with you any further as I know the true value that my planning partner & I add to our clients future financial worlds and lifestyle. Yes, less than 5% of the financial advisors out there understand the strategies we teach and implement, and there are mostly product peddlers in the marketplace harming people, not helping. I know what my mission and purpose in live is, to serve others with THEIR best interest in mind, not mine. Of this I am very clear. I hope and wish the rest would operate from the same place but that’s unfortunately not the world we live in (full of con-men and scam artists). Sad but true. Good luck to all!
Thank you for not pursuing physicians, and that’s Dr. White Coat Investor to you. 🙂
I agree there are mostly product peddlers in the marketplace harming people. What’s funny is everyone seems to think the others are the product peddlers and they’re in the top 5%. But if you’re selling whole life insurance more often than very rarely, you are one of the product peddlers.
Fred,
If I had $1M to “hand over” it wouldn’t be to an insurance company.
The permission slip argument is one of the stupidest things I have ever heard. If I want a permission slip for a more lucrative retirement lifestyle I think I’ll go moonlight some more rather than buying a complex financial product.
This is the same argument “my guy” was/is making. Thanks again for putting it into perspective.
Fred I think you missed the point that most of us want to out live our term life policies, but in that time we invest the money saved by not having a whole life and can then self insure with a lot more money than we’d have if we bought whole life. What I find horrible is that not only do agents blindly push it ( I had one push it as assest protection, meanwhile I live in NJ where it is not protected), but this past week guardian actually send me mail directly with the wonderful offer to switch my term to whole life. It sickened me to the point that I’m now going to switch my term to a different insurance company.
that is sad on many levels…..
– Guardian is a solid company in my experience and if you are getting physically ill from junk mail there are other issues at play
– smart wealthy people do not self insure – they spread the risk to other entities. Buy term & invest the difference can work on paper. However, in practical reality there is volatility, fees, taxes, investor emotion, along with a million other factors. Then at distribution (retirement) what is the exit strategy? How long will we live? What will our & family’s health be? What will rates be? Stock market? Taxes? Inflation? Etc. All of these things are part of a strategy put not complete plans in and of themselves.
So you’re telling me buying a whole life will protect me more against inflation than a tax efficient stock market returns over 30-40 years? How about the first 10 when I’d still be getting negative returns guaranteed from whole life while wasting a good 10-20 grand a year to maintain said advantage of whole life?
Where exactly did I say that?
By properly positioning investable assets AND permanent whole life insurance you can potentially distribute assets more creatively and aggressively at retirement…thus having more income which better mitigates inflation risks and concerns.
Let’s be honest here…you don’t care about understanding how strategies work or full disclosure or the truth …you just want your biases confirmed and to be deemed right. Which is fine…but not much helpful can be ascertained that way.
Yes, there are lots of creative and interesting uses for whole life. But as a general rule, there is a better way to do anything you can do with whole life. Pay for college? 529 works better. Save for retirement? 401(k) works better. Cover loss of income prior to financial independence? (Term life works better.) Permission to spend in retirement? SPIA +/- longevity insurance works better. LTC needs? LTCI works better.
Are there a few niche uses? Sure. But it’s wrong product the vast majority of the time it is sold.
529 – can work but one dimensional and every dollar in is one less dollar for retirement….also crowds out options to use various “other people’s money” strategies
401k – “works better’? What does that mean? Does it have the potential for greater accumulation value? Of course it does…who is claiming otherwise? You are being disingenuous in that you are the one actually comparing apples and oranges. Term does work better if you die prematurely …if however, the overwhelming likely scenario of the insured living a very long healthy life…it can be the mostly costly decision there is when you actually use economic science and include lost opportunity cost and not only limited, bogus math. You are going to do a SPIA on a single life without life insurance? Then spouse and family get nothing. You are going to do a joint life? Then you have to take less of a payout. LTCi can be a use it or lose scenario so there is a huge potential lost opportunity cost there as well…..they answer is not micro products for every need…that leads to huge waste…..an efficient overall strategy is the only way….I will give you that 90% of agents are hacks that are clueless product pushers…..as are investment brokers.
“It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.”
