Term or whole life?

[4jacks]

That is a great question, Clydewolf, but as a client of this product, my understanding is that as my income increases I have the option to increase my monthly benefit as well. I also chose to add the lump sum debt elimination rider which may help with those unforeseen expenses. Most people that have regular term insurance when they die, their beneficiaries normally end up broke within 4-5 years. If most people can barely handle managing their monthly income how can we expect them to handle a huge lump sum. I feel with Salary Shield I have a lot more coverage versus having normal term ins. Before I was insured for $350k for $83 a month which frankly I was under-insured since I am married and have kids. With Salary Shield, I have the peace of mind knowing that if I died today, my family would continue to get $3500 monthly plus $200,000 lump sum; over $1 million in coverage if I died prematurely for only $86 a month!

$86 a month seems really expensive.

Also I wouldn't want to pay extra money to relieve me of the responsibility of having to Teach my beneficiaries what to do with the money. If your go with your plan and die and give your beneficiary $3500 a month, and they die, what happens? I'm assuming most plans would not transfer the rest to a second beneficiary. Which means you're kids would have nothing. And the insurance company made a good deal. However, if you take a lump sum, Teach your kids and spouse what to do with it. Then if you die, and your spouse dies a little later, then you're kids have money and know how to handle it.

[KrozFan]

That is a great question, Clydewolf, but as a client of this product, my understanding is that as my income increases I have the option to increase my monthly benefit as well. I also chose to add the lump sum debt elimination rider which may help with those unforeseen expenses. Most people that have regular term insurance when they die, their beneficiaries normally end up broke within 4-5 years. If most people can barely handle managing their monthly income how can we expect them to handle a huge lump sum. I feel with Salary Shield I have a lot more coverage versus having normal term ins. Before I was insured for $350k for $83 a month which frankly I was under-insured since I am married and have kids. With Salary Shield, I have the peace of mind knowing that if I died today, my family would continue to get $3500 monthly plus $200,000 lump sum; over $1 million in coverage if I died prematurely for only $86 a month!

I agree with 4Jacks, sounds expensive to me. I did a time value of money calculation and assuming that this policy paid for 30 years, and you got an 8% return on the money this is worth roughly $618k today. (It's been a while since I really did those calculations so if someone wants to check and either verify or dispute my numbers please do.) So compared to your old policy it's a better deal. I compared this to a policy from Zander Insurance, and for a 35 year old male, non smoker, standard health I found a $650k policy for $57.25/month. That's roughly 45% more than you're paying now.

But a lot of it is peace of mind as well. While I agree with 4Jacks that I'd rather have the money and teach my wife and kids, assuming I had any, how to properly deal with the money, or set up a trust if I didn't believe they would behave, if having this type of plan helps you sleep at night that has some benefit as well. I still think it's expensive though and you may do better if you shop around.

[mptpro]

i agree with all your other points, but this one needs more fleshing out:

i agree with you in principle. but the reality is that many people don't see a lump of money in their checking account at the end of the month (or pay period) and think to themselves "look at all that money i saved, let's put that in a savings or investment account!". they usually spend it, give it, waste it, etc. the issue is not a mental one or even one of willpower. it is behavioral/psychological and it is a similar reason Dave Ramsey's debt snowball method of debt reduction works rather than using the "mathematical" method of paying off higher interest rate debt first (which clearly does save you more money in the longrun IF one can stick to it).

however, i do see a possible solution without forcing one to pay egregious whole life premiums: after tweaking a budget for 2-3 months getting a sense of what can be realistically saved, automate transfer of money from your checking account into a savings/investment vehicle after you get your paycheck so that you have already paid yourself first. if you find out you need the money later on in the month, you can always get it back out (whereas you can't with whole life without some catches). of course, this is for the people who actually could save some money if they just disciplined themselves....for those who truly are paycheck to paycheck, the solution can only be to increase income or downgrade lifestyle/frugalitizing.

one thing i wholeheartedly agree with you on: a CV policy is NOT the solution to a discipline problem.

I understand. The way you implement this in practical terms is you set up a monthly automatic draft into their mutual fund/IRA at the same time you set up the life insurance. You *don't* leave the client to their own devices and assume (or hope) the client invests the difference. This is one of the criticisms that firms like Primerica have, is that they sell the term life insurance and don't write up the securities RIGHT THEN AND THERE for the client. "Buy Term & Invest the Difference" is a PACKAGE deal. So, pochax, your concern is very valid, and the investment side MUST be taken care of ASAP with the client.

