Term vs Whole. Need inputs.

[soulless]

I've done my homework, but just curious what others have to say.

1. Parents are 60 and in decent health right now. Bought each a 25k whole life insurance policy. Nothing huge. Just to cover funeral expenses. I expect them to live for at least another 20 years. Currently paying $220/month total for both policies.

2. Sister just joined Primerica and she said Term life is better. She is able to get a 15 year (20 yr not available for people 60+) term life (25k each) for around $100/month. And since I am already willing to pay $220 for whole life, I can take the $120 and invest it. According to her, $120 invested over 15 yrs at a interest rate of 5-9%, I would accumulate around $40-50k.

My main problem here:

- If my parents live pass the 15 year term, which I think they will, the policy is done and renewing would be extremely costly. Accumulating 40-50k over 15 years is not a guaranteed. If I somehow landed in the 30k or under when my parents pass away, I'm screw. Yes, I will be paying more than 50k for the whole life policy if my parents pass away at 80+, but 50k is guaranteed no matter what. I don't think about how much I've paid over the years, but what I'm guaranteed at the moment.

So why is she trying to convince me that the term life + investment is a better idea? Seems to me like, term life policies were created to lapse just before the insured dies and that is why my parents do no qualify for a 20 yr term. If I need to invest extra just to cover my ass then the whole life makes sense. Who's the say the stock market will not crash to the ground on the 14th year from now?

 

[soulless]

I've paid well over $30k for my car insurance in the past 15 years and only made a single claim of $1000 in my entire life. I don't think about the other $29+k I paid to the insurance company.

Why should I care if I will be paying more in total for the whole life policy by the time my parents pass away?

 

[DHK]

Primerica has a cultish mentality regarding anything that is called "whole life" or any other policy that may have "cash values". They have created their entire marketing and insurance sales campaign around "Buy term and invest the difference". However, it is more of a mantra than a strategy, because they don't know and choose to be blinded to the advantages of permanent life insurance.

A small $25,000 policy is perfectly fine and most appropriate for your parents.

Your sister is being taught very naively, and is not equipped nor knowledgeable on how to think about insurance, except to pounce on anything that they have targeted and replace any permanent policy with a more expensive term policy (compared to other companies).

Btw, please ask her to specifically show you where you can earn 5% - 9% realistically and reliably. She is being taught DANGEROUS advice.

 

[soulless]

thanks DHK. The 5-9% interest rate was one of the real red flag for me. Will ask her next time we sit down together about this whole/Term life insurance thing. Honestly, I don't think she know any more than I do about life insurance at the moment. Her mentors were probably throwing stuff into her head right now.

Another red flag was the fact that Primerica DOES NOT offer whole life insurance. Why? My best guess is they know their chances of making a payout is low and will pocket the premium when the policy ends. I am sure a company such as Primerica has done their homework over and over and know they will get more returns vs paying.

Thanks for the video btw

 

[DHK]

I've *heard* that Primerica offers a whole life insurance product that one could convert their term to, but it's like a secret. I haven't found anything on it, but I've heard rumors.

The video goes into some significant depth about investment planning and that "rules of thumb" are just trite sayings.

Now, I would also offer some videos about life insurance, but your parent's whole life policies aren't in that category. On this forum, we would generally call those policies "Final Expense" as they are primarily sold for the death benefit and any cash values are usually minimal over time. They are easier to obtain and generally don't require a medical exam.

If your sister would like to get "beat up" a little bit on the forum, you could send her here, and we can introduce her to the REAL meaning of "Buy term and invest the difference... with me" because that's the complete phrase. It was never a planning strategy, but a replacement tactic. (If she has a thin skin, she can search the forum for BTID and read up on many of the conversations on here rather than engaging us directly.)

1. It assumes that someone can afford a permanent policy for the amount of insurance they should have.
2. They are selling something that is competing against those dollars (like investments).
3. That person has a vested interest in making a sale, but they don't want to have them go without coverage, so "buy term and invest the difference with me".

Unless the agent understands this mentality and has sufficient reasons for the client to keep it, clients are more apt to follow this, even though (I believe) it isn't usually in their best interest.

