dumb dentist question - canceling whole life insurance

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toothfairy525
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dumb dentist question - canceling whole life insurance

Post by toothfairy525 » Tue Sep 11, 2018 10:17 pm

I need some advice about how to handle canceling my whole life policy.

There was a thread written about a year ago by a young pharmacist who was also wrongfully sold whole life, and there are a lot of parallels. Key difference is I’m now a year in (not two months).

I was told about whole life insurance as a “investment” by the first dentist I worked with, and so I called up the guy who sold me my disability and asked him about it. He told me essentially what the first dentist did - it’s a way to “build wealth.” I was fresh out of residency, no loans, and had a lot of extra money each month so I thought it would be great to put a little away each month for a guaranteed return. I decided to do a $12k/yr policy (paid monthly) and then also a $600/yr term policy (paid at once). So total is 1.5mil whole life and 1.5mil term.

Last June I called the guy up as he calls himself a “financial planner,” and I asked him where I should start putting my money away now that I’ve built a solid emergency fund. He told me not to invest any of it, but rather increase my contributions to life insurance. He even told me at one point that IRAs and 401ks will not build my wealth. RED FLAG!! At that point I realized he was just after a commission. I was super busy in the midst of changing jobs, so I just got around to setting up a appointment with a financial planner who advised me it was a waste of money and completely unnecessary.

I tend to agree. I am 28, single, do not plan on having kids, and my mother and brother (my only family) do not need any financial help from me. The beneficiary of both policies is my “estate” (my two dogs).

So first question: can I fight for a refund of any of the premium? It was sold to me purely as an investment. I never realized there would be a period when I would be underwater. Given his unethical advice, should I send letters to BBB, attorney general, state insurance board, insurance company?

Second question: How do I go about doing a 1035 transfer (about $1100)? Can I write off the $11k loss?

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BL
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Re: dumb dentist question - canceling whole life insurance

Post by BL » Tue Sep 11, 2018 11:30 pm

I would ask the company for an in-force illustration that shows guaranteed amounts:
What is inforce illustration?
An inforce illustration is a picture of your insurance policy as it stands now. It will show the exact results of what has happened from the initial policy inception to today with future projections based on current assumptions.
Since you have had it such a short time, I expect much of your "investment" went to your salesman. I doubt you will get anything back. View it as an expensive lesson which would have cost you more if you took longer to get smart.

You might want to look at something like term4sale.com to see rates for term insurance as I suspect you may be overpaying on that as well. Check with an independent agent who will shop around for better rates.

Do your investing with low-ER index funds. Read some recommended books- see Wiki.
Read Getting Started in Wiki and read about the 3-Fund Portfolio.
Start investing in a 401k and Roth IRA (see Backdoor Roth in Wiki here).
Check out WhiteCoatInvestor blog and book.
Read this free pdf: https://www.etf.com/docs/IfYouCan.pdf

No, you can't write off the loss, and you probably won't have anything left to do a 1035 with.

mhalley
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Re: dumb dentist question - canceling whole life insurance

Post by mhalley » Wed Sep 12, 2018 12:12 am

Think of it this way: you realized it was a mistake with only a years worth of premiums. Every month you delay getting rid of it makes the mistake bigger. Set up your term life tomorrow, cancel the whole life the day after. Lesson learned, move on.
If you want to pursue the 1035 exchange, call vanguard and see what they can do.
https://www.whitecoatinvestor.com/1035- ... friday-qa/

https://obliviousinvestor.com/1035-exchange/

HEDGEFUNDIE
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Re: dumb dentist question - canceling whole life insurance

Post by HEDGEFUNDIE » Wed Sep 12, 2018 12:17 am

BL wrote:
Tue Sep 11, 2018 11:30 pm
I would ask the company for an in-force illustration that shows guaranteed amounts:
What is inforce illustration?
An inforce illustration is a picture of your insurance policy as it stands now. It will show the exact results of what has happened from the initial policy inception to today with future projections based on current assumptions.
Since you have had it such a short time, I expect much of your "investment" went to your salesman. I doubt you will get anything back. View it as an expensive lesson which would have cost you more if you took longer to get smart.

You might want to look at something like term4sale.com to see rates for term insurance as I suspect you may be overpaying on that as well. Check with an independent agent who will shop around for better rates.

Do your investing with low-ER index funds. Read some recommended books- see Wiki.
Read Getting Started in Wiki and read about the 3-Fund Portfolio.
Start investing in a 401k and Roth IRA (see Backdoor Roth in Wiki here).
Check out WhiteCoatInvestor blog and book.
Read this free pdf: https://www.etf.com/docs/IfYouCan.pdf

No, you can't write off the loss, and you probably won't have anything left to do a 1035 with.
+1 to all of this, except I don't think the OP actually needs any kind of life insurance at this point in his life. He has no beneficiaries!

