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  1. #1
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    Feb 2009
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    Michigan
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    Whole Life Insurance is a scam!

    Hey i wanted to post something as a scam (my first thread!) YEAAAHHH. And what better to post than the worst possible way to be insured on your life. I will list the 5 biggest reasons its a huge rip-off for the amount of money you spend!!! If you dont know about whole life (cash Value) Insurance, you might have been sold on it because they claim it has an "investment" feature and it "builds cash value" Well it does.... for the insurance company. The average rate of return the banks and insurance companies are getting is about 12% (S&P 500 over any continual period of 30 years has averaged 12.94%) so just remember this.

    So to begin:
    1. Your "Cash Value" Doesnt begin to grow for the first 0-3 years. With this type of ins, you are guaranteed nothing up to the first 3 years... not the best investment.

    2. You will only earn 1-4% interest on your money, even though i said above what the ins. companies are getting back with your money:freak3:

    3. When and if you have any cash value built up in your policy - They say its "your cash or your money" But if you ever want to take it out to use it since its yours, its considered a loan against the policy. What do loans come with - interest - at 6-8%. So you earn 1-4% and when you want to use whats yours, they charge u 6-8% to use it...again this is a great policy.

    4. If you would ever need to use this cash value, the insurance companies have a right to hold that money and not release it to you for up to 6 months. Say the market is booming and they are making great returns, they will hold your money as long as they can to yeild THEM the best profits.

    5. You only get Option A or Option B. To explain this: when you buy a whole life policy you have a face value (death benefit amount) and you build cash value the longer you pay into it, normally till age 100. So when you die... if you have a $50,000 face value policy with $30,000 of cash value built up in it, you get one or the other, option A or option B. Where does the other money go? Where do u think.
    Last edited by turbobird14; 02-24-2009 at 05:37 AM.

  2. #2
    Join Date
    Nov 2007
    Posts
    12

    Re: Whole Life Insurance is a scam!

    Turbobird14,

    Sounds like you are halfway describing Universal Life. What you have described certainly is not Whole Life.

    Insurance companies cannot take premiums and invest it in the stock market. They are required by individual state laws to hold so many dollars of principal in reserve accounts versus so many dollars in liability. They aren't getting 12% and passing on 1-4%.

    The average rate of returns on various market indices is not 12%. The s&P 500 did this once over a 19 year period, from 1984-2003. The Dow Jones finished the 20th century (1900-2000) with an annualized rate of return of 5.3%. Wall Street, in a marketing effort to sell the American people their products, have tried to convince us the markets do 12% a year.

    As for your other points:

    1. I am 25. I have nothing to access in my Roth IRA until I am 59 1/2. Is a Roth also a bad investment? BTW-there is no guarantee you won't have cash for 3 years in a whole life. It is different policy to policy and depends how you fund the policy.

    2. Whole Life insurance has minimum guaranteed interest on cash value. Most companies guarantee your interest will never be below 3-5%, but is often higher. On top of that cash value growth, whole life also pays a dividend to the policyowner, which would grow around 1-4% if you chose to let the dividend stay in the policy.

    3. Cash Value is necessary in life insurance. It is simply how it works. Take it out and you will lose death benefit. Insurance companies realize this and are good enough to let you keep both the death benefit and the cash value. They simply charge a fee for your loan. BTW- this is done all the time in real estate (called a 2nd mortgage or home equity line)- so are houses bad too?

    4. Show me a case where someone asked to withdraw the cash from the policy and the company said "We will, when we feel like it." As far as "market is booming and they are making great returns" - again, companies don't invest your premiums in the stock market. They hold it in very conservative accounts like bonds and cash and if bond yields go up then they pass it on to you. Insurance companies do not, I repeat do not, make money by investing your money in the market and giving you a small piece of the pie.

    5. Whole Life does not have Option B. You are confusing this with Universal Life.

    Where did you get your information?

  3. #3
    Join Date
    Jan 2009
    Posts
    63

    Re: Whole Life Insurance is a scam!

    Quote Originally Posted by RegRep View Post
    Turbobird14,

    Sounds like you are halfway describing Universal Life. What you have described certainly is not Whole Life.

    Insurance companies cannot take premiums and invest it in the stock market. They are required by individual state laws to hold so many dollars of principal in reserve accounts versus so many dollars in liability. They aren't getting 12% and passing on 1-4%.

    The average rate of returns on various market indices is not 12%. The s&P 500 did this once over a 19 year period, from 1984-2003. The Dow Jones finished the 20th century (1900-2000) with an annualized rate of return of 5.3%. Wall Street, in a marketing effort to sell the American people their products, have tried to convince us the markets do 12% a year.

    As for your other points:

    1. I am 25. I have nothing to access in my Roth IRA until I am 59 1/2. Is a Roth also a bad investment? BTW-there is no guarantee you won't have cash for 3 years in a whole life. It is different policy to policy and depends how you fund the policy.

