topic Re: New blog article: Is Life Insurance Worth It? in Personal Finance

New blog article: Is Life Insurance Worth It?

Elizabeth_FICO — Mon, 25 Sep 2023 18:26:41 GMT

Hello everyone! If there's a new blog article that I think you guys might like I plan on posting it in the Forums.

This week's article is: Is Life Insurance Worth It?

Let me know what you think about the article.

For more content don't forget to check out our blog.

Re: New blog article: Is Life Insurance Worth It?

High_Henry — Tue, 26 Sep 2023 03:55:09 GMT

Hello -- Lurker here. I created a profile to respond.

That article has several factual inaccuracies.

There are not "two main types" of Life Insurance. There are many types. And Whole Life insurance is NOT "also known as Universal Life." Universal Life might be described as a derivative of Whole Life, a descendant, if you will, but depending on which type of Universal Life one is discussing, there are many differences between the two types.

Cash value policies are NOT "In other words, it's an account that grows tax-free .." Life Insurance cash values are not "tax free." They can accululate tax deferred, but that is an entirely different thing. And sometimes it grows and grows only to stop growing and then start shrinking and shrinking. It can evaporate. Dependent on the policy type, the design, and the particulars of the insured.

"Within the realm of insurance talk, the general rule of thumb is that you should have at least seven to ten times the amount of your annual salary." I don't know exactly what "the realm of insurance talk is," but I can assure you financial professionals who sell Life Insurance and/or advise clienst on how much to purchase don't have such a "rule of thumb."

Sorry, but this writer is way outside their depth. If that was my blog I would remove this article immediately (and cancel payment to the writer.)

Re: New blog article: Is Life Insurance Worth It?

NoMoreE46 — Wed, 27 Sep 2023 20:14:00 GMT

This might out of the scope of this article, but a very important benefit is that the death payment is generally Tax free in addition the tax benefit mentioned on the growth.

Re: New blog article: Is Life Insurance Worth It?

NoMoreE46 — Wed, 27 Sep 2023 20:33:54 GMT

For the general public, stating that there are Two types of life insurance policies (term and permanent) is fine.

Re: New blog article: Is Life Insurance Worth It?

Aim_High — Mon, 09 Oct 2023 02:20:46 GMT

Sometimes I cringe at articles that seek to "inform" the public without recognizing the potential complexity and ramifications of the topic. The author is a "personal finance writer" but is she a licensed insurance agent or certified financial planner? I doubt it.

My point is that life insurance isn't something that someone should read a web article about and make such an important decision. She makes it sound like a consumer can "do their homework" to learn about the subject. In reality, a one-on-one consultation with a knowledgable professional is still absolutely necessary. This isn't buying a sweater. Since licenses are required to sell insurance products, this is closer to considering surgery than it is to buying socks. Don't try to make it sound like someone can make their own "informed" decisions about what they learn on the webz in a few hours.

And yes, the 7x-10x figure is just too ambiguous since the amount of insurance someone needs is very personal to circumstances. And incomes change over a lifetime.

But I did learn something. SPENDING is a pillar of financial well-being.

"While insurance, alongside saving, spending, and investing, is one of the main pillars of financial well-being ..."

Re: New blog article: Is Life Insurance Worth It?

SouthJamaica — Mon, 09 Oct 2023 15:44:58 GMT

@Aim_High wrote:
Sometimes I cringe at articles that seek to "inform" the public without recognizing the potential complexity and ramifications of the topic. The author is a "personal finance writer" but is she a licensed insurance agent or certified financial planner? I doubt it.

My point is that life insurance isn't something that someone should read a web article about and make such an important decision. She makes it sound like a consumer can "do their homework" to learn about the subject. In reality, a one-on-one consultation with a knowledgable professional is still absolutely necessary. This isn't buying a sweater. Since licenses are required to sell insurance products, this is closer to considering surgery than it is to buying socks. Don't try to make it sound like someone can make their own "informed" decisions about what they learn on the webz in a few hours.

And yes, the 7x-10x figure is just too ambiguous since the amount of insurance someone needs is very personal to circumstances. And incomes change over a lifetime.

But I did learn something. SPENDING is a pillar of financial well-being.
"While insurance, alongside saving, spending, and investing, is one of the main pillars of financial well-being ..."

Did my sarcasm meter just go off?

Re: New blog article: Is Life Insurance Worth It?

SouthJamaica — Mon, 09 Oct 2023 15:47:24 GMT

IMHO life insurance is never really "worth it". It's like gambling in a casino. The house always wins.

That being said, it's something many of just feel that we have to do.

But "worth it"? Never.

Re: New blog article: Is Life Insurance Worth It?

Aim_High — Mon, 09 Oct 2023 21:29:41 GMT

@SouthJamaica wrote:
... The house always wins.

... But "worth it"? Never.

But the house doesn't always win, @SouthJamaica. Those who buy the policy to protect their loved ones and then die an early, unexpected death "beat the house." The family reaps the benefit of a far greater lump sum than was paid. Actuarial tables make sure that the insurance company brings in more money overall than they give out, but they have to do that to stay in business. Individual policyholders can come out far ahead.

I've heard criticism of life insurance comparing it to investments, but life insurance isn't an investment. For those of us who started a family in our 20's or 30's, were the primary breadwinner, and wanted to make sure the family was provided-for if something were to happen, life insurance was definitely "worth it" in providing peace-of-mind even if it were not needed.