[mptpro]

I agree with 4Jacks, sounds expensive to me. I did a time value of money calculation and assuming that this policy paid for 30 years, and you got an 8% return on the money this is worth roughly $618k today. (It's been a while since I really did those calculations so if someone wants to check and either verify or dispute my numbers please do.) So compared to your old policy it's a better deal. I compared this to a policy from Zander Insurance, and for a 35 year old male, non smoker, standard health I found a $650k policy for $57.25/month. That's roughly 45% more than you're paying now.

But a lot of it is peace of mind as well. While I agree with 4Jacks that I'd rather have the money and teach my wife and kids, assuming I had any, how to properly deal with the money, or set up a trust if I didn't believe they would behave, if having this type of plan helps you sleep at night that has some benefit as well. I still think it's expensive though and you may do better if you shop around.

I understand. I thought the same when I was first introduced to this product back in August of 2009. However, after test marketing and honestly evaluating my career over twenty years, I came to the conclusion that SalaryShield was better for most people. Here's why:

1) I've paid seven death claims in 20 years. None of my client invested ALL of their proceeds which was the original idea. They just don't.
2) Getting an 8% return CONSISTENTLY is unrealistic. And you NEED to get that in an withdrawal scenario. With an annuity you could get a guaranteed 5% withdrawal, but not 8%
3) Using 5%, the lump needed is larger and thus the premium is higher than in your example. After running hundreds of these quotes in the last six months, the premiums between level term and SalaryShield is usually within $10 of each other. (I have 60+ life agents in my Agency so we've had a lot of samples come through our doors).
4) The client also needs to LEAVE THEIR HANDS OFF OF THE LUMP for decades to make it work. Why not remove all of these variable, especially if the premium is within $10?
5) The most telling fact, is that when given the choice client predominately choose SalaryShield. Occasionally, one spouse will choose SalaryShield and the other will choose the level term option.

Increasingly, our financial lives revolve around monthly payments. The spouse's income whom we're replacing isn't paid out in a lump sum, so why should the life insurance be paid out that way? Why not replace the monthly income, with monthly income? No mess, no variables.

Almost every agent felt the same way you do, until they went out in the field and presented it to their clients and were surprised how many choose SalaryShield. But, having choice is the key.

[mptpro]

$86 a month seems really expensive.

Also I wouldn't want to pay extra money to relieve me of the responsibility of having to Teach my beneficiaries what to do with the money. If your go with your plan and die and give your beneficiary $3500 a month, and they die, what happens? I'm assuming most plans would not transfer the rest to a second beneficiary. Which means you're kids would have nothing. And the insurance company made a good deal. However, if you take a lump sum, Teach your kids and spouse what to do with it. Then if you die, and your spouse dies a little later, then you're kids have money and know how to handle it.

Again, if you compare the amount of level term that is required to generate the monthly income *consistently* and *guaranteed* for *decades* the premiums are VERY close, often cheaper.

As for the beneficiary dying. Yes, the payments CONTINUE to the next beneficiary, and so on, until the payments are exhausted. For example, let's say the primary is 40 years old and dies. This means the beneficiary will get $3,500 for 25 years (the product goes until age 65). Now, if the beneficiary dies 5 years later, then *someone* WILL get $3,500 for 20 more years. There are an unlimited number of beneficiaries.

[mptpro]

That sounds good and is simplistic. But what about an inflation factor? That breadwinner's monthly income would likely increase over the years. And the expenses of the beneficiary/dependents would likely increase too. But they would be stuck with the same income.

I'll add to Estrada's answer.
1) Heritage Union, the underwriter for SalaryShield, actually had an increasing rider on their original product but found that most clients didn't add it. Chalk it up to confusion. So, to keep the product simple they eliminated it. Same for waiver-of-premium.

2) You have a level-term rider you can add, up to $250,000 (very cheap) to take care of initial expenses, debts, colege etc.