    2. Whole Life insurance has minimum guaranteed interest on cash value. Most companies guarantee your interest will never be below 3-5%, but is often higher. On top of that cash value growth, whole life also pays a dividend to the policyowner, which would grow around 1-4% if you chose to let the dividend stay in the policy.

    3. Cash Value is necessary in life insurance. It is simply how it works. Take it out and you will lose death benefit. Insurance companies realize this and are good enough to let you keep both the death benefit and the cash value. They simply charge a fee for your loan. BTW- this is done all the time in real estate (called a 2nd mortgage or home equity line)- so are houses bad too?

    4. Show me a case where someone asked to withdraw the cash from the policy and the company said "We will, when we feel like it." As far as "market is booming and they are making great returns" - again, companies don't invest your premiums in the stock market. They hold it in very conservative accounts like bonds and cash and if bond yields go up then they pass it on to you. Insurance companies do not, I repeat do not, make money by investing your money in the market and giving you a small piece of the pie.

    5. Whole Life does not have Option B. You are confusing this with Universal Life.

    Where did you get your information?

    He probably just read "Common Sense."

    A L Williams and its successor have been trying to brainwash people with this nonsense for decades.

    I had a cousin who was pursuaded to drop his whole life policy with Principle Mutual and by term. He then dropped the term and was diagnosed with cancer.

    If he had his whole life in force with Principal he would have been able to sell it to an investor and have a more comfortable end to his life.

    As it was, he didnt have any other policy to assign and died miserably.

    Principal , however, did pay the death benefit anyway because it was on extended term because of a small amount of cash value still in the policy, but he couldnt sell it and get the benefit in advance.

    Another Principal policyholder, like many demutualized policyholders- - my parents, bought a car with the stock given from the demutualization of my brothers policy.

    Now that policy is held as collatoral for my brothers indebtensess to my other brother.

    Its unfortunate that so much ill financial advise is given by unqualified people and desminated by often uneducated and ill informed people like the OP>

  4. #4
    Join Date
    Nov 2007
    Posts
    12

    Re: Whole Life Insurance is a scam!

    AL Williams and all of the talking heads on TV have all said the same thing for the past decade - "buy term and invest the rest." They all said to buy term insurance because it is cheaper and use the savings to invest in the stock market. They say you will always have greater returns and grow more cash value.

    Taking there advice would have cost you dearly. The markets are now where they were in 1997- twelve years of gains erased. I would rather have 12 years of guaranteed interest in a whole life.

  5. #5
    Join Date
    Jan 2009
    Posts
    63

    Buy term and invest the difference is a scam!

    Quote Originally Posted by RegRep View Post
    AL Williams and all of the talking heads on TV have all said the same thing for the past decade - "buy term and invest the rest." They all said to buy term insurance because it is cheaper and use the savings to invest in the stock market. They say you will always have greater returns and grow more cash value.

    Taking there advice would have cost you dearly. The markets are now where they were in 1997- twelve years of gains erased. I would rather have 12 years of guaranteed interest in a whole life.

    Indeed. "Buy term ( then drop it) and invest the rest," will no longer play in Peoria.

    I would like to see the numbers on this one.

    I bet the vast majority of those who bought term dropped the policy,while as you pointed out, stock market gains have all been wiped out, leaving the people with so much common sense nothing.

    They would have:

    No insurance. No savings.

    In contrast:

    A whole life policy holder would now be able to stop paying premiums in most cases because of the cash buildup. Their policy would be secure in its death benefit and they would also be able to borrow against its cash value.

    It surprising over time what a whole life policy yields in terms of growth-in addition to the death benefit of course.

    5% real growth on top of the death benefit would not be unrealistic over the long term for most whole life policies.

  6. #6
    Join Date
    May 2007
    Posts
    5

    Re: Whole Life Insurance is a scam!

    I thought I would post this in this thread as well:

    There is nothing wrong with either whole life or term life. Neither is a "scam." They both serve different purposes and both are useful for certain people in certain situations. What a person needs to make sure of is that he or she is buying a decent policy from a decent company. If you buy a bad policy, I guess it could be considered a "scam," but that's where research comes in.

    Term is a death benefit only policy. No one should go into it expecting it to be an investment. It is designed for people who need protection to cover a mortgage, dependents, or spouse for only a certain period of time (hence the "term"). It mostly comes into play for a young couple with children and a mortgage, where if one or both parents were to pass away early, the family would be in dire straights financially. Many of these young couples cannot comfortably afford the premiums on a whole life or UL policy, so term offers them protection. Sometimes you can do a "half and half" policy with half term and half whole life. It allows the couple to have a high death benefit with the term while still owning a policy that builds cash value. Some couples eventually drop the term if they can afford to go with all whole life. Some don't because they don't believe in or need the cash value aspect; they are only looking for a temporary death benefit.