I had an investment adviser set me up early-on with a combination of permanent whole life and a larger portion of decreasing term combined with investments. The idea is that as investments and net worth grow, the need for insurance declines and the family is always protected financially. I think whole life is underrated by many consumers who are shopping for whatever is cheaper without considering other options and their overall financial plan.

For someone who is single and has enough money or prepaid burial burial expenses set aside for final medical bills, debts, and burial expenses so as not to burden their family, life insurance may be an unnecessary expense. For families protecting the financial interests of a surviving spouse and/or children, it can be invaluable.

Re: New blog article: Is Life Insurance Worth It?

SouthJamaica — Mon, 09 Oct 2023 22:07:38 GMT

@Aim_High wrote:
@SouthJamaica wrote:
... The house always wins.

... But "worth it"? Never.
But the house doesn't always win, @SouthJamaica. Those who buy the policy to protect their loved ones and then die an early, unexpected death "beat the house." The family reaps the benefit of a far greater lump sum than was paid. Actuarial tables make sure that the insurance company brings in more money overall than they give out, but they have to do that to stay in business. Individual policyholders can come out far ahead.

I've heard criticism of life insurance comparing it to investments, but life insurance isn't an investment. For those of us who started a family in our 20's or 30's, were the primary breadwinner, and wanted to make sure the family was provided-for if something were to happen, life insurance was definitely "worth it" in providing peace-of-mind even if it were not needed.

I had an investment adviser set me up early-on with a combination of permanent whole life and a larger portion of decreasing term combined with investments. The idea is that as investments and net worth grow, the need for insurance declines and the family is always protected financially. I think whole life is underrated by many consumers who are shopping for whatever is cheaper without considering other options and their overall financial plan.

For someone who is single and has enough money or prepaid burial burial expenses set aside for final medical bills, debts, and burial expenses so as not to burden their family, life insurance may be an unnecessary expense. For families protecting the financial interests of a surviving spouse and/or children, it can be invaluable.

The house always wins in the aggregate, not on each bet or on each policy, but the odds are fixed so that overall the house always comes out ahead.

Re: New blog article: Is Life Insurance Worth It?

Anonymous — Tue, 10 Oct 2023 02:42:49 GMT

@SouthJamaica wrote:
The house always wins in the aggregate, not on each bet or on each policy, but the odds are fixed so that overall the house always comes out ahead.

Right, but the neat thing about life insurance is that you can always win. Just die ASAP after the waiting period, make sure it doesn't look like a suicide and your heirs are WAY ahead!

But seriously, like most insurance policies (auto, home, health) it can often make sense for an individual, even if the net benefit is negative in the long run. Home insurance is perhaps the most obvious, relatively few of us would be happy having to come up with the funds to rebuild our house if it was a total loss, in a relatively short about of time. It makes sense to pay a small fee against a small chance of catastrophic loss. (Off topic: some Long-Term care companies use this as an example against self-insuring, you insure your home even if you have the money, why not Long Term care. My answer is that LTC can cost lots of money, but over a much longer period of time, so I may feel if needed I can pay $100K for two or three years)

Re: New blog article: Is Life Insurance Worth It?

Anonymous — Tue, 10 Oct 2023 02:44:35 GMT

@NoMoreE46 wrote:
For the general public, stating that there are Two types of life insurance policies (term and permanent) is fine.

I think it depends on the intent of the article. If was just "interesting" then I agree, but if meant as a starting point to make real decisions, then it needs to point out that there are many types of product, and the non-term ones can get very complex.

Re: New blog article: Is Life Insurance Worth It?

ejbarraza — Tue, 28 Nov 2023 15:37:41 GMT

You can get a hybrid policy with Long-Term Care and Whole Life Insurance in one policy. The whole life insurance policy cash value can grow at an Internal Rate of Return between 4-6%, the Death Benefit is guaranteed, the premiums are level, and the Death Benefit can be accessed for Long-Term Care insurance claims. Guardian Life has an index participation rider that can earn a 2-9% IRR based on the annual returns of the S&P 500 (SPX). Also the cost of borrowing is fixed at 4.76% which is a good hedge for interest rate volatility and this rate drops to 2.76% after the 20th anniversary. Whole Life can be pledged as collateral for an insurance-backed Line of Credit from The Bankcorp Bank or Merchant's and Manufacturer's Bank. In so doing, the interest is tax-deductible as a business expense. Embedded Life insurance, long-term care insurance, and Business Line of Credit with tax-advantaged retirement income. And it avoids probate.

Re: New blog article: Is Life Insurance Worth It?

NoMoreE46 — Tue, 28 Nov 2023 18:38:12 GMT

Sounds like you got some industry experience here @ejbarraza .

Re: New blog article: Is Life Insurance Worth It?

ejbarraza — Wed, 29 Nov 2023 02:11:42 GMT

@NoMoreE46 Yes I have my life insurance license and plenty of continuing education credits. Also, I have worked with banks like The Bancorp to onboard an insurance-backed line of credit based on the cash value of Indexed Universal Life Insurance. Previously they only allowed Whole Life as collateral.

https://drive.google.com/file/d/1bA1hZNgSGaNIG6f-OeCE_6U77pPnBPMN/view?usp=sharinIUL