3) If you follow the philosophy of decreasing responsibilities, such as debts and kids, then that counter-acts the increase in income. After 2 decades in this business, I can honestly tell you that most of the time and when re-visit the insurance needs for my clients, I end up *decrasing* their insurance, not increasing it. This is, again, because though their income may go up, other expenses have gone down (and their personal savings has gone up) he overall need for coverage decreases.

4) you can always do a policy change form and increase the monthly benefit.

[4jacks]

As for the beneficiary dying. Yes, the payments CONTINUE to the next beneficiary, and so on, until the payments are exhausted. For example, let's say the primary is 40 years old and dies. This means the beneficiary will get $3,500 for 25 years (the product goes until age 65). Now, if the beneficiary dies 5 years later, then *someone* WILL get $3,500 for 20 more years. There are an unlimited number of beneficiaries.

Payments STOP at 65???
Dude, it sounds like you are peddling garbage.
You're whole arguement is that people are too lazy to teach thier dependants how to manage thier money. So your solution is to offer a product that manages it for them, but then leaves them hanging at age 65? Are the dependants suppose to die at age 65? What are those people suppose to do from age 65 to 80, 85 or even 90?? We've already established that they suck at handling money.

A lump sum of $525k at 8% will draw out $3,500 a month FOREVER. And when FOREVER is over, you still have $525k in the bank.

Assuming your product cost the exact same as a $525k 25-year term life policy for a 40 year old.

You product would have a higher payout until age 52. i.e. If he dies at 40 years old, total payout is 1.05 million.
However if he dies at age 53 total payout is 504k

The probability of Death is MUCH MUCH MUCH higher for ages 52-65, then it is for ages 40-52. The insurance companies have to be making a killing off this product.

Not to mention if you die, your beneficiaries have that monthly income FOREVER, not just until 65.

Again, if you compare the amount of level term that is required to generate the monthly income *consistently* and *guaranteed* for *decades* the premiums are VERY close, often cheaper.

The word *consistently* is meaninless. You have up markets and down markets, on *average* if you re-invest anything above the target %, and withdrawal it when you are below the target %, the math will work out.

The word *decades* is meaningless, a $525k principle at 8% will earn $3,500 a month FOREVER

The word *guaranteed* is your mighty secret weapon. But even that is meaningless. You will say that investing the principle in the stock market is not guaranteed, and you can lose it all. And that is correct. But you want to offer to have a Company pay us monthly. And that guarantee is only as good as the company. Sure it doesn't happen often, but that company could go under. Even if you say that the Federal Govt. backs the payments, that guarantee is only as good as the Government. And history will show they only last an average of 200-300 years, so let's not pretend that couldn't happen either.

All in all, that product is garbage and you shouldn't sell it. You should do the right thing and teach people how to handle the lump sums.

[garyatk]

Well said 4jacks! But remember... he is in the business of commission based sales of financial products, not educating his clients on what is best for them. If he did, he wouldn't have many clients.

BTW... Happy Birthday!!!!

[4jacks]

Well said 4jacks! But remember... he is in the business of commission based sales of financial products, not educating his clients on what is best for them. If he did, he wouldn't have many clients.

Yeah, I sold life insurance for the worst 10 weeks of my life. I'm not saying mptpro is an evil or person or anything like that. There is a lot "training" that goes on, that basically preaches up these whole life policy benefits, so that you eat, sleep, and dream whole life.

I'd like to say that I was too smart to sell whole life insurance, and had moral objections to the job. But the fact of the matter is that I sucked at it. Going into people's homes and pulling the whole "God Forbid, little timmy should die! You will need money to replace him"

It was horrible. I signed two policies in 10 weeks, lol.

BTW... Happy Birthday!!!!

Thanks!

[mptpro]

Yeah, I sold life insurance for the worst 10 weeks of my life. I'm not saying mptpro is an evil or person or anything like that. There is a lot "training" that goes on, that basically preaches up these whole life policy benefits, so that you eat, sleep, and dream whole life.

Ah, you got the wrong guy. I do not recommend, sell, or endorse cash-value life insurance. Maybe it was a typo on your part. I am term-only and have been for twenty years.

Payments STOP at 65???
Dude, it sounds like you are peddling garbage.
You're whole arguement is that people are too lazy to teach thier dependants how to manage thier money. So your solution is to offer a product that manages it for them, but then leaves them hanging at age 65? Are the dependants suppose to die at age 65? What are those people suppose to do from age 65 to 80, 85 or even 90?? We've already established that they suck at handling money.

