Is Whole Life Insurance A Rip Off?


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Presented by Brokers Alliance with guest co-host Bobby Samuelson
What is Whole Life Insurance? Is it a rip off, or a benefit I need for my estate plan, retirement plan, or business insurance needs? The hosts will answer those questions and also determine if whole life insurance stands up to other Permanent Insurance policies and even Term Insurance.

Whole life insurance, sometimes called permanent insurance, or ordinary life, is designed to stay in force throughout one’s lifetime. As long as the policy owner meets his or her obligations under the policy, the policy remains in force, regardless of any changes in health that may occur. Unlike term insurance, where premium payments generally increase, as the insured gets older (the chance of death increases with age), premiums for most whole life policies remain level. A portion of each premium payment is set aside to earn interest. Over time, a whole life policy will develop cash values. The accumulated cash values form a reserve which enable the insurer to pay a policy’s full death benefit, while keeping premiums level.

During life, many whole life policies have provisions to borrow a portion of the accumulated cash
value. If a policy is terminated without the insured dying, there are various surrender options for
the cash value available to a policy owner.

Policy loans: Almost all whole policies permit the policy owner to borrow a portion
of the accumulated cash value, with the insurance company charging interest on the loan. The rate
charged to borrow the funds is often lower than current open market rates. A policy loan will
reduce the death benefit payable if the insured dies before the loan and any interest due is repaid. A policy loan will also reduce the cash surrender value if a policy is terminated. If a policy lapses or is surrendered with a loan outstanding, the loan will be treated as taxable income for the current year, to the extent of gain in the policy.

Policy dividends: Whole life contracts classified as “participating” offer the possibility of policy “dividends.” Such policy dividends are not guaranteed, and represent a return to the policy owner of part of the premium paid. A dividend may be taken as cash or a policy may offer a number of other ways the dividend might be used:

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25 thoughts on “Is Whole Life Insurance A Rip Off?”

  1. Except for the endowment date of the contract, the death benefit DEFRA
    corridor exceeds the cash value, so the death proceeds are greater than the
    accumulated cash values.And in more cases the death benefit is tax free.

  2. that was not the point i was making..the point i made is the WL company
    isnt gonna give the deceased family the face amount(DB) ALONG with the
    CV…ive seen countless policies that stated that clearly, but the family
    was told they would get both..the entire basic purpose of ANY insurance is
    to replace..not to make people wealthy

  3. Ummm… No. If you select death benefit option 2 you receive the DB and CV.
    CV isn’t mean’t to be saved up and received upon death. It’s meant to
    provide liquidity in times of need. If you don’t like that, then chose DB
    option 2.

  4. Yay! Your money will be there but guess what you get to take it out as a
    loan at whatever ridiculous rate the insurance company states in the
    policy. That sounds like a deal to me.

  5. Tell the whole truth to people. 1-4 years no money goes into the savings
    account. 2. if they want to borrow THEIR OWN money they have to pay 6-8
    percent on their money. 3. you only pay 1-4% and inflation is 3%. 4. if you
    die, you lose what is in the cash value. Tell the people the whole truth
    about your product and it will never sell.

  6. Absolutely ridiculous. Why should you borrow YOUR OWN MONEY? Who cares
    about a “low interest rate” (6-8% low??) to access you own money? You paid
    for your cash value. Plus you have no value in your account for 2 years
    minimum. Minus 200% interest minimum! Plus you will either get the
    insurance portion or the cash value portion, NEVER both! It is a rip off.

  7. Anyone who thinks whole life is a good idea, check out the 1979 Federal
    Trade Report on Whole Life. Easy to find on the Net. It’s from the
    government’s own investigation. It’s ugly.

  8. You can surrender the policy for all of your cash value, but what is the
    point of getting life insurance just to borrow back money later or cash it
    out. Some companies offer a deposit fund with guaranteed interest rate
    which works like a savings account.

  9. Many whole life company’s illustrations show three different scenarios. The
    guaranteed rate (no dividends), a mid-point dividend and the current
    dividend. In answer to your question why whole life sales people don’t show
    a lower dividend – it’s simply because it’s built in to the illustration
    software already. You can’t manipulate the return or dividend in this case
    as you can in an IUL illustration product. The agent is not able to create
    an outcome – which is a dangerous practice.

  10. The first lie is that whole lie (I mean Life… sorry I left the “f” out)
    is that Whole life started it all. Wrong. The history of Life Insurance
    proves that in the beginning there was only term. Whole life was created
    after many years for three reasons, none of which were in the favor of the
    consumer.

  11. No Stephen, your ignorance is showing. In no circumstance does a whole life
    policy pay the cash value at death. It becomes part of the death benefit.
    You know it, I know it, and Kathy surely knows it! That is why “Buy Term
    and Invest the Difference has been kicking whole life butts for over 30
    years.

  12. Bottom line, buy term. that is the smartest way to be protected. do not buy
    trash value insurance, NEVER. Term is the best. period

  13. I bought my WL policy since 1995 and paid until 2010 still pay that time,
    my Agent told me only 9 yrs will pay off, is that possible? NO. I looked at
    my dividend drop from $147 in beginning to $37, I stop and transfer to IUL
    product. I gain so much back …

  14. Dividends are a over payment of premium, which aren’t guaranteed. Not only
    does that mean you’re over paying, it’s not even 100%. Not including all
    the other crap with these crappy types of policies. Borrowing your own
    money, expensive, low rate of return on cash value..etc. just crap.

  15. Also, the emphasis on the dividends..c’mon guys. The client is already
    paying 10X as much for the same coverage as of a term policy. Whole life
    makes no sense, anyone selling them knowingly is a scum bag.

  16. Does everyone agree that there is no need for permanent insurance? Term
    expires. UL has a lot of moving parts and perpetual expenses. What else is
    there?

  17. Life insurance is not supposed to protect you in old age. It is to give
    income to a young family in case the main breadwinner who brings in the
    income dies. All this talk in the comments below about an 85 year old not
    being able to get insurance is ludicrous. This is how life insurance
    salesmen scare people. Your supposed to build up assets and save your whole
    life. You should invest in index funds or real estate. Life Insurance is
    not a way to build up assets. It is useless. Maybe whole life insurance can
    maybe be used to extremely wealthy families with estate taxes that need to
    be paid, but for anyone with a net worth below $10 million there is no need
    to ever touch a whole life insurance product. 

  18. I have learned that the more opinions I read or listen to, the more I
    realize that many people do not know jack.

  19. Life insurance is for the young and the old. Burial expenses and the living
    spouse can sometimes be left without financial stability. 10,000 / 20,000
    can be a huge help. With retirement age going up from 62 to 65 and possibly
    increasing over the next few years, life insurance is recommended for
    anyone that doesn’t have a big savings account. The older a person gets,
    the more frail the body gets. Medical expenses can sometimes interfere with
    saving up for burial expenses. We are all headed that way, the best thing
    to do is be prepared. Burial expenses can take a toll on the family, which
    is the last thing anyone would want to be remembered by. My advise is to
    research the products and make a educated decision for your individual
    needs and beliefs. God bless you all.

  20. If you are sincerely writing and working with families up to the high end
    ranges you will then understand the value of whole life insurance.
    Otherwise you will not understand its value. Suzi does not understand the
    value of whole life. Its a shame. 

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