    Whole life is much more complicated unfortunately. There are so many policies out there, and unfortunately a person can be taken advantage of if he or she is not careful. There are A LOT of unscrupulous insurance agents out there. You need to check the guaranteed minimum interest rate as well as actual historical interest rates to get a sense of what the policy is paying in terms of interest. The comment about whole life being a "forced savings" plan is correct; many people are not disciplined enough to buy term and invest the difference. I look at whole life as being similar to an annuity; not the greatest interest rate, but not much risk either; you're pretty much guaranteed some rate of return on your premiums. In this market, that may not be such a bad thing. In a booming bull market, your 4-6% may be a bad thing. It just depends on your objectives and risk tolerance.

  7. #7
    Join Date
    Mar 2009
    Posts
    1

    Re: Whole Life Insurance is a scam!

    Quote Originally Posted by turbobird14 View Post
    Hey i wanted to post something as a scam (my first thread!) YEAAAHHH. And what better to post than the worst possible way to be insured on your life. I will list the 5 biggest reasons its a huge rip-off for the amount of money you spend!!! If you dont know about whole life (cash Value) Insurance, you might have been sold on it because they claim it has an "investment" feature and it "builds cash value" Well it does.... for the insurance company. The average rate of return the banks and insurance companies are getting is about 12% (S&P 500 over any continual period of 30 years has averaged 12.94%) so just remember this.

    So to begin:
    1. Your "Cash Value" Doesnt begin to grow for the first 0-3 years. With this type of ins, you are guaranteed nothing up to the first 3 years... not the best investment.

    2. You will only earn 1-4% interest on your money, even though i said above what the ins. companies are getting back with your money:freak3:

    3. When and if you have any cash value built up in your policy - They say its "your cash or your money" But if you ever want to take it out to use it since its yours, its considered a loan against the policy. What do loans come with - interest - at 6-8%. So you earn 1-4% and when you want to use whats yours, they charge u 6-8% to use it...again this is a great policy.

    4. If you would ever need to use this cash value, the insurance companies have a right to hold that money and not release it to you for up to 6 months. Say the market is booming and they are making great returns, they will hold your money as long as they can to yeild THEM the best profits.

    5. You only get Option A or Option B. To explain this: when you buy a whole life policy you have a face value (death benefit amount) and you build cash value the longer you pay into it, normally till age 100. So when you die... if you have a $50,000 face value policy with $30,000 of cash value built up in it, you get one or the other, option A or option B. Where does the other money go? Where do u think.


    HAHA you have no idea what you're talking about and it cracks me up beyond belief. Even term life which demenishes after the term is up and you get nothing is still a good deal, b/c it is lower premium and covers ur family for that time period, but yes the comp makes money b/c a lot of ppl dont cash those in.

    But as far as whole life, youve got to be drunk, are u gonna think its a rip off when ur parents die, you find out they left you a quarter million dollars and all they paid a month for it was like 200 bucks a month ..i dont kno ur situation, but that was purely hypothetical..

    If youre wondering how they make money then its b/c, they DO take ur premiums and invest in their company etc.....but what u dont realize is, that has nothing to do with u, that is for them in the present time, but when ur policy is time to pay out, you have that guaranteed amount which is paid to you by the previous years of peoples premiums to the company. They always make money of course, but so do you. you have to realize they can invest their money however they want, but they are guaranteed to pay u what is in the contract, that is federally mandated across the board, no matter what company.

    of course its pay to play, like i said they use ur money for the present time until you die, so they charge u penalties to borrow against it. You really think they are going to let u pay 100 a month for 200,000 policy and just act like its ur free money.

    But the fact is, it is ur money once u retire or die and leave it to ur loved ones, and all u put into it was maybe 30,000 and you family recived like 250,000 or whatever the case may be

    the way the insurance companies make their money is from them investing in the market with ur premiums and that is their profit, but they still are fixed to ur contract, believe it or not, it is not rocket science

  8. #8
    Join Date
    Jan 2009
    Posts
    63

    Re: Whole Life Insurance is a scam!

    Quote Originally Posted by Oh Wow View Post
    HAHA you have no idea what you're talking about [b/c] [comp] makes money [ b/c] a lot of [ ppl ] dont cash those in.

    But as far as whole life, [youve] got to be drunk, are [ u gonna ]think its a rip off when [ur] parents die, you find out they left you a quarter million dollars and all [they paid a month for it was like] 200 bucks a month ..[i ][dont kno ur]

    If youre wondering how they make money then its [b/c], they DO take ur premiums and invest in their company etc.....but what [u] dont realize is, that has nothing to do with [u], that is for them in the present time, but when [ur] [ u ]

    of course its pay to play, like [ i ]said they use [ur] [ u ] u ur free money.

    ur money once u retire or die ur loved ones, and all u

    ur premiums ur contract, believe it or not, it is not rocket science
    Let's hope so, otherwise this poster would have a real hard time "sellin INsurance.

