Whole life insurance pros and cons?

[dreamin_disney]

My daughter just got hired with a school. She went and signed up for her medical benefits.
American Fidelity was also there. She’s 23. She got disability insurance and whole life insurance through American fidelity. The sales person went over it with her but no brochures were given. They are suppose to send info through email. She wasn’t to sure but got it to be safe.

she is 23 years old. Not married and no kids.
whole life insurance is $160.00 x’s 10 months total $1600.00 per year

the coverage is for $200,000

she was told she can keep the policy even if she leaves the district.

there’s also an additional $20 cost for something so total
$180.00 x’s 10 months total $1800.00 per year.

she’s waiting for the paperwork.

can someone explain whole life insurance?
is it good to have?
Does it seems expensive for what she’s payping for the coverage amount Or is that the going rate?

any thought or opinions?

 

[duffybear32830]

Whole life insurance is a total rip off. If she has dependents or someone who relies on her income, then she should get term insurance. $200k coverage would maybe be $100 per year for a 23 year old.

 

[DLgal]

Whole life insurance is a total rip off. If she has dependents or someone who relies on her income, then she should get term insurance. $200k coverage would maybe be $100 per year for a 23 year old.

Not even. I got a $500k 20 year term policy as a healthy 27 year old for $19/month. I got a $1M 30 year term policy at age 39 for $80/month.

OP, advise your daughter to exercise her right to cancel that policy. That is an exorbitant amount of money for such a meager amount of coverage.

Until she has dependents of her own, she does not need life insurance, and when she does, term insurance is the way to go.

Whole life insurance is the biggest scam in the insurance business.

 

[ruadisneyfan2]

I'm no insurance expert but IIRC, the way it was explained to me is that term life ins works along the same lines as say car insurance: you choose the amount of coverage (250k, 500k, etc) and the length of the coverage (10, 20, 30 years, etc) and coverage stays in effect as long as you continue making the payments agreed upon. Usually it's monthly but it may cost less overall to pay quarterly, semi-annually, or annually. Once the term expires, so does the coverage unless you want to sign up to continue.
With whole life, it's more like an investment vehicle. You send them your payments but the money builds in an account which may be cashed out down the road while you're still alive. Both options were presented to us by an Amex Financial "Advisor" which was really not much more than a salesman but we were young. (I was in my late 20s.) Still, I had a well-established retirement account and just looking at how much the whole life insurance earned as it keeps building over one's lifetime, I could immediately tell that I'd do much better with a Vanguard account; all are no load. The Amex whole life insurance had a 5% load right off the top (investment fee) which I felt was a rip off. We ended up buying nothing from Amex and felt like they really didn't have our best interests in mind.
Later, once we had children, we bought dh term life insurance x 20 years which covered him at least until our children were adults. In hindsight, I wish we chose a 30 year term. It was so cheap back then and 25 years later (and older) means the cost was staggering when we tried to get new insurance. By then he had mild sleep apnea and that jacked up the rates 3x. Now he is 64 and only has what's offered through his job because it's so expensive to have a private plan.
When I was young, and our children were too, I always relied on my employer's life insurance plan until a coworker died of cancer in her early 50's. It was so sad. Also since she couldn't work for the last year of her life, she was no longer officially employed by the hospital and she most likely was no longer covered by her employment benefits, so unless she had a private policy, it's too late to get one once you become ill. So because of that, I decided to get a private policy so that if I become ill and no longer can continue to work, I'll still be covered.

If your daughter is very young and just beginning her career, she most likely doesn't need life insurance if she doesn't have anyone depending on her income. That is, unless she had a lot of student loans. Private loans are not forgiven, even in death.

 

[barkley]

Until she has dependents of her own, she does not need life insurance, and when she does, term insurance is the way to go.

the other circumstance wherein life insurance (be it whole or term) is advisable is if the single individual has a parent or other person who is co-signer on a loan. in the case of some refinanced or private student loans wherein parents are co-signers there's no provision for forgiveness upon the death of the primary borrower. in that case it can be very responsible to have the most inexpensive life insurance policy that meets the total payoff (esp. when many young adults have these loans into the high 5 and low 6 figures).

