Whole life insurance. Dump it or other alternatives?

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Mbmd
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Whole life insurance. Dump it or other alternatives?

Post by Mbmd » Mon Nov 04, 2019 5:42 pm

Hello.

I’m relatively new to this forum.

About 4 months ago I received some great advice about getting rid of Whole life insurance.
The short version is that I have continued to make WLI payments; partially my fault for procrastinating on such an important matter, and part of it from misinformation I was given about “best time to cancel the policy”.

I have contributed a total of $32000 dollars and the value is $5800.

If I continue $2270/month payments for 10 more months, at the anniversary of the policy, the value will be $28200.
In 10 months my total contributions will be $54000.

I see it as losing nearly $27000 now or 26000 in 10 months.

I am sure the financial advisor will also miss out on an even bigger commission if I cancel now; which is the only reason I want to cancel now.

Ideas? Alternatives?

At last I am cancelling now and not after 10 years.

Thanks in advance for your advise and your time.

zlandar
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Re: Whole life insurance. Dump it or other alternatives?

Post by zlandar » Mon Nov 04, 2019 5:59 pm

$135 for someone to tell you yes or no to keep the policy:

https://evaluatelifeinsurance.org/

DIY:

https://www.whitecoatinvestor.com/how-t ... fe-policy/

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Stinky
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Re: Whole life insurance. Dump it or other alternatives?

Post by Stinky » Mon Nov 04, 2019 6:02 pm

Drop it. Now.

Not another penny into this policy.
It's a GREAT day to be alive - Travis Tritt

fabdog
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Re: Whole life insurance. Dump it or other alternatives?

Post by fabdog » Mon Nov 04, 2019 6:02 pm

Sorry... not sure what your question is... what other alternatives are you seeking?

This is a hole that you are shoveling money into... first rule of holes... stop digging.

Do you really want to make 10 more payments and be out of pocket that money, to lose $1K less? What would that money make you over the next 10 months in some other investment?

And is that $28200 value guaranteed? or a projection?

Mike

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Nate79
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Re: Whole life insurance. Dump it or other alternatives?

Post by Nate79 » Mon Nov 04, 2019 6:11 pm

Goodness. What a horrible product. Stop right now and cancel it.

Broken Man 1999
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Re: Whole life insurance. Dump it or other alternatives?

Post by Broken Man 1999 » Mon Nov 04, 2019 6:13 pm

zlandar wrote:
Mon Nov 04, 2019 5:59 pm
$135 for someone to tell you yes or no to keep the policy:

https://evaluatelifeinsurance.org/

DIY:

https://www.whitecoatinvestor.com/how-t ... fe-policy/
Sounds like $135 would be a small price to pay considering the dollars being thrown around. I would certainly engage their services.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

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Wiggums
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Re: Whole life insurance. Dump it or other alternatives?

Post by Wiggums » Mon Nov 04, 2019 6:21 pm

I dump the policy tomorrow, but if you feel like spending $135 will Help you to make this decision, then go ahead and do it.

fleetwdl
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Re: Whole life insurance. Dump it or other alternatives?

Post by fleetwdl » Tue Nov 05, 2019 2:43 pm

If you really need life insurance, you may want to get some term insurance in place before you cancel your existing policy. I kept a "universal life" policy for much longer than I wanted to as I was almost un-insurable due to some health issues, and I needed to have life insurance in place to protect my wife should I have died.
I canceled the policy when we had accumulated enough to self insure.

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mickeyd
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Re: Whole life insurance. Dump it or other alternatives?

Post by mickeyd » Tue Nov 05, 2019 4:12 pm

I see it as losing nearly $27000 now or 26000 in 10 months
What advice did your "financial advisor" give you on this dilemma? You paid in advance for his/her advice.
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle

lukestuckenhymer
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Re: Whole life insurance. Dump it or other alternatives?