123
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Re: dumb dentist question - canceling whole life insurance

Post by 123 » Wed Sep 12, 2018 12:48 am

If the period for which you paid the initial policy premium has not yet expired you can contact the insurance company and cancel the policy. Canceling the poiicy probably has to be in writing. If you cancel the policy there can be a partial refund of premium depending on how much of the premium period has elapsed. Potentially a surrender charge might absorb some or all of any premium refund on a new policy.

If the policy has cash or surrender value it may be possible to exchange it for another policy, or exchange it for an annuity, such as with Vanguard. There can be some policies that provide that any cash value gets applied to pay premiums due if the policy holder doesn't pay the premium, those kind of policy provisions can eat up a lot of cash/surrender value fast. If the policy has cash/surrender value and you exchange it for something like a Vanguard annuity (you send the policy to Vanguard and they take care of getting the money) then the amount you paid in premium becomes the "basis" of the annuity. You would then only be taxed on distributions from the annuity when you have received more than your "basis". Sometimes doing an exchange is more trouble than its worth, your asset is tied up in something that is eventually taxed as ordinary income.

If you only "lost" one year of premium on a life insurance policy you should consider yourself very fortunate.
The closest helping hand is at the end of your own arm.

inbox788
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Re: dumb dentist question - canceling whole life insurance

Post by inbox788 » Wed Sep 12, 2018 1:24 am

mhalley wrote:
Wed Sep 12, 2018 12:12 am
Think of it this way: you realized it was a mistake with only a years worth of premiums. Every month you delay getting rid of it makes the mistake bigger. Set up your term life tomorrow, cancel the whole life the day after. Lesson learned, move on.
If you want to pursue the 1035 exchange, call vanguard and see what they can do.
https://www.whitecoatinvestor.com/1035- ... friday-qa/

https://obliviousinvestor.com/1035-exchange/
Cancel the whole life now and walk away. Your dogs don’t need $3M if you died. The term $1.5M is more than sufficient for the rest of the year, and you might want to downgrade a bit next year. Or try to get a little back from that policy also, but it’s not going to be much.

You can look into some of the ideas put forth here, but don’t be too hopeful. Overall, it’s a cheap lesson learned if you follow the advice here on other matters as well. People have paid far more for far longer in worse policies, and others have suffered in multiple ways from “advisors” working for AUM.

Nate79
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Re: dumb dentist question - canceling whole life insurance

Post by Nate79 » Wed Sep 12, 2018 10:01 am

Contact the insurance company and complain with written details any negative or lies told by the salesman when they tricked you into buying this policy. I would also threaten them to go to the state insurance commissioner as well as informing every one of your friends, customers, local newspaper, etc of how you were swindled out of your money. If they won't give your money back then follow thru. Drop the hammer on these thieves.

Jack FFR1846
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Re: dumb dentist question - canceling whole life insurance

Post by Jack FFR1846 » Wed Sep 12, 2018 10:24 am

It is 100% true that investing in a whole life policy builds wealth....and it does it far better than an IRA, 401k or any other retirement account........for the salesman selling you the policy. He's looking to upgrade his 4 series to a 6 series grand coupe.
Bogle: Smart Beta is stupid

simas
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Re: dumb dentist question - canceling whole life insurance

Post by simas » Wed Sep 12, 2018 10:47 am

1. No , no refund . consider it fairly inexpensive lesson
2. yes, you can 1035 it but even the best plans like this from Vanguard still have many multiples of costs to run vs standard investments.


Cancel whole life, move on, stop listening to 'friends'.
For term, could go either way, it is fairly inexpensive protection. you are single now but who knows what the future would bring in that regard
Keep disability insurance

simas
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Re: dumb dentist question - canceling whole life insurance

Post by simas » Wed Sep 12, 2018 10:50 am

Nate79 wrote:
Wed Sep 12, 2018 10:01 am
Contact the insurance company and complain with written details any negative or lies told by the salesman when they tricked you into buying this policy. I would also threaten them to go to the state insurance commissioner as well as informing every one of your friends, customers, local newspaper, etc of how you were swindled out of your money. If they won't give your money back then follow thru. Drop the hammer on these thieves.
?? are you even serious?! where do you get this information??