 

[deltadisney]

Go to YouTube and search for Dave Ramsey/whole life insurance, and he lays out succinctly how whole life is a major rip-off, not an “investment” as it’s touted, and how it strongly benefits the agent. I’m biased, because I strongly side with Dave Ramsey on his whole life opinion, but at a minimum, it will lay it out and at least give you/her a few questions to ask your agent to help you/her make a more informed decision.

 

[tvguy]

Whole life insurance is a total rip off. If she has dependents or someone who relies on her income, then she should get term insurance. $200k coverage would maybe be $100 per year for a 23 year old.

That sound about right. Please note, that is $100 per YEAR not per MONTH.

 

[HerRoyalHighness]

My father paid into that crap for YEARS and the payout wouldn't cover his funeral costs. There was nothing "saved". Buy term, invest the rest independently and retire wealthy.

 

[MillauFr]

My father paid into that crap for YEARS and the payout wouldn't cover his funeral costs. There was nothing "saved". Buy term, invest the rest independently and retire wealthy.

Agreed although is the OP's case no life insurance is needed at all.

 

[DLgal]

That sound about right. Please note, that is $100 per YEAR not per MONTH.

That still seems high. But maybe I just got a really good rate.

 

[SteveH]

While I'm not a big Dave Ramsey fan I think this article by him is well worth a read. I knew enough about whole life knowing my brother sold it - my brother never met a scam he didn't like.

 

[clh2]

As others have indicated, term life insurance is the way to go, as far as life insurance goes.

Life insurance should be looked at once she gets into a serious relationship, and there is a house, kids and other significant financial obligations.

My husband’s term policy has expired, my term policy has about 2 years left, it was a 20 year term, for $400K, and was about $350/year. Age and health are considerations are when term policies are priced out. we worked with our financial planners to come up with “how much insurance was needed, and for how long.

The one question I would ask your daughter, does her employer provide life insurance, as a standard benefit? Many employers provide 1 or 2 times annual salary for life insurance. (Although my previous employer only had $20k per employee, and was a joke IMO). So, she should verify if she has this coverage, even though she may not be signing up specifically for it.

 

[BGparadise]

If she is looking for the investment vehicle as well, just get a term policy and put the savings in a retirement account.

My understanding from friends and family that sell universal and whole life policies is that it does not make sense as an investment vehicle until you have exhausted all other tax deferred methods.

 

[mjkacmom]

My husband is a CFP, has been working in the industry for 30+ years. We don’t have any whole life policies, just term, and have a nice retirement plan. He discourages most from buying whole life as an investment. Does her company offer a term life policy?

 

[Mrs. Bradbury]

My sweet MIL was encouraged by her coworker (they both worked at an insurance company!) to get a whole life policy on my husband, who was 8 at the time. It's a $10,000 policy. She recently signed it over to us when she and FIL broke up housekeeping and moved into assisted living and I was shocked to discover that after 50 years, it's still not paid up and the annual premium is $100+. If we cashed it in, the cash value is less than $5000. AFTER 50 YEARS OF PREMIUMS. It's a sensitive subject with my husband right now because he's so upset about his parents going into assisted living, but suffice it to say that after a respectful period of time, we won't continue paying and will cash it in. I wonder if there are tax implications on cashing it in . . .

 

[mjkacmom]

Wow, look at the BBB reviews! Disability insurance really needs a lot of research, have her pull that too. Was this representative a family member of a school employee?

 

[lanejudy]

My sweet MIL was encouraged by her coworker (they both worked at an insurance company!) to get a whole life policy on my husband, who was 8 at the time. It's a $10,000 policy. She recently signed it over to us when she and FIL broke up housekeeping and moved into assisted living and I was shocked to discover that after 50 years, it's still not paid up and the annual premium is $100+. If we cashed it in, the cash value is less than $5000. AFTER 50 YEARS OF PREMIUMS. It's a sensitive subject with my husband right now because he's so upset about his parents going into assisted living, but suffice it to say that after a respectful period of time, we won't continue paying and will cash it in. I wonder if there are tax implications on cashing it in . . .

