Is Whole Life Insurance Worth It?

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trueblueky
Posts: 2365
Joined: Tue May 27, 2014 3:50 pm

Re: Is Whole Life Insurance Worth It?

Post by trueblueky »

Term is 100% profit for the insurance company
Except for the whole policyholder dying thing.

That's gotta cut into profits.
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kenyan
Posts: 3015
Joined: Wed Jan 12, 2011 11:16 pm

Re: Is Whole Life Insurance Worth It?

Post by kenyan »

trueblueky wrote: Mon May 14, 2018 6:15 pm
Term is 100% profit for the insurance company
Except for the whole policyholder dying thing.

That's gotta cut into profits.
I have a coworker who is using term life as an investment. You heard me correctly.

He's over 70, and is holding a policy to try to increase his inheritance. He figures that if he dies in 10 years, he's 'earning' something like 8% or more on his investment. I don't know all of his numbers, but he did mention that his annual premium, at least for last year, was close to $50,000.
Retirement investing is a marathon.
inbox788
Posts: 8372
Joined: Thu Mar 15, 2012 5:24 pm

Re: Is Whole Life Insurance Worth It?

Post by inbox788 »

kenyan wrote: Tue May 22, 2018 4:20 pm
trueblueky wrote: Mon May 14, 2018 6:15 pm
Term is 100% profit for the insurance company
Except for the whole policyholder dying thing.

That's gotta cut into profits.
I have a coworker who is using term life as an investment. You heard me correctly.

He's over 70, and is holding a policy to try to increase his inheritance. He figures that if he dies in 10 years, he's 'earning' something like 8% or more on his investment. I don't know all of his numbers, but he did mention that his annual premium, at least for last year, was close to $50,000.
:shock:
There's issue with viatical settlements when a 3rd party is betting on a poor outcome, but when the policy holder is doing it, it's even more concerning. What is this guy doing? Driving fast and recklessly? Rock climbing? Bungee jumping? Sky diving? Overeating fatty and fried foods? Not exercising?

I'd take the insurance company side of the bet. They know what they're doing. Chances are he'll be half a million poorer in 10 years, but at least he'll be alive to complain about it.
Smithy explained the basics of the GI life insurance policy to the new army recruits, and then said: “If you have the GI life insurance policy and go into battle and are killed, the government has to pay $200,000 to your beneficiaries. If you don’t have GI life insurance, and you go into battle and get killed, the government only has to pay a maximum of $6,000.
Now,” he concluded, “which group of soldiers do you think they are going to send into battle first?”
http://insurancelaughs.blogspot.com/201 ... -joke.html
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kenyan
Posts: 3015
Joined: Wed Jan 12, 2011 11:16 pm

Re: Is Whole Life Insurance Worth It?

Post by kenyan »

inbox788 wrote: Tue May 22, 2018 4:36 pm
kenyan wrote: Tue May 22, 2018 4:20 pm
trueblueky wrote: Mon May 14, 2018 6:15 pm
Term is 100% profit for the insurance company
Except for the whole policyholder dying thing.

That's gotta cut into profits.
I have a coworker who is using term life as an investment. You heard me correctly.

He's over 70, and is holding a policy to try to increase his inheritance. He figures that if he dies in 10 years, he's 'earning' something like 8% or more on his investment. I don't know all of his numbers, but he did mention that his annual premium, at least for last year, was close to $50,000.
:shock:
There's issue with viatical settlements when a 3rd party is betting on a poor outcome, but when the policy holder is doing it, it's even more concerning. What is this guy doing? Driving fast and recklessly? Rock climbing? Bungee jumping? Sky diving? Overeating fatty and fried foods? Not exercising?

I'd take the insurance company side of the bet. They know what they're doing. Chances are he'll be half a million poorer in 10 years, but at least he'll be alive to complain about it.
Smithy explained the basics of the GI life insurance policy to the new army recruits, and then said: “If you have the GI life insurance policy and go into battle and are killed, the government has to pay $200,000 to your beneficiaries. If you don’t have GI life insurance, and you go into battle and get killed, the government only has to pay a maximum of $6,000.
Now,” he concluded, “which group of soldiers do you think they are going to send into battle first?”
http://insurancelaughs.blogspot.com/201 ... -joke.html
Yeah, his strategy is mind-boggling to me. From what I know, he never intends to stop working, is somewhat obsessed with leaving a lot of money to his family, and is earning far too much money for his current level of contribution - I know he's pulling in a full pension at the same time, and my company, for a given pay grade, essentially pays people based upon age, not performance.

I agree that it's not likely he's outsmarted the actuaries.
Retirement investing is a marathon.
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David Jay
Posts: 14587
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Is Whole Life Insurance Worth It?

Post by David Jay »

gmaynardkrebs wrote: Mon May 14, 2018 11:43 am... more importantly, due to the cost, the amount of insurance purchased is simply inadequate to the need.
This is a point I have made before:

As a process engineer, I observe that the design of whole life is the inverse of the needs of most people:
1. When one is young, has few assets, has family responsibilities and needs protection, it is difficult to afford whole life at the level required for adequate protection (perhaps 15 years income).
2. When one is older, no longer has dependent children, has a nice nest egg and doesn’t need insurance, one keeps paying the premium so that someone else can benefit after one’s death. Oh, and if one wants to access a portion of their own money during their lifetime, they have to pay the insurance company interest for the privilege.


By comparison, term life is cheap so young families can afford a bunch of it. As one grows their retirement portfolio (they can afford to do that because they aren’t paying exorbitant life insurance premiums), they reach the place where they no longer need life insurance. That happened to me at about age 58. At that point my wife was provided for (from our portfolio) in the event of my passing.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
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