That costs $1 million right now, but the price goes up every year. He wants to endow a chair at his medical school. Joe really wants a guaranteed death benefit to fund a specific need at his death. Let's go through seven case studies just to demonstrate. While whole life has its pros and cons, there are a handful of reasonable and appropriate uses of a whole life policy. I have zero problems with someone buying a whole life policy that they really understand and really want. Buy as many policies as your heart desires and your wallet can afford. If someone really understands how a whole life policy works and they still want it, I say more power to them. Surely Someone Likes Whole Life Insurance, Right? You don't have to sell very many of those a month to have a very nice life. Now you know why they were giving you such a hard sell. If you buy a policy from an agent that has $40,000 per year premiums, that agent was paid something like $20,000-$40,000 to sell it to you. Whole life commissions are 50%-110% of the first year's premium. Agents do not understand the chart above because most of their financial education was provided by the insurance company they work for.Whole life insurance pays really high commissions, and people do what they are incentivized to do. ![]() The most cynical among us consider the first reason to be the most important, but I think the second actually has more to do with it: If whole life insurance is only rarely the best product for a given need, why does it get purchased so often? There are two primary reasons, and both have to do with the sellers of the product. ![]() For example, here are some of the potential uses of a whole life insurance product and what is usually a better alternative (you can click to enlarge): They simply use the money to buy better financial products for whatever their financial need or want may be. alternatives for various financial tasks, very few people actually want whole life insurance. What do I mean by a “product designed to be sold?” Well, once people understand how a whole life insurance policy works and its performance vs. Whole Life Insurance Is Designed to Be Sold However, given the persuasiveness of those who sell whole life insurance, it's important to understand the reasoning behind that answer of “no, it's not worth it.” Let's get into the long answer. So, the short answer to whether whole life insurance is worth the premiums you pay has to be, “No, it isn't.” It's rarely the best use of someone's extra cash, even if they are a physician. As a general rule, it is a product designed to be sold, not bought. Whole life insurance is a life-long life insurance policy that gradually accumulates cash value that can be accessed by surrendering the policy or borrowing from the insurance company at pre-set terms with the cash value as collateral. ![]()
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