Personal Investments • Questions about Whole Life

Years ago, my parents purchased a whole life policy in my name. I was unaware of the implications or of the minutiae of the policy until a few weeks ago, when this year's premium came up for renewal. It's been 8 years since the policy was bought: 500K death benefit
I met with my agent today, who told me that in the future I would be needing more whole life insurance, not less. He said to leave the finance and investing to him and to leave the medicine to me (I am a doctor) which actually makes me want to cancel the policy even more.

He said that there are 3 benefits to the policy.

• Leverage, being able to use the money as a sort of "loan" and that the interest I pay is actually less since the return on the policy is 3-4% so the spread would be about 2% in the current market rate.

• Tax free benefits: being able to pass on my money tax free

• Being able to limit risk and loss to creditors

I don't understand this idea. I think the main benefit of the 3 that he listed was being able to use the money in a loan situation, can anyone care to share their thoughts? I am also happy to post details on the inforce illustration that was sent to me.

My cumulative premium through age 70 would be: $134,450
Gross retirement income from loans and surrenders: $38,396 for 20 years
Total cumulative after-tax retirement income: $767,920 ($38,396 for 20 years)
Remaining death benefit after loans and surrenders: $427,724

If I were to surrender the policy tomorrow, the cash surrender value would be: $20,313. He is telling me that I have essentially paid up the premium and that any more that I were to add now would be just part of the savings. My $3700 premium is due this May and he told me to add more to it, like $7,000 worth LOL.

Can anyone help me understand whether these benefits of whole life are actually worth it? I asked him why this is needed if I were to invest the difference, he said that most do not have the discipline to do this. Then he talked about points 2 and 3, particularly the leverage. I'm unsure as to how a loan against my own policy would allow me to get a lower interest rate vs just from a bank, but it seemed like that point did make some sense.

I've been a Boglehead since last year and pretty ahead of the game in terms of personal finance so it was pretty patronizing to me to hear someone say to leave the medicine to me and the finance to the "expert"

My goodness! What a condescending jerk you have for an agent! What you've recounted in your post would make me never want to talk to him again, about anything at all.

Channeling the agent - OF COURSE you need more whole life. What a crock of absolute garbage.

You don't give a whole lot of financial information in your post, either about you or about the whole life policy. But if your parents were buying a large whole life policy just a few years ago, that probably makes you someone in your late 20s or early 30s. Is that about right?

You've expressed nothing in your post that would compel you to need life insurance for your entire life. Typical situations where whole life is indicated is when you have a disabled child who is expected to outlive you and you want to provide support after your death, and someone who wants additional liquidity to pay estate taxes after their death.

Otherwise, you need life insurance to provide for those who are dependent on your income (spouse? - children?) and who would be financially hurt by your death. The need for life insurance is often at its greatest when you are young, and diminishes as kiddos grow up and your other financial assets grow.

I wouldn't ever recommend a whole life policy to a young person such as yourself as an "investment vehicle".

I'd recommend that you get an "inforce illustration" directly from the insurance company, or from the agent if you don't mind talking to him again. From the illustration, you'll be able to see the rough surrender value that you have if you were to lapse the policy now. You'll also be able to see the projected growth in the policy if you choose to keep it. It’s likely to return somewhere in the 4% range on the cash value on a non guaranteed basis over time.

I’d advise you get adequate level term life insurance for yourself, which could be a large amount or zero depending on your family situation, and then lapse the whole life policy.

And don’t believe another word from this whole life agent. If his mouth is moving, he’s lying.

Post back with questions.

Statistics: Posted by Stinky — Sat Feb 24, 2024 1:58 pm — Replies 6 — Views 192

---