Post by lukestuckenhymer » Tue Nov 05, 2019 4:18 pm

Whole Life is a scam being pushed by unsavory salespeople who sometimes convince unsuspecting customers that it's an investment. It is a money pit and should be illegal, frankly. Dump it and get a term life policy if you need coverage.

123
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Re: Whole life insurance. Dump it or other alternatives?

Post by 123 » Tue Nov 05, 2019 4:32 pm

Mbmd wrote:
Mon Nov 04, 2019 5:42 pm
...I am sure the financial advisor will also miss out on an even bigger commission if I cancel now; which is the only reason I want to cancel now...
The person who sold you the policy likely got his/her biggest commission based on the premium for the first year of policy coverage. Often the commission can be 50% - 80% (sometimes more) of the first year commission. Due to the costs of selling the policy plus the actuarial costs of the insurance the insurance company typically loses money on the first year of the policy (of course the agent does very well). There is often an ongoing commission to the agent/financial adviser for "servicing" the policy which from the renewal premiums.

If you have some cash value in the policy you may want to consider exchanging it for an annuity with a low-cost provider like Vanguard. Exchanging it for an annuity lets you transfer the "basis" of the policy (the sum of all the payments you made) to the annuity. As a result the value of the annuity can grow over time and not result in any taxable consequence until the value of the annuity exceeds the basis. It is a way to somewhat partially recover the premium money that has been paid. Of course an annuity has higher expenses than just a regular taxable account. Some people might find it an exchange to an annuity a useful option.
The closest helping hand is at the end of your own arm.

AznSaver
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Re: Whole life insurance. Dump it or other alternatives?

Post by AznSaver » Tue Nov 05, 2019 8:36 pm

My immediate and visceral response is to tell you to get rid of it ASAP, but...

It's important to understand your situation to see the whole picture...
What was the immediate need for having such a high premium policy?
Do you still require life insurance?
Are you of an age/health condition to find a reasonable term life product that could satisfy that need if it still exists?

IMHO it doesn't make sense to make the 10 additional payments to save a loss of $1k.
You could cut your losses now and put the money into an index fund and possibly recovered much more than your $1,000.

Based on your individual circumstances the sale of this product maybe outside of the "Life Insurance suitability standards" and a sale of such a product by a fiduciary can be grounds for legal recourse for you to recoup additional/all costs associated with this...

KK0727
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Re: Whole life insurance. Dump it or other alternatives?

Post by KK0727 » Wed Nov 06, 2019 1:11 pm

I'm in the same predicament : my premiums are much lower than yours (as is my cash value), but I just don't see the value in it when that money can be used towards other, more profitable, investments.

Don't feel bad, I've been sitting on this decision for almost a year now and still can't "cut the cord."

dtee
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Re: Whole life insurance. Dump it or other alternatives?

Post by dtee » Wed Nov 06, 2019 4:49 pm

I'm not trying to steal the OP's thread here, but 99% of the time, term life insurance is recommended whenever you need life insurance.
Can anyone on this forum justify or give me reasons why or when someone would need to buy whole life insurance? I'm still having a hard time seeing the 1% of the folks who would need it.

dtee
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Re: Whole life insurance. Dump it or other alternatives?

Post by dtee » Wed Nov 06, 2019 4:49 pm

I'm not trying to steal the OP's thread here, but 99% of the time, term life insurance is recommended whenever you need life insurance.
Can anyone on this forum justify or give me reasons why or when someone would need to buy whole life insurance? I'm still having a hard time seeing the 1% of the folks who would need it.

KK0727
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Re: Whole life insurance. Dump it or other alternatives?

Post by KK0727 » Wed Nov 06, 2019 5:03 pm

dtee wrote:
Wed Nov 06, 2019 4:49 pm
I'm not trying to steal the OP's thread here, but 99% of the time, term life insurance is recommended whenever you need life insurance.
Can anyone on this forum justify or give me reasons why or when someone would need to buy whole life insurance? I'm still having a hard time seeing the 1% of the folks who would need it.
I agree. I maaaaay need term life, which I have, but I don't have the need for whole life (I have minimal debt and do not plan on having kids.) It's definitely not a great investment vehicle....I wish I knew then what I know now before signing up.