You're completely missing the point, and mischaracterizing the idea. There is NO difference in philosophy between SS and level term - only the method of payout is the difference. With level term, the idea is also to only get coverage until a specific time once you have non-job income source (such as retirement assets). SalaryShield just happens to be built specifically to age 65 (but they have a product that goes longer, as well). Because not everyone is fixated on that date, we often add level term to the product.

Perhaps you, and others, are misunderstanding the product and you think it is cash-value? It is basically a term-to-65 product that pays monthly upon death. Which is what all of us term-guys do manually, anyway, If my client is 40 years old, we get him a 25-year term, if he is 35 we get him a 30-term, if he is 50 we give him a 15-year term. In the meantime, we invest his money in mutual funds, and once there is enough to retire on, we cancel the insurance. In these cases you could argue that the client would be "left hanging" as well if they didn't save enouhg. Sound like a whole life argument.

SalaryShield just does the insurance part-automatically. Except is can go for longer than 35 years. I can start it at age 18 and go to 65, level guaranteed premiums. All SS is doing, is offering a longer term, and a monthly payout.

Also, getting a client to invest money monthly while both spouses are alive and working, is a lot different than a widow(er) trying to manage $1M and not having their spouses income. vIt's not that they "lazy" (your terminology, not mine), it's that:

1) THey have to invest all of it, NOW, with no deviation.
2) Keep their hands off of it for x years.
3) Get a consistent, ROR for x years (See below).

So, you argument is invalid.

All SS is saying, "look, we're replacing a loss of monthly income, with a monthly income. We're going to pay it until retirement which is what your spouses was going to do anyway."

The word *consistently* is meaninless. You have up markets and down markets, on *average* if you re-invest anything above the target %, and withdrawal it when you are below the target %, the math will work out.

The word *decades* is meaningless, a $525k principle at 8% will earn $3,500 a month FOREVER

The word *guaranteed* is your mighty secret weapon. But even that is meaningless. You will say that investing the principle in the stock market is not guaranteed, and you can lose it all. And that is correct. But you want to offer to have a Company pay us monthly. And that guarantee is only as good as the company. Sure it doesn't happen often, but that company could go under. Even if you say that the Federal Govt. backs the payments, that guarantee is only as good as the Government. And history will show they only last an average of 200-300 years, so let's not pretend that couldn't happen either

How very wrong you are. I assume you are not a financial planner?

It is a common mistake, so don't feel bad. There is a tremendous difference between *consistent* returns and *average* returns. The concept is called "sequence of returns". Hawaii and Death Valley both have an average of 71 degree temp per year - but they get there very differently. One is consistent, other is not.

If your client invests a lump sum, AND BEGINS WITHRAWALS, then it VERY MUCH MATTERS what the near-term ROR's are. It is irrelevant that she may get 8% over 10 or 20 years. If, in the near-term, (such as 2007,2008,2009) she has low returns, and she is withdrawing she will run out of money very quickly (faster than if you calculated an average of 8%).

This is the same for retirement withdrawals, and one of the most misunderstood aspects of financial planning. Average rates-of-return are only valid in the *accumulation* phase, NOT in the withdrawal phase. Planning for withdrawing money is an entirely different game.

This is where SS comes in, it pays the monthly income guaranteed, because at this point the beneficiary is in a *withdrawal* phase. Period.

And, by the way, no sane financial advisor would count on 8% during withdrawal phase! More like 4%. One broker/dealer I was with would even let us illustrate a WITHDRAWAL scenario with more than 6%. Again, the problem is the issue of consistency vs average.

Now, as for your complete misunderstanding on how insurance proceeds are guaranteed. SalaryShield payments are guaranteed the same way every other lump-sum payout is guranteed. Period.

So, any criticism you have of the monthly payout begin guaranteed you also assessing to EVERY OTHER LIFE INSURANCE PAYOUT. Once the client passes away, SalaryShield has to put the ENTIRE future payments in reserve, and that is backed by the legal reserve of each STATE. So, if SS goes out of business, the payments get made by the legal reserve fund. Again, no different from any whole life or term lump-sun payout.