Wow! My parents (or maybe my grandmother) did buy us whole life policies as children - I don't really know the reasoning. Mine was originally a very small $2000 policy and the premium is about $23 per year; more than 50 years later I believe the value is somewhere around $50K. It's been paid off for at least 3 decades, and it doesn't gain much because the annual premium is so low. I just let it ride, it would be more hassle than it's worth to try and cash in.

 

[DLgal]

My sweet MIL was encouraged by her coworker (they both worked at an insurance company!) to get a whole life policy on my husband, who was 8 at the time. It's a $10,000 policy. She recently signed it over to us when she and FIL broke up housekeeping and moved into assisted living and I was shocked to discover that after 50 years, it's still not paid up and the annual premium is $100+. If we cashed it in, the cash value is less than $5000. AFTER 50 YEARS OF PREMIUMS. It's a sensitive subject with my husband right now because he's so upset about his parents going into assisted living, but suffice it to say that after a respectful period of time, we won't continue paying and will cash it in. I wonder if there are tax implications on cashing it in . . .

Yeah, it's such a scam.

You won't have to claim the cash out on taxes. It's a return of premiums paid, basically, considered like a refund.

My husband, as a brand new 2nd LT in the Marine Corps (22 years old) was preyed upon by Lincoln Benefit Life Insurance and signed up for a $100,000 whole life policy that cost him $100/MONTH. After 7 years, when we had wised up and decided to look into it, and I realized with horror what a waste of money it had been, we decided to cash it out and close the policy. Our cash value was less than $3500 on over $8000 in premiums paid. We considered it a lesson learned.

 

[dreamin_disney]

we talked to our daughter. We asked what exactly is she looking for. She said she got the insurance so if she was to die , become disabled or unable to work, that it would cover medical bills, funeral expenses , pay off her bills or house when when she’s older if something was to happen. She doesn’t want me or my husband to carry the burden of those expenses.

right now , she just turned 23. She got a teaching job. She’s not married or have a boyfriend, husband or anyone special in her life . She has no kids.

she earned her BA and credential in four years , so she saved money graduating in 4 years and not having to go additional time for her credential. We paid for housing. She earned some scholarship so that helped with some of her tuition. She took out only subsidized loans. With covid we saved a year and 2 months of housing . The only student loans is about $9500 and she has that saved in her account and just waiting until May to pay it off .

I let her read all your comments and told her it’s up to her. I think she was trying to do the right thing and leave us some money and to take care of us and not leave us with a burden if something was to happen.

Hubby said we can go check out AAA and see if they have any policy’s or to get more info.

she also got a $50,000 life and AD&D insurance policy through her work for free paid by employer . Anyone know what what AD&D stand for?

disability income protection plan through American fidelity for $40.66 per month for 10 months a year pay

 

[Twilghtsprkle]

we talked to our daughter. We asked what exactly is she looking for. She said she got the insurance so if she was to die , become disabled or unable to work, that it would cover medical bills, funeral expenses , pay off her bills or house when when she’s older if something was to happen. She doesn’t want me or my husband to carry the burden of those expenses.

right now , she just turned 23. She got a teaching job. She’s not married or have a boyfriend, husband or anyone special in her life . She has no kids.

she earned her BA and credential in four years , so she saved money graduating in 4 years and not having to go additional time for her credential. We paid for housing. She earned some scholarship so that helped with some of her tuition. She took out only subsidized loans. With covid we saved a year and 2 months of housing . The only student loans is about $9500 and she has that saved in her account and just waiting until May to pay it off .

I let her read all your comments and told her it’s up to her. I think she was trying to do the right thing and leave us some money and to take care of us and not leave us with a burden if something was to happen.

Hubby said we can go check out AAA and see if they have any policy’s or to get more info.

she also got a $50,000 life and AD&D insurance policy through her work for free paid by employer . Anyone know what what AD&D stand for?

disability income protection plan through American fidelity for $40.66 per month for 10 months a year pay

AD&D stands for accidental death and dismemberment. It pays out if you die due to an accident. Nothing if you die of natural causes.