 

[Newby]

I've done my homework, but just curious what others have to say.

1. Parents are 60 and in decent health right now. Bought each a 25k whole life insurance policy. Nothing huge. Just to cover funeral expenses. I expect them to live for at least another 20 years. Currently paying $220/month total for both policies.

2. Sister just joined Primerica and she said Term life is better. She is able to get a 15 year (20 yr not available for people 60+) term life (25k each) for around $100/month. And since I am already willing to pay $220 for whole life, I can take the $120 and invest it. According to her, $120 invested over 15 yrs at a interest rate of 5-9%, I would accumulate around $40-50k.

My main problem here:

- If my parents live pass the 15 year term, which I think they will, the policy is done and renewing would be extremely costly. Accumulating 40-50k over 15 years is not a guaranteed. If I somehow landed in the 30k or under when my parents pass away, I'm screw. Yes, I will be paying more than 50k for the whole life policy if my parents pass away at 80+, but 50k is guaranteed no matter what. I don't think about how much I've paid over the years, but what I'm guaranteed at the moment.

So why is she trying to convince me that the term life + investment is a better idea? Seems to me like, term life policies were created to lapse just before the insured dies and that is why my parents do no qualify for a 20 yr term. If I need to invest extra just to cover my ass then the whole life makes sense. Who's the say the stock market will not crash to the ground on the 14th year from now?

The term life is just in case they die before you expect them to.

Here are the problems:
1. Investing money is never guaranteed. Your sister is WAY over projecting what the investment will likely do. And you have no guarantee that it won't lose money.

2. If you do buy term they have to be healthy enough to pass underwriting. Way harder to get approved for term than final expense whole life. Might cost more than she is expecting.

3. The good news is: if they are healthy Enough for term, you can buy it at a LOT lower price than Primerica is quoting. They are not usually competitive on the price of their term insurance. And most quality term insurance has guaranteed conversion options to whole-life up to certain ages. Primerica lacks this very important feature.

4. More good news: you are very likely paying more than you need to for their whole-life policies. Let a good broker shop the rate you got and compare it to low priced companies like Oxford, Standard Life, KSKJ, Security National, etc. work with a broker to get a low rate AND professional help on the underwriting.

You are buying life Insurance instead of lottery tickets because you want guarantees. Your broker MIGHT advise you to buy a competitively priced term policy (not Primerica) and SAVE (not invest) the difference if the numbers look correct.

 

[soulless]

thanks. Will tell her about this forum. I'm sure she will learn a few things. She is new to the insurance business after all. Not to mention, I think she made a bad move for joining primerica and think she will rely on it as the main source of income vs full time job. I am sure many succeeded with primerica, but I also know many who gave up/failed.

 

[soulless]

The term life is just in case they die before you expect them to.

Here are the problems:
1. Investing money is never guaranteed. Your sister is WAY over projecting what the investment will likely do. And you have no guarantee that it won't lose money.

2. If you do buy term they have to be healthy enough to pass underwriting. Way harder to get approved for term than final expense whole life. Might cost more than she is expecting.

3. The good news is: if they are healthy Enough for term, you can buy it at a LOT lower price than Primerica is quoting. They are not usually competitive on the price of their term insurance. And most quality term insurance has guaranteed conversion options to whole-life up to certain ages. Primerica lacks this very important feature.

4. More good news: you are very likely paying more than you need to for their whole-life policies. Let a good broker shop the rate you got and compare it to low priced companies like Oxford, Standard Life, KSKJ, Security National, etc. work with a broker to get a low rate AND professional help on the underwriting.

You are buying life Insurance instead of lottery tickets because you want guarantees. Your broker MIGHT advise you to buy a competitively priced term policy (not Primerica) and SAVE (not invest) the difference if the numbers look correct.

excellent input. Thanks a lot

 

[Newby]

excellent input. Thanks a lot

What company are their $25,000 whole life policies with. We can tell you instantly if you should re-shop those.

 

[soulless]

What company are their $25,000 whole life policies with. We can tell you instantly if you should re-shop those.

the 25k whole life insurance i got is from Fedelity. Primerica doesn't sell whole life..