his rights (including right to cancel) were and are spelled out in the contract he signed. do not sign contracts and enter into agreements you do not understand. where is zero state commissioner, court, President, God would do on this now unless somehow he did not sign it (salesperson forged his signature ,etc.)

cancel this junk and move on.

simas
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Re: dumb dentist question - canceling whole life insurance

Post by simas » Wed Sep 12, 2018 11:01 am

toothfairy525 wrote:
Tue Sep 11, 2018 10:17 pm
I need some advice about how to handle canceling my whole life policy.
contact life insurance company (not the agent, company). see what procedures they have (which form you have to mail in, etc)
mail in the form
they mail you the check (if there is any cash balance)
start of new year they mail you 1099R for the amount , enter it in your taxes.

fairly simple

Nate79
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Re: dumb dentist question - canceling whole life insurance

Post by Nate79 » Wed Sep 12, 2018 11:24 am

simas wrote:
Wed Sep 12, 2018 10:50 am
Nate79 wrote:
Wed Sep 12, 2018 10:01 am
Contact the insurance company and complain with written details any negative or lies told by the salesman when they tricked you into buying this policy. I would also threaten them to go to the state insurance commissioner as well as informing every one of your friends, customers, local newspaper, etc of how you were swindled out of your money. If they won't give your money back then follow thru. Drop the hammer on these thieves.
?? are you even serious?! where do you get this information??

his rights (including right to cancel) were and are spelled out in the contract he signed. do not sign contracts and enter into agreements you do not understand. where is zero state commissioner, court, President, God would do on this now unless somehow he did not sign it (salesperson forged his signature ,etc.)

cancel this junk and move on.
Yes I am serious. There have been multiple threads on this topic. This is nothing new. If the salesman falsified statements in order to sell the product you can complain and insurance company may offer money back or you can complain to insurance commission who will be VERY interested to hear about false statements by insurance industry.

toothfairy525
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Re: dumb dentist question - canceling whole life insurance

Post by toothfairy525 » Wed Sep 12, 2018 12:05 pm

Nate79 wrote:
Wed Sep 12, 2018 11:24 am
simas wrote:
Wed Sep 12, 2018 10:50 am
Nate79 wrote:
Wed Sep 12, 2018 10:01 am
Contact the insurance company and complain with written details any negative or lies told by the salesman when they tricked you into buying this policy. I would also threaten them to go to the state insurance commissioner as well as informing every one of your friends, customers, local newspaper, etc of how you were swindled out of your money. If they won't give your money back then follow thru. Drop the hammer on these thieves.
?? are you even serious?! where do you get this information??

his rights (including right to cancel) were and are spelled out in the contract he signed. do not sign contracts and enter into agreements you do not understand. where is zero state commissioner, court, President, God would do on this now unless somehow he did not sign it (salesperson forged his signature ,etc.)

cancel this junk and move on.
Yes I am serious. There have been multiple threads on this topic. This is nothing new. If the salesman falsified statements in order to sell the product you can complain and insurance company may offer money back or you can complain to insurance commission who will be VERY interested to hear about false statements by insurance industry.
First, thank you everyone for the replies.

I called this morning and was told me I had a cash value of $97, the guy last week said $1100. I honestly don’t care at this point, it’s just not worth my time. They’re sending all the documents to cancel both policies. I have term life through my job for free. I’m also switching salesmen for the disability so this guy won’t be earning any more commission from me.

In terms of fighting this, I figure there’s nothing to loose. He misrepresented what whole life was to make a sale, and gave me unethical advice re investing to further his commission. As a dentist I treat everyone’s teeth as if they were my own, so I expected the same. But again, lesson learnt.

He wrote I had a net worth of $150k on my application, and when I texted him I would’ve put $10k (what was in my bank account), he said ‘you’re worth that.’ I mean I signed, but it was under the impression he knew what he was talking about and had my best interests in mind.

Should I just send a scary letter to the insurance company and wait to see what happens? And then pursue the state board, BBB, ADA, etc.? I understand $12k isn’t much and really I lucky in the grand scheme of things, but it’s upsetting to see this happen time and time again to dentists and doctors.

bltn
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Re: dumb dentist question - canceling whole life insurance

Post by bltn » Wed Sep 12, 2018 12:42 pm

I would cancel the insurance and drop the matter . Unless you like a good scrap and don't mind dealing with this for the next year.
If you signed the standard contracts , you won t have a leg to stand on. The salesman will claim one thing was said, and you ll claim another.
You ve learned a valuable lesson regarding whole life insurance for the cost of a year s premiums. So you gained some valuable knowledge.
You'll make other investing mistakes in the future that will cost money. Just realize them as quickly as possible to keep your education costs down.
That s what I did. Sometimes I lost more than I should have but it took me varying lengths of time to appreciate my mistakes.
Reading this forum at your age is giving you a good early start.

