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Rich E | Whole life question? |
i hear the old addage "buy term and invest the difference" all the time on this website and many others. its seems to be a very popular saying but how come at the company im about to start working at (guardian insurance co), almost all the planners there buy whole life insurance as well as heavily promote it. i know for a fact that most of them do actually contribute to large whole life policys. seems to me if these policys were truly innefective than the people who sell them and truly understand them wouldnt swear by them and also buy whole life policies for themselves. I hear very good things about guardian whole life. any comments on this? |
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insuranceguytx
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Rich
You have a lot to learn about the way insurance works and the way that insurance companies work. If you want to be an effective and competent insurance agent, find a mentor who can help guide you and continually work at improving your knowledge of insurance and financial issues.
Guardian is a good company but every company has good and bad apples.
Term Insurance as well as Whole Life are TOOLS - each tool has its own best use. When used for a different use, that tool tends not to perform well.
Keep in mind that what is good for Client A may not work well for Client B. What works for Client A TODAY may not work well TOMORROW. Many things change throughout a client's life. The products change too.
Also be aware that there are no laws against owning more than one insurance policy or more than one type of insurance.
Sad Soul and Mark S (above) are giving you a very slanted view of insurance.
Good Luck.
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mbrcatz
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Oh, I believe it. Because the sales guys are TRAINED on the "benefits" of whole life. They're trained that a "forced savings plan" is best. That people can't (and in some cases it's true) invest on their own. That if the goal is to "leave a legacy", it's better to leave a sure legacy of a life insurance policy, than it is to trust your own investment strategy.
With whole life, you're PAYING for a service - the whole lifetime savings plan. You actually pay through the nose. When people "run the numbers", you can see how profitable it is for the agent and the company - ESPECIALLY when you consider that the average life insurance policy is in place for ONLY FIVE YEARS, then it lapses, and the process starts all over again.
Are they inneffective? No. They ARE providing you with life insurance. It's the MOST EXPENSIVE life insurance out there, but the product is solid, and real.
Guardian is a decent company. If your financial goals are BEST met with a WHOLE life policy, Guardian isn't a bad company to go with.
It's just that most of the time, for most people, the GOALS are met just as well with alternative products and methods (buying term, investing the extremely considerable difference). |
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Financial JUSTICE
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The answer is simple, Guardian Insurance Co and like many others have only one thing in mind and that is making huge profits. If you do the math, you see why companies rather promote whole life insurance or universal life insurance than term insurance. Its because companies make huge profits by selling very expensive life policies. The agent that sells it gets a nice paycheck as well.
There is nothing good about whole life or any cash value life insurance, no matter what company it comes from. It benefits more toward the company and the agent than it does to the consumer. You probably understand the inner workings of whole life insurance, but if you don't, here are general facts about whole life insurance:
1) They are expensive life policies.
2) Cash value has low rate of return of 1-3%
3) You may borrow the cash value and pay loan interest of 6-8%.
4) You lose all cash value upon death.
I don't know about you, I rather spend less money on life insurance by going with term insurance than spending more on cash value life insurance. No one in their right mind want to spend more money on any type of insurance, whether its auto or homeowner or life insurance. |
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aaron p
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All agents buy their own products. If they don't, it's hard to sell it. They also get their own commission.
The fact of the matter is that regurgitating generalized advice to individuals is a disservice - whether that be 'buy term, invest the difference' or 'our dividend is high and our company is stable....' The one area that a properly funded WL out paces other types of policies is in the guaranteed cash value. Maybe all of your future co-workers are incredibly conservative. Maybe they just need to buy into the company philosophy before they can sell it to other people.
Don't worry though, Guardian's not unique in pushing its ideals onto the agents. All career companies do it. That's how they convince you that sending a disproportionate amount of your business to that company is the right thing to do. Still the best place to get trained. Just eat the olive and spit the pit. |
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Mark S
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Check the below listed website. Someone who is unafiliated with the industry. Check on yahoo finance also.
There are five rules to ALL whole life policies, some may have all five some may only have two or three.
1) In the first two years, there is NO cash value, even if you sink a couple grand into it to start, that goes to fees and the agents' commission. Have seen it where I work.
2) When they do begin to make money, you will only earn between 1-4%. Even in Universal and Variable Universal Policies; again, most goes to fees and agent commissions.
3) Money can be taken from the cash value, but as a loan. What you will hear those agents say is that this is tax free. It is only tax free because it is a loan. If a loan is outstanding when a person dies, the family gets face amount minus loan plus fees and interest. You will be charged between 6-8% on this loan.
4) The company can make you wait for up to 6 months to get your money back. Yep, this really seems like this is your money. Why can't I take my money out when I want and without paying a fee? The money in the cash value, then, is not my money but the company's money.
5) You pay for two and only get one. Meaning, you pay for a death benefit and a savings thing, but when you die your family chooses between face amount and cash value. Or you can pay more, to both the company and agent, so your family gets both. HHHMMM, something smells fishy!
The agents are fol;lowing what many sales trainers say, including Zig Ziglar, you will have better sales results if you own what you sell.
It does not matter which kind of whole life we are talking about, the cash value CANNOT equal or exceed the face amount of the policy. Why? Because then there would be a taxable event. The only time they equal is when the person is 95-100. They will receive the face amount, in cash, and the insurance will discontinue.
Check out Dave Ramsey, Suze Orman about cash value or term insurance. |
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Mr. Greg
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The reason they promote and buy them is because they receive the commission off them. There are two reasons for buying their own policy. In one sense, they get the policy at a discount since the sales charge or commission goes back to them. Two, their production numbers go up. Insure themselves and their families... it may mean a bigger bonus or higher ranking on the charts.
Are they bad? Not necessarily. I used to work in the industry and I own a limited pay whole life product. It's good for starting off when you're young because it's like forced savings + life insurance. Sure you get less life insurance for a whole life policy, but if you're young you typically don't need as much. Also whole life sticks with you for the rest of your life considering you pay your premiums or have your dividends pay it. Lastly, any withdrawls are tax free. This is great for anyone who's maxed out on IRAs/401ks/other tax free investment vehicles.
Ok, now for the downside. The phrase "buy term and invest the difference" does hold true for most people. Given that you can accept a moderate level of risk and earn on average 10% in the market, why would you buy a whole life policy and earn approximately 5%? Typically you can buy term insurance which is often times less expensive than whole life and you can get a lot more insurance. Assuming you get the 10 % over time by investing the difference, when you reach retirement age (usually when you're not eligible for reasonably priced insurance) you should have enough saved to negate the need for life insurance.
Another downside is any withdrawls you take from the cash value of the policy are considered loans. With a loan comes an interest rate, but you usually pay some of the interest back to yourself. Sometimes the company lets you pay all the interest back to yourself (but usually not). So in essence you're paying money to borrow your own money and this interest rate will not go away unless you pay it back in full.
The last major downside that I can see is that while whole life policies can stay in effect until you die, The amount that's paid out is usually insignificant. For instance, my grandmother took out a policy on my mother when she was born. It was paid up in a fairly small amount of time. Now she has a $500 death benefit and has a cash value of 3,000. One thing i don't know is how much my grandmother paid for the policy. However, you can see that $3000 won't pay for much today. She would have been better off sticking it in the stock market. A $25000/$50000 policyis probably not going to be much by the time you move on to the next place.
Overall. They're okay. I wouldn't swear by them but I wouldn't say that they're bad. Knowing what I know now, I'd probably go with buy term and invest the difference. |
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