Bob-
You sell insurance for a living. I don’t expect to convince you that whole life insurance is dramatically oversold. As long as we’re doing quotes, how about this one:
Upton Sinclair famously said:
I agree that 90%+ of agents are hacks. That seems like another reason to avoid this product.
You are not my target audience. I don’t expect to convince you that much of your life’s work may be a disservice to your clients. If someone really understands how whole life works and wishes to purchase it, that doesn’t bother me a bit nor take any money out of my pocket. But I’m sick and tired of hearing docs being sold crap policies by crap “advisors.” Don’t believe that happens all the time? Here are a few dozen examples from this year alone:
https://www.whitecoatinvestor.com/forums/topic/inappropriate-whole-life-policy-of-the-week/
I sell life insurance for a living?????
My “salary” depends on me not understanding something?
My target audience is people….including doctors which is your target audience. You will not convince me of that because you don’t have the clue as to what you are talking about. I am not doing a disservice to anyone. I have spent almost 25 years research every aspect of financial life. You regurgitate the garbage promoted by investment firms, CFPs, and the mainstream media. This has failed for decades but they still keep beating people over the head with it. You can tell people what they want to hear vs the truth for clicks to sell advertising which of course is the noble type of selling. As a doctor you should understand unqualified people spewing simplistic nonsense about things they no nothing about.
I actually do understand a lot about unqualified people spewing simplistic nonsense about lots of things including whole life insurance. Thanks for stopping by.
you clearly don’t understand that……just blinded by your own arrogance. You like other unlicensed financial entertainers spew uneducated fallacies with impunity. If this were medicine you would be committing financial malpractice yet you continue to deflect with intellectually dishonest tactics.
P.S. It’s cute that you stalked me.
It’s cute that you pretended you were somebody that you aren’t. Not rare in these threads. But cute.
If the “educated” would tell it like it is, there would be no need for unlicensed financial entertainers. Instead they prey on the financially illiterate who have dedicated their lives to healing the sick and injured. Stop selling doctors products they neither need nor want once they understand how they work.
Are you suggesting you don’t sell insurance for a living? That seems unlikely given the location of your IP address, your name and the last name in your email address, and a quick Google search putting it all together with the words “insurance agent.”
It’s almost cute how angry and how persistent they are. Glad you are on our side WCI 🙂
Agreed! To Janettebournes! I keep looking for the like button for all of WCI comments on this thread. He’s a beast.
Bob,
If you think WCI is “spewing simplistic nonsense” you should read his blog instead of just attacking this one aspect of his advice. None of his regular readers will be shocked that despite being coy in earlier posts you’ve been shown to be a WLI salesman.
I’m following his “spewed” “simplistic” “regurgitated” “nonsense” and it’s funny I just keep getting richer. Actually our NW grows by about $140k/year. And it’s also funny I have paid ~$0 in commissions so far on my rapid path to being a millionaire by 40. Funny as well I have this cheap life insurance policy that guarantees my wife will be rapidly FI if I kick the bucket. Funny that my average investment return for the first 5 years of my practice is around 7-8%.
Let me know how your amazing advice can beat WCI’s.
[Ad hominem attack deleted.]
Agreed, Following WCI and PoF have made me so much richer than all 5 of the “financial advisors” I have talked to at one point or another. Coincidence… I think not!
Such an intellectually dishonest, lazy, and disingenuous argument. The whole fallacy that people who don’t have whole life insurance and then die leave nothing to their family/dependents is just laughable. I’m surprised that someone in the finance/insurance industry, such as you claim to be, doesn’t understand that.
The money I save on the premiums with a $4 million term policy instead of being wasted on whole life don’t just vanish into thin air, as you seem to think. Instead that money is diverted into 529s for my kids and tax efficient taxable investment accounts to the tune of around $70,000 per year (which doesn’t include maxing out 403b, 457b, backdoor Roths for spouse and me, and HSA).
But yeah, if I die in 15 years after my term life policy is no longer in force then my “spouse and family will get nothing…” ?
No better illustration out there of how crucial the concept of fiduciary responsibility is. WL insurance agents (like realtors) have only one purpose, which is to make a sale. They do not have a fiduciary responsibility to do what is in your best interest–their purpose is not to “help” you, it is to make a sale, period.