Vanguard Fan 1367
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Re: dumb dentist question - canceling whole life insurance

Post by Vanguard Fan 1367 » Wed Sep 12, 2018 9:14 pm

I would consider the whole life experience a lesson and move on.

I would also recommend for investing that you ask the Bogleheads here for advice. A periodontist lectured on finances at the Florida Dental Convention a few years ago and recommended that I read Bogle's books. The books have changed my life with investing. You can read his books and also get a lot of great investing advice here. Become a smart dentist about investing!

simas
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Re: dumb dentist question - canceling whole life insurance

Post by simas » Wed Sep 12, 2018 9:23 pm

toothfairy525 wrote:
Wed Sep 12, 2018 12:05 pm
He wrote I had a net worth of $150k on my application, and when I texted him I would’ve put $10k (what was in my bank account), he said ‘you’re worth that.’ I mean I signed, but it was under the impression he knew what he was talking about and had my best interests in mind.

Should I just send a scary letter to the insurance company and wait to see what happens? And then pursue the state board, BBB, ADA, etc.? I understand $12k isn’t much and really I lucky in the grand scheme of things, but it’s upsetting to see this happen time and time again to dentists and doctors.
See the bolded part above. Look, if you have unlimited time (or believe you time worth nothing), you can try to be a test case and come back here years later and many thousands in court/attorney fees to tell us how it went. or , if you want to pay just a few hundreds an attorney for consultation to review your evidence to see if you have any grouns here (which I seriously doubt), you can do that. or attorney politely laughs at you then you know everything you need to know on this..

I do not think you will get anything out of this as there are zero reasons to give you money. what for? you entered a contract, enjoyed your coverage (protecting against risk of death) during that period, now you want out because you think it is a bad investment deal (yes, I think so too). and know that any insurance company will vigorously defend itself in court and you may find yourself wondering if _you_ want to be accused of slander, libel , or other fun things.

Unless you have real evidence that would stand in court proving fraud , your best bet is to move on. there is a reason why there is a pinned thread on this forums asking for people to ignore any permanent life policy 'recommendations' (sales pitches). bad financial deal for vast majority of the buyers of such products. bad deal <> illegal.

pintail07
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Re: dumb dentist question - canceling whole life insurance

Post by pintail07 » Thu Sep 13, 2018 9:57 am

You can get all the premium back. I helped guide the poster you referred to and he got all his money back. I would assume the agent is a New York Life, Northwestern or Guardian agent. I wrote a ghost letter for the guy to send certified to the agent, his boss and the president of the company. They will put up a brief defense but will cave, I promise. The agent lied and the big issue is where is the insurable interest, that should have made the underwriters pause. I will send the ghost letter if you want.

RickBoglehead
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Re: dumb dentist question - canceling whole life insurance

Post by RickBoglehead » Thu Sep 13, 2018 10:31 am

To me, it comes down to whether or not he lied, or you didn't know what to ask and heard what you wanted to hear. As someone else said, you have zero reason to have any insurance. So, back when you bought it, you should have thought then about why you needed insurance.

I'd be shocked if you got back a dime more than the policy's worth. In the future, if you don't understand it, don't sign it. Doesn't matter how busy you are.

Nate79
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Re: dumb dentist question - canceling whole life insurance

Post by Nate79 » Thu Sep 13, 2018 11:07 am

pintail07 wrote:
Thu Sep 13, 2018 9:57 am
You can get all the premium back. I helped guide the poster you referred to and he got all his money back. I would assume the agent is a New York Life, Northwestern or Guardian agent. I wrote a ghost letter for the guy to send certified to the agent, his boss and the president of the company. They will put up a brief defense but will cave, I promise. The agent lied and the big issue is where is the insurable interest, that should have made the underwriters pause. I will send the ghost letter if you want.
+1
Good advice. I'm not so sure they will cave so easily but I would also contact the state insurance agency. They will be very interested to hear the details. Perhaps can cc the state insurance agency in the letter to the company.

Luke Duke
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Re: dumb dentist question - canceling whole life insurance

Post by Luke Duke » Thu Sep 13, 2018 11:19 am

HEDGEFUNDIE wrote:
Wed Sep 12, 2018 12:17 am

+1 to all of this, except I don't think the OP actually needs any kind of life insurance at this point in his life. He has no beneficiaries!
One risk of not having insurance now is that he could develop a condition in the future that would make him uninsurable.

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