For all of you reading this, keep it simple with this issue. All SS is, is a an alternative method of payout, and I brought it up becuase it is the best representation of "Buy Term & Invest the DIfference" I've ever seen; and that is a relevant issue of this tread's topic.

1. You and you family make money.

2. You save monthly in mutual funds (use American Funds), in 401ks, IRA's etc, until retirement (age 65)

3. Once you have your nest egg built, move it into an Golden Goose (ie Variable Annuity with Guaranteed Income Rider) and have a guaranteed monthly income until the day you both die. Meanwhile your balance is still in the market (ie, American Funds Mutual funds) so it will grow and when it does, it pushed your monthly income UP. When you die, your kids inherit the cash.

4. Get SalaryShield for the amount that you bring home, after taxes. If one of you dies before you complete steps 2, you will get enough monthly income to, in fact, continue with step 2, and then step 3.

Done.

[quote/[All in all, that product is garbage and you shouldn't sell it. You should do the right thing and teach people how to handle the lump sums.[/quote]

1. I disagree. I thought SS was a "gimmick" until I researhced it and test marketed it.
2. I HAVE been teaching people how to handle the lump-sums for 20 years. People don't. Period.


[quote/]Well said garyatk! But remember... he is in the business of commission based sales of financial products, not educating his clients on what is best for them. If he did, he wouldn't have many clients.[/quote]

FYI, and anyone reading this, the commissions my agency, and my Advisors (I have 31 fully-licensed Advisors, an 50+ life-only Reps), are the SAME for SS and TERM. To the penny. There is no financial incentive for the Advisor to market one "normal" term vs SalaryShield. Same for mutual funds and VA's.

[4jacks]

There is NO difference in philosophy between SS and level term - only the method of payout is the difference.

That is wrong. The method of payout is different and so is the amount of payout You did not address that point.
In most cases the total payout for SS claims will be a lot less than for level term.
So why would should I buy the less insurance (total payout) (in case I die) for the same price?

With level term, the idea is also to only get coverage until a specific time once you have non-job income source (such as retirement assets). SalaryShield just happens to be built specifically to age 65 (but they have a product that goes longer, as well). Because not everyone is fixated on that date, we often add level term to the product.

Perhaps you, and others, are misunderstanding the product and you think it is cash-value? It is basically a term-to-65 product that pays monthly upon death. Which is what all of us term-guys do manually, anyway, If my client is 40 years old, we get him a 25-year term, if he is 35 we get him a 30-term, if he is 50 we give him a 15-year term. In the meantime, we invest his money in mutual funds, and once there is enough to retire on, we cancel the insurance. In these cases you could argue that the client would be "left hanging" as well if they didn't save enouhg. Sound like a whole life argument.

SalaryShield just does the insurance part-automatically. Except is can go for longer than 35 years. I can start it at age 18 and go to 65, level guaranteed premiums. All SS is doing, is offering a longer term, and a monthly payout.

I understood all that, it’s completely irrelevant and not what I was talking about. Your SS product is simply mathematically inferior to level term.

Also, getting a client to invest money monthly while both spouses are alive and working, is a lot different than a widow(er) trying to manage $1M and not having their spouses income. vIt's not that they "lazy" (your terminology, not mine), it's that:

I understand that, they just had a huge lose; it is hard to handle $1M. I still don’t think selling them an inferior product is the answer.

1) They have to invest all of it, NOW, with no deviation.

First, other than paying funeral expenses, what do you expect them to do? They just lost their loved one, they shouldn’t be throwing parties and buying yachts, if they are, then they deserve to lose it all.

Second, they have to do the same thing in your scenario. They have to invest the monthly amount into retirement every month.

2) Keep their hands off of it for x years.

This is MATHEMATICALLY untrue. If what they invest in pays monthly income, they can collect that income next month.

3) Get a consistent, ROR for x years (See below).

This is also MATHEMATICALLY untrue. See below.

So, you argument is invalid.

Haha, I hope you’re are joking.

All SS is saying, "look, we're replacing a loss of monthly income, with a monthly income. We're going to pay it until retirement which is what your spouses was going to do anyway."

Yeah, and that’s all fine and dandy, all I’m saying is for the same amount of money you can have a million bucks and collect that monthly income FOREVER <--- I think you missed that forever part.

How very wrong you are. I assume you are not a financial planner?

