Is Whole Life Too Expensive?

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When I started in the life insurance business in 1995, new agents that came into the insurance business worked for one company.  These companies were referred to as captive companies or career companies.  The agent would be able to offer products from that one company and no one else.  At the time this was ok.   That is how the life insurance business was done.  Most products were very similar and there really weren’t a lot of options anyway. There was just not a lot of competition.  Term life insurance was also more expensive than it is today so many chose whole life insurance to protect their lives.  But is whole life too expensive?

It all depends on how you look at it.  Are you using the policy for pure life insurance protection or will you use your whole life insurance policy as a Bank on Yourself program.  Many of our clients use whole life insurance to finance their life.  You can build up enough cash inside your policy to finance cars, homes, college and even retirement.

The life insurance arena has really changed over the last 20 years.  Although whole life insurance has always been the most sold life insurance product available, is it the smartest policy for everyone?  We are now seeing more and more varieties of term life insurance products offered by the life insurance companies.  There are even many life insurance policies with no medical exam available. This makes buying life insurance an easier choice.  We have products that can fit most budgets and offer much more coverage than a whole life policy ever could.  We realize that whole life insurance is not for everyone. just ask Dave Ramsey about life insurance.

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Term life insurance is evolving for the better.  Today we see cheaper rates, longer term periods available, return of premium term, policies with family riders, and better conversion options.  We can insure 80-year-olds with term insurance and even have term life insurance policies for our older clients that will keep premiums level to age 90.  Some of the more popular term life products we are seeing are the living benefit term policies.  These policies will pay a lump sum benefit if the insured has a chronic or critical illness.  This is a huge benefit that can keep families financial secure in tough times.   I know many who could have benefited from having one of these newer term policies with living benefit coverage.  As a matter of fact, we offer the newer living benefit policy to all of our clients.

Living benefits on a term policy will pay a benefit when the insured has a critical illness such as a heart attack, stroke or cancer.  The policy will also pay a benefit if the insured can’t perform 2 out of the 6 activities of daily living.  Medical expenses are the number one cause of bankruptcy filings today.  A living benefit term policy could actually pay off a mortgage or other debts due to a severe critical or chronic illness. Don’t let health issues stop you from getting the coverage you deserve.  There are companies who offer life insurance for people with heart problems.

Here is the rub.  I spent my early years with a couple of captive carriers, so I have seen the brainwashing first hand.  Whole life insurance is a very profitable product for life insurance carriers.  These captive companies spend a great amount of time training new agents on how to sell life insurance.  Mainly whole life insurance.  Most of the newer agents coming in are young therefore most of their clients will be around the same age.  In most cases, our younger clients really need term life insurance and a lot of it.  Our younger clients are usually not making a lot of money yet, they may have young children, new home mortgages, car loans, student loans, you name it.  Whole life insurance just doesn’t fit into everyone’s budget.  This could be the perfect time to consider a term life policy or a less expensive permanent policy called indexed universal life insurance.

Is Whole Life Too Expensive?

So I was recently introduced to a movement to educate consumers about whole life, by Chris Huntley of Huntley Wealth.  Chris is very passionate about spreading the word and educating his clients about the different types of life insurance.   What a great idea.  The whole life rebellion story needs to be told and what better voice than actual life insurance agents.  At the end of the day, the decision is all yours about what type of life insurance you will buy.  Hopefully, this rebellion will help make more informed consumers out of life insurance shoppers.

When you get down to it, whole life is really expensive.  I ran a quick quote on whole life insurance from a leader in the industry and compared it to a 30-year term policy from another leader in the term life insurance space.  Here is what I found:

MetLife whole life premium – $9950 per year

Banner Life term life insurance premium – $913 per year

If you are a 30-year-old male in preferred health and need $1 million of life insurance coverage, a whole life policy with MetLife can run you $9950 per year while a 30-year term policy with Banner Life is only $913 per year.  The MetLife policy will cost over 10 times more than the term life insurance.  And yes, there is a cash value build up in whole life.  In this example of a MetLife policy, the cash surrender value in the 10th year is around $90,000 and that is assuming a 5% dividend rate.  There have been many years that dividends have not been paid by whole life companies or dividend scales have been decreased.  This is another case where whole life insurance just doesn’t make a lot of financial sense.

Deciding Which Kind Of Policy Is Best For You

It’s important that you purchase the right kind of life insurance plan to give your family the money that they need. There are dozens of different factors that you’ll need to account for when deciding if a whole life plan is right for you. Luckily, there are several other kind of plan that you can choose from if a whole life insurance plan doesn’t work well for you.

As we mentioned earlier, term life insurance policies are a popular alternative because they are much more affordable, but another option is to buy a no medical exam. As you can guess from the name, these no medical exams will allow you to purchase coverage without having to undergo the exam because you’re approved for the plan. There are several advantages and disadvantages to these plans compared to whole life plans.

The most notable benefit is that you can get life insurance coverage much quicker than you can with a whole life plan that requires a medical exam. With a no medical exam, you won’t have to wait for the insurance company to review your medical exam results, which means you can get life insurance in a matter of days, versus the month that it could take with a normal plan.

There are a few pitfalls to these plans, that may hinder the effectiveness of your plan. With a no medical exam, the coverage is going to be more expensive than a plan with a medical exam. The purpose of the exam is to give the insurance company of your health. Without that picture of health, they are taking a great risk, which means higher premiums.

Another significant disadvantage with these plans is that you may be limited on how much life insurance you can purchase with a no medical exam. Most insurance companies are only going to allow you to buy $250,000 worth of life insurance. For most families, this isn’t going to be enough protection.  It’s important that you give your family enough resources to get through the difficult time.

It’s important that you understand all of your options and the advantages of each type of plan. We know that finding the perfect insurance plan can be a long and difficult process, but it doesn’t have to be. Our agents can help you compare dozens of plans.

You can’t predict the future, which means you shouldn’t wait any longer to get the life insurance protection that your family deserves. If something tragic were to happen to you, they would be left with all of your debts and final expenses, which can make the whole situation a thousand times worse.

If you have any questions about whole life insurance or any of the other options, please contact us today. We would be happy to answer those questions and ensure that you’re getting the best plan to meet your needs at an affordable rate.

Whole life plans are a great option for some applicants, but everyone is different and has different life insurance needs. It’s important that you find a plan that fits in your budget and meets your preferences.

The bottom line is that you should explore your options.  Independent life insurance agents like Ogletree Financial have your best interest in mind.  We offer many competitive term life insurance products.  If you don’t know what type of insurance you should buy or how much life insurance you need, we can help you. We have clients all over the country just like you that benefit from our help.  You can start by generating a quote right here on our website.  We can walk you through the rest, just give us a call or leave us the best number to call you when you are completing the quote request.

Not ready for whole life insurance?  Just want a term life insurance policy?

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