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David Jay
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Re: Whole life insurance. Dump it or other alternatives?

Post by David Jay » Wed Nov 06, 2019 7:52 pm

dtee wrote:
Wed Nov 06, 2019 4:49 pm
I'm not trying to steal the OP's thread here, but 99% of the time, term life insurance is recommended whenever you need life insurance.
Can anyone on this forum justify or give me reasons why or when someone would need to buy whole life insurance? I'm still having a hard time seeing the 1% of the folks who would need it.
Some people here have suggested a multi-generational care need (say a severely handicapped child who will need lifetime care) or an estate bumping up against the estate-tax limit (currently $11.4 Million).
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

fundseeker
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Re: Whole life insurance. Dump it or other alternatives?

Post by fundseeker » Wed Nov 06, 2019 8:23 pm

OP, Just wondering if you don't mind sharing what you actually bought, i.e., the benefit if you pass away, etc. Thanks!

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Stinky
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Re: Whole life insurance. Dump it or other alternatives?

Post by Stinky » Wed Nov 06, 2019 8:28 pm

David Jay wrote:
Wed Nov 06, 2019 7:52 pm
dtee wrote:
Wed Nov 06, 2019 4:49 pm
I'm not trying to steal the OP's thread here, but 99% of the time, term life insurance is recommended whenever you need life insurance.
Can anyone on this forum justify or give me reasons why or when someone would need to buy whole life insurance? I'm still having a hard time seeing the 1% of the folks who would need it.
Some people here have suggested a multi-generational care need (say a severely handicapped child who will need lifetime care) or an estate bumping up against the estate-tax limit (currently $11.4 Million).
And in those cases as mentioned by David Jay, it’s less expensive to buy a universal life policy with a premium guarantee than to buy traditional whole life. Pure insurance, no cash value, can stay in force for the whole of life.
It's a GREAT day to be alive - Travis Tritt

AznSaver
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Re: Whole life insurance. Dump it or other alternatives?

Post by AznSaver » Wed Nov 06, 2019 8:31 pm

dtee wrote:
Wed Nov 06, 2019 4:49 pm
I'm not trying to steal the OP's thread here, but 99% of the time, term life insurance is recommended whenever you need life insurance.
Can anyone on this forum justify or give me reasons why or when someone would need to buy whole life insurance? I'm still having a hard time seeing the 1% of the folks who would need it.
There are a few instances where it can make sense, but it really does come down to the exact product and circumstances.
*These are few examples from my days as an agent, while they do have caveats when implemented as intended it does have a purpose*

- Most commonly I sold it to parents/grandparents of newborn or very young child, the policies were mostly 10 yr paid up around $50-100k.
The this worked is that yes you are buying coverage on your kid, it's their policy they are the owner but do not take possession until legal age.
The policies cost were incredibly low, you would pay for 10 years and never pay again, the policy's cash value would continue to grow, esp. w/dividends set to accrue interest... When your kid turns 18 congrats here is some non-taxable money you can use for college/school/car or continue to hold it and save or if something happens where they lose the ability to buy insurance (health condition) use it for that.
Worst case scenario and it needs to be used it will prove the death benefit to allow parents to take time to grief and collect themselves instead of having to worry about needing to work to pay the bills.

- One that is rare even by insurance sales standard was a business continuation/buyout agreement that required the purchase of whole life.
This is a type of scenario where a business could not survive the loss of a key individual and would need funds to be able to bring onboard someone of a similar caliber. The customer started a small business that rapidly expanded and then transitioned into a corporation with investors. The customer still lead the day-to-day operations and was the "head" of the company, part of the investor agreement stipulated a business continuation policy which was paid by the corporation. The customer was the owner of the policy, the company paid the premiums and was the primary beneficiary. Since the company was started after the customer was married his wife was also list as a partial percentage beneficiary to buy her out if the husband were to pass. *This was a brilliant situation that I happened to be apart of but not the initiator. They had already chose this route I just explained technicals and sold the policy* Business Key policies are common, but not too many are whole life.