  9. #9
    Join Date
    Jul 2008
    Location
    San Antonio, TX
    Posts
    1

    Re: Whole Life Insurance is a scam!

    This is good stuff. I've always loved the Primerica "buy term and invest the rest slogan." This concept has historically worked (except the last year of the market) over a long period of time. One problem, though - People buy term and spend the rest!

    I agree with deskjockey that you cant say whole is better than term or vice versa. Each has a purpose it serves and a good insurance agent/financial planner/financial advisor will use a bland of whole, term, and possibly universal or varaible life to put together a proper plan.

  10. #10
    Join Date
    Oct 2008
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    454

    Re: Whole Life Insurance is a scam!

    Quote Originally Posted by ultima95 View Post
    This is good stuff. I've always loved the Primerica "buy term and invest the rest slogan." This concept has historically worked (except the last year of the market) over a long period of time. One problem, though - People buy term and spend the rest!

    I agree with deskjockey that you cant say whole is better than term or vice versa. Each has a purpose it serves and a good insurance agent/financial planner/financial advisor will use a bland of whole, term, and possibly universal or varaible life to put together a proper plan.
    Well put. A needs analysis needs to be done on each client to determine his or her need.

    One way fits all is not the best approach, as is Suzi Orman's crusade against any time of permanant insurance.

    See "Suzie Orman is a Scam"

  11. #11
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    Apr 2009
    Location
    SW Ohio
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    15

    Re: Whole Life Insurance is a scam!

    Obviously, Whole Life insurance is not a scam. But, in fairness, it's not the right fit for everyone.

    As an insurance broker for 29 years, I, obviously can choose the type of coverage I want. Traditionally, I have purchased term coverage, and deposited the balance in matching 401Ks and Roth IRAs.

    You just need to evaluate your particular situation with a local experienced financial advisor.

  12. #12
    Join Date
    May 2009
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    4

    Re: Whole Life Insurance is a scam!

    The only time you win with a whole life or ul or vul or eiul insurance is if you die early! Period.

    The later you die, the more your premium increases - check the yearly premium table for the exact figures. It is in cents per thousand. It is not so obvious when it is per thousand. Try computing the exact amount that you have to pay monthly when you are at age 60, 70, 80. You will then see that it is too much. The premium increases dramatically until such time that the money you put in is greater than the amount your dependents will receive when you die. Then you start wishing you should have taken just the term insurance which automatically ends when you are about ~70. You don't need insurance by that age anyway. Your dependents most likely can support themselves even if you are gone. At that age, you may have put a lot in a whole life insurance and you don't want to cancel it since you will be wasting a lot of money if you do. And if you can't cancel, you'ld wish u would just die early so the dependents you love dearly would get some amount.

    That is why they always say -- buy term and invest the difference.

    Try asking you whole life insurance agent what the "no lapse ending date" date in your policy means. Usually that is ~20 years from the time you purchase the insurance (for a guaranteed 20 year insurance). You actually started with a premium that pays for "Cost of Insurance" and the remaining for "Investment or Cash Value". The "Cost of Insurance" grows yearly until such time that the whole premium amount covers only "Cost of Insurance". After the "no lapse ending date" date, your current premium can no longer pay for your "Cost of Insurance" alone. At that time, you insurance premium starts to increase dramatically and you have pay it otherwise the policy will lapse. And if you allow it to lapse, you will giving up a lot of money. If you die that time, you win. If not, you start losing more and more. Now don't u just hate that!

  13. #13
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    Re: Whole Life Insurance is a scam!

    "The only time you win with a whole life or ul or vul or eiul insurance is if you die early! Period."

    Actually...not true.

    I'll be clear...I think term is a viable solution in many...in fact most cases. But not all.

    That's undisputed.

  14. #14
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    May 2009
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    4

    Re: Whole Life Insurance is a scam!

    Oh yes it is totally true! If you have an insurance agent that is a real friend, he would advise you to buy term and invest the difference. The reason agents suggest whole life insurance is to make more money. They are not the ones who are going to pay the premiums anyway.

  15. #15
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    Re: Whole Life Insurance is a scam!

    Sorry Mark. There are times WL is better. Not often...but in some cases. That's undisputed and I'll put my 29 years of insurance experience behind it.

    Check your numbers with somebody who bought term and invested in late 98. WL was clearly the better option.

    Your opinion is welcomed but this thread is moot. The last word is yours.

  16. #16
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    May 2009
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    Re: Whole Life Insurance is a scam!

    That can happen when you really don't know how to invest.

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