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In Reply to: Re: Re: Re: Comparing Term Life Policies posted by MA_Agent on August 15, 2001 at 06:42:01:
: Do you know that only 3% of all term policies result in a claim? Talk about lost money.
Actually, the money isn't completely "lost". You can use the basis to convert an equal amount of taxable or tax-deferred income into tax-free income.
I recall people complaining about whole and how expensive it can be, however, over a 15 year time period, it can be reasonably assumed you'd recover your cost. Beyond that, living benefits will begin to accrue, such as increasing dividends, aiding to provide retirement income.
MA_Agent, it seems things always loop back around to the never-ending term vs/whole life debate. So, let's take joeseph's August 8 post (RE whole life) as a case study. He has been paying $1,800/year for a $250,000 WL policy for the last 15 years. Today, his CV is $43,600...and total DB is $277,000. What could he have done differently:
1. BTID -- $1,800 - term premium of $280 =
$1,520 to invest in a qualified plan. Compounding
at 9.5% (11% long-term market average annual gain
minus 1.5% fees) he will have $46,421 in the plan. Plus, assuming a 32% tax bracket, his tax savings will be $486.40 annually. If this is invested also, he will have $14,854 additional. In total, he will have $61,275 in his IRA, TSA, or 401(k), NOT counting any employer match.
2. BULID -- If he had used a minimum-funded, guaranteed UL instead of term, his annual premium would be $450 instead of $1,800. Using the same math, at the end of 15 years he will have $54,422...plus CV in UL of $4,836 running at current experience including 6.5% interest...for a total of $59,258.
Fairly close either way, but the UL has additional advantages over the term. In either case, he has a lot more than the $43,600 WL. So, please tell my again why he is better off with WL and why it is such a good "investment".
: My problem with Primerica is this: I had a family member who bought the policy, and it has provided some protection, and due to his current condition, it would probably be unwise to get rid of it. However, he is paying more than he should, and on an increasing annual basis. And, it ends in his mid-50's. It would have been far better to convert this to whole life and begin funding a nest egg for retirement, if not now, then in the future. He won't have much to protect him thereafter, and he still has other debts to pay should something happen.
Or, he could have bought a quality term policy rather than PFS' stripped-out stuff...converted it to a low-level UL...and used the difference to fund a good disability income plan.
: The other issue I've encountered is that people who tend to buy term insurance, don't really know why they bought it, don't know the recommended amount or were sold by some friend doing Primerica part-time, telling them they needed it. I don't know how many people I've encountered that have said they "bought some policy off a friend who was offering it and suggested I take it."
That's part of an insurance industry problem...
not just Primerica. Agents are trained to sell insurance on a "trust me" relationship basis...
not help people be good consumers and good stewards of their insurance provisions.
Would you take investment advice from a friend, doing it part-time, recommending you invest now for your retirement without really considering why or how much you should invest?
Apparently PFS does it all the time though Smith Barney...so I guess a lot of unfortunate consumers have at least two strikes against them with Primerica. Throw in a refi mortgage, and they're OUT!
Both are financial vehicles that need to be adequately measured and purchased and aligned with their corresponding needs.
These are educational issues...but, if every consumer knew how insurance worked and where the money goes, the industry would have a much harder time making money by getting them to overpay.
Just my observations on some interesting points you made, MA_Agent.
Take care...hindi