AznSaver
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Re: Whole life insurance. Dump it or other alternatives?

Post by AznSaver » Wed Nov 06, 2019 8:54 pm

Stinky wrote:
Wed Nov 06, 2019 8:28 pm
David Jay wrote:
Wed Nov 06, 2019 7:52 pm
dtee wrote:
Wed Nov 06, 2019 4:49 pm
I'm not trying to steal the OP's thread here, but 99% of the time, term life insurance is recommended whenever you need life insurance.
Can anyone on this forum justify or give me reasons why or when someone would need to buy whole life insurance? I'm still having a hard time seeing the 1% of the folks who would need it.
Some people here have suggested a multi-generational care need (say a severely handicapped child who will need lifetime care) or an estate bumping up against the estate-tax limit (currently $11.4 Million).
And in those cases as mentioned by David Jay, it’s less expensive to buy a universal life policy with a premium guarantee than to buy traditional whole life. Pure insurance, no cash value, can stay in force for the whole of life.
Umm, universal life policies do contain cash value and are significantly more complicated and worse for the average consumer. Other than pre-1988 single premium policies, fixed premium/flexible payment present an interest risk to the purchaser where they can be underfunding the coverage and/or eating away at the cash/death benefit.

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Stinky
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Re: Whole life insurance. Dump it or other alternatives?

Post by Stinky » Wed Nov 06, 2019 9:57 pm

AznSaver wrote:
Wed Nov 06, 2019 8:54 pm
Stinky wrote:
Wed Nov 06, 2019 8:28 pm
David Jay wrote:
Wed Nov 06, 2019 7:52 pm

Some people here have suggested a multi-generational care need (say a severely handicapped child who will need lifetime care) or an estate bumping up against the estate-tax limit (currently $11.4 Million).
And in those cases as mentioned by David Jay, it’s less expensive to buy a universal life policy with a premium guarantee than to buy traditional whole life. Pure insurance, no cash value, can stay in force for the whole of life.
Umm, universal life policies do contain cash value and are significantly more complicated and worse for the average consumer. Other than pre-1988 single premium policies, fixed premium/flexible payment present an interest risk to the purchaser where they can be underfunding the coverage and/or eating away at the cash/death benefit.
Guaranteed universal life remains in force whether the cash value is positive or not, so long as required premiums are paid. It does not have the interest rate risk that “regular” universal life has. See the article below. Link at the bottom of this post.

What is Guaranteed Universal Life Insurance?
Also known as “No Lapse” or “Secondary Guarantee Universal Life”, Guaranteed Universal Life Insurance is a much more affordable option in comparison to whole life insurance. Let’s break it down.

Term Life Insurance is a type of policy that provides a guaranteed level premium and death benefit for a certain amount of years (known as the term). It is normally offered in increments of 5, such as 10, 15, 20, 25, and 30 years.

Whole Life Insurance is a permanent form of life insurance, providing coverage for life – it has guaranteed level premiums/death benefit beyond age 100, as well as a guaranteed cash value. Since this type of policy delivers more perks and a longer coverage, the premiums are much higher in comparison to term life. That’s where GUL comes in.

Guaranteed Universal Life Insurance is a nice mix between the two. This type of policy issues fixed rates until a specific age (such as 90, 95, 100, 105, 110, or even 121!) rather than a certain number of years (like term life). While the premiums are a little more expensive than term life, they are much more affordable than whole life prices.

It is important to note that GUL does not accumulate guaranteed cash value like whole life does. We’ll cover the pros and cons of this policy in the following sections.


https://termlifeadvice.com/the-pros-and ... rsal-life/
It's a GREAT day to be alive - Travis Tritt

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