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Is Whole Life Insurance a good investment?

I keep reading that Whole Life Insurance is a bad investment. Can someone elaborate? What Life Insurance is suitable?


Answers and Comments

Richard Stumpf
August 12, 2020

Are you asking about life insurance or investments?  All life insurance is a bad investment, from an investment point of view.  You would be better off sticking to traditional investment vehicles, stocks, mutual funds, etc.  But from an insurance perspective, the more important question is what is your goal for the insurance.  If you are looking for the biggest bang for the buck (young family needing protection), then you use term.  If you are looking estate planning, then you use whole life or universal life for the set lifetime premiums.  Yes, some insurance policies have "investment" capabilities, and even tax advantages, but they are only appropriate if you have all your other insurance and investment needs taken care of first.

Robert Bell
August 27, 2020

Having a Whole or Ordinary Life Policy would be considered a very very conservative investment. It would be similar to owning gold. You may not earn as much as other investments but it is safe and your cash value (if you take it) is tax free. If you are needing life coverage and want to build a retirement fund I would suggest another type of life policy. A knowledgeable adviser will understand what you are searching for if the adviser reads this paragraph.  

Terrence Wittman
October 19, 2020

As the 2 people above have saiad, there are many different types of "Life Insurance". Are you asking about "Whole" or "Permanent" Life Insurance? Also, to say Permanent Life is a "Bad" investment is simply not true, if set up correctly. If it was so bad, why do the wealthy own a ton of it?! Since there is so much to discuss, if you still need help, please reach out to me and we can connect and I can work with you on the proper plan. 

Gary LoDuca
Gary LoDuca
October 22, 2020

If you're looking for life insurance protection and growth of cash value, not really.  We offer an alternative that combines a specialized Index Universal Life (IUL) policy that minimizes death benefit and is funded up to maximum limit to avoid creating MEC.  A client commits to fund 5 annual payments ($20,000 annual minimum) that is combined with 75% match funding from non-recourse bank financing.  It's available to individuals who under age 65, in reasonable health and have at least $100,000 in annual income. 

An example would be, 45 male in good health who funds $25,000 for 5 years ($125,000 total contributions) gets $1,037,440 initial death benefit and has opportunity to create $56,158 per year in tax-free income (from policy loans) starting age 65 through age 90. 

We have a simple online calculator that is available to run your own calculations if you'd like to see what is possible.  Contact our office and I can explain how simple it is to run.    

Todd Anderson
Todd Anderson
October 22, 2020

It looks like my peers are doing a really great job of confusing the issue and question.  First off whole life is not an investment.  It's life insurance.  The entire premise of life insurance is to buy you time.  Time to pay of bills, build businesses or accumulate.  If you have enough time, you can accomplish all of these things.  If you end up on the front of a Mack truck and you still want some of these goals to come true, that's when insurance proceeds walk in to help pay those bills.  The question of what type of insurance is really as simple as how long is it going to take you reach your other goals and would you like to buy some dollars at a discount to make sure they regardless of whether you're around to see it.

Jonathan Eleser
October 23, 2020

Hello, so there are different ways to answer the question. I'm assuming you are referring to using Whole Life as a means of accumulation of wealth though. With that in mind, it is not an investment at all. I'm saying this with the same reasoning as why the IRS does not tax dividends on life insurance policies. The accumulation and payout of life insurance dividends is quite literally "a partial refund of over funded premiums". Any growth of cash value balance is merely the result of over paying for the policy and the amortization adjusted interest credited to the account is below inflation. 

If you want growth, they are quite possibly the most expensive and least useful tools out there. If you want security in your investments, there are far more efficient and prudent tools. 

 

Let me know if you have any further questions. 


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