All realtors, insurance agents, and sales people do not help anyone…..got it.
Do doctors make sales?
Doctors sell their advice. Can you imagine if your doctor was paid a percentage of the drugs he prescribed?
I don’t have a problem with a commissioned insurance agent selling insurance products. What I have a problem with is them pretending they’re providing unbiased advice while selling said products.
I don’t disagree with you. Pretending not to be biased in anything is disingenuous. We all have biases. If you and your family made a fortune on the stock market you are pro market…if growing up you had to move from 1br apartment to the next because your father lost his shirt in the real estate market you will be anti…..and vice versa. Orthopedic surgeons are pro surgery…..chiros are not…. GI docs are pro scopes, PTs are pro physical therapy, dermatologists are pro drugs as are pharmacists…and most GPs…..maybe they are right most of the time but they have an inherent bias. You have a bias toward every part of mathematical, linear, traditional financial advice and you hate whole life. All of these ideas are constantly promoted by those who control the assets and the advertising…the investment industry. I love investments. I was a option floor trader for years. My problems is when they are promoted as something they are not……this is the failed model you are perpetuating.
Not sure what your last sentence is referring to. Please explain. What exactly am I promoting investments as that they are not?
This is a new one.
A WLI salesman is pretending he is fighting for us against the investment industry.
So it costs me $20-30k in my first year for you to fight this good fight for me and then a few thousand ever year after that?
I think I stick with Vanguard, Kthanksbye.
So tax question: if you decide to dump your whole life insurance is there a difference to your taxes between taking the cash value distribution versus 1035’ing the cash value to a annuity and then cashing out? Would the later give a loss on taxes beyond the 2% loss limit of income and the first option not?
Yes. More details here:
https://www.whitecoatinvestor.com/how-to-dump-your-whole-life-policy/
[Ad hominem attack deleted. Weird how it always comes to that with insurance agents around here.]
Oh come on WCI, we want to see the ad mominem attacks! That’s part of the fun of the comment section in your Whole Life blog posts! 😉
Loyal readers demand a post showing all the ad hominem attacks you have received from WLI salespeople.
We will not be ignored!
Would have been fun to keep them all huh?
Yeah, absolutely! You could try doing it reddit-style where the comment is automatically collapsed for downvotes and only displays if the user chooses to expand it.
I’m truly I’m shocked these WL-type insurance agent hacks still show up here after Dr. Dahle absolutely eviscerates their products and arguments with his insights and clarity. The fact that Jim allows these comments is a real credit to him and what must be his view that to help his audience he needs to expose the fraud clearly for what it is. It’s a lesson in transparency and patience to me as a reader.
When these guys start telling you it’s not about the money, you can be sure it’s all about the money. If it wasn’t almost criminal what they do, it might be funny.
My guess is that every time WCI posts about whole life insurance, he must schedule the next day or two to handle trolls and flamers who show up.
And there are new ones all the time.
Some of them absolutely seem to believe what they are talking about. LOL.
Good call HARJOSINGH. Though I have no data to back this up, I wouldn’t be surprised if Jim make a conscious effort to post his whole life posts on Fridays so he’s got more time to fight the WL salesmen, errr… I mean “advisors” in the comment section.
Not sure you guys understand how this works. The regular readers comment on a post for the first few days. The whole life guys show up two years later wanting to argue about something not understanding that nobody reads to comment # 967 on a post. Go back to some of those other posts and scroll down. You’ll see that every few months an agent shows up and repeats all the same arguments.
I just went through the comment section of your LEAP Review article. You weren’t kidding! So many insurance agent comments from 2014-2016 on an article written in 2013. Twenty minutes of entertainment.
I agree, and in my view they break basic rules of courtesy.
A public forum like this is not a pulpit for anyone to come and start yelling.
It is more like a room in WCI’s web home. Jim graciously allows us to speak here.
One has to know what this website is about, what has been said already, and the basic tone/tenor of interactions. It is upon the visitor and not the host to know all that.
For example, this topic – the three main ways whole life plans are sold are – preying on fears about uncertainties in life & market, lack of knowledge about alternatives on the part of the buyer, and lack of openness on the part of the seller.
