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Peter Said:

Whole life vs. term--can you prove higher return with whole life?

We Answered:

Whole life: A client of mine owned it since 1978. It is now 2006 and there's only 20,000 in the cash value. The client is now 58 years old and going to retire soon. Do you think $20,000 is enough for retirement? That won't even last for 1 year. So the average rate of return is less than 2%. Remember: To access cash value, you have to borrow it (this is stated in every cash value policy). If you wish to take it all out, you will have to surrender the policy with possible surrender charges (depends on how long you had it). I believe that you don't need life insurance during the retirement years because you have no or very little financial obligations.

With term, premiums are lower than whole life because it doesn't have cash value. So, client should invest the difference in mutual funds. In the past 25 years, mutual funds has perform an average rate of 14%. However, investors rate of return is only 2.9%. Why? Stock market crashes, people tend to pull out. And when the stock market rebounds, people start putting money back in. If they were to just leave their money where it is no matter how the market performs, they could of earn an average rate of 14%. (this is what one of the Legg Mason portfolio managers said and show a graphic illustration).

My client has also invested in mutual funds back in 1993. She made a small deposit of $5000. She now has over $40,000 in it.

So here's comparison base on what my client had:
Whole life: Took over 25 years to accumulate $20,000 (i roll it over to variable annuities using 1035 exchange)
Mutual funds: Took just over 10 years to accumulate $40,000.

Which one do you think is better? Point proven, cash value policies suck and that's why financial experts say you should always keep investments separate from life insurance. This is only done by buying term and investing the difference. When its time to renew your term, you do not need a proof of insurability and you may elect to lower your coverage amount. In case you die, your beneficiary will get death benefit from term and your assets. Compare to cash value policies, your beneficiary will only get one of the above.

(by the way, after showing my client the truth, she now owns Term and putting away more money toward her retirement).

Kenneth Said:

I'm 22 y/o and have been offered term life ins. for 30 yrs @ 55.00/mth and ROP 30 yrs @ 87.00/mth Help!?

We Answered:

At your age, you should look at getting a whole life policy. Maybe not a Million Dollar one, but at least something. It will be very cheap and at least you'll have something when you are old and grey.

You're best bet is to contact in lisensed isnsurance broker that has access to term and whole life and has access to several companies. He will find you the best options to suit your needs and if he's a good advisor he will be able to make an unbiased recommendation and be able to help you with the investing side of things as well.

Buy Term and invest the Rest is not for everyone and should not be used as a one size fits all. Most people that promote that strategy soley, either misunderstand how whole life works or just refuse to be honest about it. Suze Ormand included (she's an entertainer, not a good financial planner...she's on TV because she's charismatic and entertaining...just like Jim Cramer). She's been debunked several times. Take a look at this video where she flat out claims that Variable Annuities are useless, then a caller calls in with a good story about them and she backtracks saying their only good if they have a death benefit...guess what Suze...they ALL have a death benefit. There is also a gaurantee on maturity and they don't cost 1.3% more for it...most are lucky to be half a % difference. http://www.youtube.com/watch?v=rd_3nCENM… Anyone that quotes Suze Orman as a reliable source automatically loses ALL credibility in my books. She's got some decent general advice, but it's not always accurate and it's never good for EVERYONE like she would lead you to beleive.

Read the book "No Salesman Will Call" by Lyle Manery. In this book he takes a critical analisys of the Buy Term and Invest the Rest theory and exposes miscalulations, contraditory statements and misinformation in more than 10 books promoting the strategy.

Darryl Said:

Which life insurance is better?

We Answered:

There is a lot of information missing in order to truly recommend the correct course of action for a real client; however, I will say this: a lot of agents sell on the "buy term and invest the difference" model, but the problem is, MOST people FAIL to invest that difference. Furthermore, if there truly is a life insurance need and they don't have a policy with a conversion feature, you've just sold them short.

Having said that, it would depend on what the life insurance need is. Frankly, if it's a premium issue, I would sell them a permanent policy with a term blend, but I would sell UL, and not whole life, unless they were adamant that their premiums be level. UL gives better return, even with a fixed rate, and they may be able to purchase a cash accumulating UL and use that cash value for investments or whatever later, as long as their policy remains in force. Whole life is expensive when compared to UL on the vast majority of cases. Furthermore, dividends aren't guaranteed.

It would all depend on what the need is, and the client's tolerance for savings and risk.

Rafael Said:

Life Insurance Objections Part One.?

We Answered:

Life insurance can be one of the toughest sales. Life insurance is bought on emotions. Even if you have the answers to all of the questions they'll come up with more objections to get rid of you.

One of the best ways to get around some of these objections is to completely agree with the person then turn it around on them with a question of your own. But you need an original question because they've heard all the responses before from other agents. Which means most of what you'd get on Answers wouldn't be of much value. Sit down with family or a good friend and do some role playing and come up with original responses.

Velma Said:

Second thought about endowment/whole life insurance and some doubt.?

We Answered:

Hi Abhik,

Never consider Insurance an expense. The true function of insurance is risk cover and providing for your dependents. Don't consider insurance as an investment. Investment should yield high returns which insurance will not be able to give you. Investment can always be done in more lucrative avenues.

The bonus is considered separately from your premium. The bonus accrued is part of the profits made by the insurance company by the investments they have made with the premiums earned over the months. You have done the right thing by taking a whole life policy. Its very necessary that how many ever other policies you might take, you should have a pure insurance policy