There is an assumption on the part of the buyer that the seller is working in their best interest – and Physicians fall prey to this because they themselves practice fiduciary relationships and assume so about the others. It doesn’t help that the alternatives take time to learn and need a teacher who doesn’t have another motive, and learning to manage risk is a mature endeavor.
You put this all together- fear is a big motivator, and there is no bigger fear than fear of the unknown.
From 1998, when I moved to the US, till now, I have yet to hear a coherent argument that explains why anybody should buy a Whole Life Policy instead of buying a term policy to manage the risk, and investing the rest – it’s that simple. All this bellyaching on hundreds of posts on WCI – not one of them has said a rational/evidence-based statement. They quickly get down to how they have decades of experience, or the company they work for has decades of experience, and how they have hundreds of clients, and how WCI doesn’t know anything.
These people don’t have the manners about how to behave in public much less about how to have a strong argument. I wonder if they are even aware that their posts show their ignorance among the people who are educated about the subject.
Oh, I can make a pretty coherent evidence-based argument for whole life. That’s not that hard to do. That’s part of the reason why it’s so easy for me to argue with these guys and make them look foolish. I actually understand how their product works whereas most of them are actually kind of ignorant about the (usually better) alternatives to whole life. But nobody needs me to make the pro-argument since there are so many highly motivated people out there doing it already. For someone to be able to make an informed decision, they need someone to point out the anti/con side of the argument.
The argument FOR whole life looks like this:
As I’ve said before, if you actually understand how whole life insurance works and still want the policy, then knock yourself out. It doesn’t bother me a bit. But I’m sick of it being sold like it was sold to me as an MS2 or how it is sold to a doc who isn’t even doing a backdoor Roth IRA or someone who still has student loans or when the policy is designed to maximize the agent’s commission or when the client doesn’t even know why he owns it etc.
Nicely put. I have heard all these. And there is the argument about forced savings with safe returns – typically made to younger people.
And at each step of this argument, there is an alternative that is better – you yourself are presenting that. The big question is – are the buyers told about the alternatives so they can make an informed decision? At each step, there is a sort of “Daddy knows better” like glossing over. Every time I listen to a whole life argument, I discover so many different ways they can create riders about so many things – the main goal being the sale, not full disclosure.
The fact that 80% of people dump their policies should be required disclosure. Won’t you tell your patients if a medication had 80% rate of a certain side effect that caused major complication?
So I actually think there may be something in the forced savings argument.
What I tell residents is that WLI is a bad idea 99.5% of the time.
But could you imagine a young doc who had the insight to know that they just couldn’t control their spending and decided to do WLI as a way to create a “bill” that they had to pay each month for savings?
It would be a rare bird obviously, and there would be major other issues going on. But I have probably met a handful of people like this in my life — money burns a hole in their pocket.
Again I know it would be a rare scenario, but in a case like that just saying “you need to be more disciplined” may not actually be a path to long term success.
I don’t know. I think the forced savings argument is pretty weak. If you don’t have the discipline to regularly save, you probably don’t have the discipline to make your WLI premiums and it’ll end up lapsing or you’ll borrow it all out anyway.
Yeah, fair point.
I do know a few high income profs who have WLI and appreciate the “set it and forget it” aspect of savings.
Clearly not worth the downsides, but something I guess.
Years ago when I was first out of residency I was convinced to buy an extremely large WLI policy by a financial advisor who was also a close friend. I was young and dumb. I’ve come to realize the error of my ways, but have questions surrounding an argument for conflict of interest. Do I have grounds for an attorney at any point? TIA!
Probably. He was operating under the suitability standard, not the fiduciary one.
Would a participating whole life policy be a good investment for a fairly well paid physician, married to a commercial artist with a wildly variable income? If I, the physician, 55, were to pass on today, my wife of 45, would likely have to sell our home in order to make it. Her income can be as little as 15k in one year, followed by a relative banner year of 65-75k, with no predictability. That’s the way it is in the creative world. A policy was presented to me, cost of $2,650/month, that would provide my wife with $2,000,000 upon my death. Wise or unwise?
Sounds like you have a need for life insurance, but I’m not hearing a need for a permanent life insurance policy. Why not buy a $2 Million 10-20 year term policy (however long until you hit financial independence)?
Whole life insurance isn’t a great investment, but I’m not sure what you need is a good investment. What you need is to be saving a big chunk of your income to hit financial independence ASAP in case you live a long life and a good term insurance policy to cover your insurance need until you do.
What happens if he never becomes financially independent due to illness or other life circumstances and the term policy ends or spikes in cost due to being past the 20 years? I’ve seen this over and over managing in Hospice and helping people in their affairs. People then try to get another policy and it’s too late. I’ve seen them refinance houses to pay for college for example and then end up loosing the house because their term policy lapsed and the spouse can’t afford it. I personally feel that everyone doesn’t fit in one category or other so easily. People say WL people are all about sells buy so are Advisors who are AUM. Then you have those who are just so arrogant that they can’t see past their own ideas to recognize everyone doesn’t have the stomach to tolerate the market. I saw someone that put all their money in a Roth as instructed by similar blogs but they never allocated the funds so it was sitting in money market the whole time. Truth is both sides have benefits for different people.
Now you see why it is important to buy a policy (and live your life) in a way such that you are VERY sure you will be FI by the time the policy expires. But even if you miss it by a year or two, most term policies can be extended a year or two at a non-egregious price even if it is much higher than what was paid 30 years ago.
Look, if people can’t save and invest without having to fork out a ton each month for a whole life policy, they’re the same people who are going to surrender their policy early anyway. Just having a whole life policy isn’t somehow going to save their bacon from all their terrible financial decisions throughout their life.
If people won’t tolerate investments like stocks or real estate at all, there are consequences to that. If you want to save for retirement using only a whole life policy, you better be prepared to save 50% of your gross income each year of your career.
Only insurance agents think “both side” of the whole life “debate” have benefits for different people. Everyone else sees the truth–that whole life is usually inappropriately sold and very few people actually benefit from buying a policy. 75% of the docs in my FB group who have actually bought a policy regret doing so. 80% of the general population who buy policies surrender it within the first 30 years. You are not doing those folks a favor. Knock it off.
And as far as illness and disability- buy health and disability insurance. These solutions aren’t rocket science. Whole life insurance is not the solution to someone becoming ill or running into “other life circumstances.” It is for someone who has a need for a death benefit late in life. Those folks are very rare.
arrogant, sad, and pathetic
Quite true. That’s a fair assessment of the whole life insurance salesweasels who troll a two and half year old thread on someone else’s website.
By chance Jim, what IP address and business did Nicole and Roberto use to post?
They’re different. Not even in the same city. But not a surprise. I mean there are obviously lots of agents out there working hard to sell these polices to docs with $200K in loans.
Kind of a sad last comment on the site. Have a nice life.
This is bad advice for a few reasons:
1) Saying any particular product or strategy is good or bad for everyone, as a blanket statement, is not only incorrect, but potentially dangerous to all.
2) It seems that the writer of this article does not understand insurance, let alone the advantageous or disadvantages of permanent insurance, financial planning, estate planning, taxation, wealth creation, etc.
3) A proper financial advisor wouldn’t tell a dentist how to place a crown. A dentist shouldn’t claim to be the messiah of financial advice, especially in such a popular blog. Again, very dangerous to readers.
4) Too long to write here, but many of the argument points stated in the blog are outright false and others incredibly misleading (see the arguments on VUL, which is very risky for an insurance product, the arguments on 401ks, retirement planning, income, death benefit.) All of these would statements would get a real advisor sued or worse. Just terrible advice that I am sure people reading are taking as gospel.
5) This seems to be an article written out of personal bias. If this person was actually a CFP, registered rep, etc. this would breach fiduciary duty and 4 other rules.
1) I don’t recall ever making this argument. Every, always, and never are dangerous words. I prefer things like “rarely”. If I had to assign a percentage to doctors who need a whole life policy, 1% seems about right.
2) Seems unlikely, but I suppose you’re entitled to your opinion.
3) Who’s the dentist?
4) Hard to respond when no specific argument made. You’re basically just saying “you’re wrong.”
5) Good thing this person is none of those things, just someone telling it like it is.