I’m correct. I am a civil engineer, I got A’s in Calculus III and Physics III, you wanna keep arguing math with me?

It is a common mistake, so don't feel bad.

I don’t, once again I am mathematically correct, and you are trying to sell an inferior product for the same amount of money.

There is a tremendous difference between *consistent* returns and *average* returns.

True but irrelevant for a retirement period of 20-30 years.

If your client invests a lump sum, AND BEGINS WITHRAWALS, then it VERY MUCH MATTERS what the near-term ROR's are. It is irrelevant that she may get 8% over 10 or 20 years. If, in the near-term, (such as 2007,2008,2009) she has low returns, and she is withdrawing she will run out of money very quickly (faster than if you calculated an average of 8%).

Not true, math below.

The Client is never instructed to Withdrawal principal, they concept is to withdrawal Interest monthly. If the very first month, the interest is below the target, then the client may need to withdrawal a bit of the principle. However if the very first month the interest is above the target and the client leaves the extra interest in the account, it increases the principle and creates a hedge for future months where the interest is below the target.

The *average* will always prevail, it’s math. Now if the target was set at 8% over the course of her retirement, and she only averages 4% then yes, there will be less money in the account, for her dependants.

Let’s use our example of a lady needing to replace a monthly income of $3,500. If her policy gives her $525k with a target of 8% a year, to yield $3,500 per month, but in reality she only receives 2% each year, then it will take her 15 years to run out of money. Not the very short time you seem to think. And 2% is very low. In this scenario, it would have been better for her to take the SS if her husband died between the age of 40 and 50. However, this scenario is still better then SS if he died between ages 50 and 65. WHICH IS MORE LIKELY? Once again, your product is garbage.

And, by the way, no sane financial advisor would count on 8% during withdrawal phase! More like 4%. One broker/dealer I was with would even let us illustrate a WITHDRAWAL scenario with more than 6%. Again, the problem is the issue of consistency vs average.

I don’t care what numbers you use. They are your numbers not mine. You said that your SS policy was about the same price as a similar level term. If that is true, then your SS policy is a rip off.

Now, as for your complete misunderstanding on how insurance proceeds are guaranteed.

You brought up guarantees, Not Me!

SalaryShield payments are guaranteed the same way every other lump-sum payout is guranteed. Period.

So what? What does that have to do with this conversation. Did I say it wasn’t.

You said the SS provided some guarantee that level does not.

For all of you reading this, keep it simple with this issue. All SS is, is a an alternative method of payout, and I brought it up becuase it is the best representation of "Buy Term & Invest the DIfference" I've ever seen; and that is a relevant issue of this tread's topic.

It is an INFERIOR method of payout, not an alternative.
The payout method is mathematically manipulated to provide a lower total payout to the customer, while at the same time charging the same premium. If this were merely an Alternative it would cost half as much.

4. Get SalaryShield for the amount that you bring home, after taxes. If one of you dies before you complete steps 2, you will get enough monthly income to, in fact, continue with step 2, and then step 3.

Or get term, for the same amount of money and if you die, you collect your monthly income FOREVER on top of what you get from step 3.

Why do you not understand the forever part. FOREVER > Until 65

All in all, that product is garbage and you shouldn't sell it. You should do the right thing and teach people how to handle the lump sums.

1. I disagree. I thought SS was a "gimmick" until I researhced it and test marketed it.

Mathematically it is a gimmick. You test marketed it to see how well you can sell it and you think that is a selling point?

2. I HAVE been teaching people how to handle the lump-sums for 20 years. People don't. Period.

Giving them less for the same price is not the answer.

FYI, and anyone reading this, the commissions my agency, and my Advisors (I have 31 fully-licensed Advisors, an 50+ life-only Reps), are the SAME for SS and TERM. To the penny. There is no financial incentive for the Advisor to market one "normal" term vs SalaryShield. Same for mutual funds and VA's.

I have a really hard time believing that. However if it is true, and YOU own your company and you teach your agents to sell this garbage for the same price. Then you are getting rich off the backs of fools. Because the insurance company is paying someone more money to sell this garbage. That is darn sure!

[garyatk]

4jacks... I am pleased that you are so informed on this stuff, and are capable of respectfully sorting through the point of view of a successful salesman.

I don't have the patience for it. Years ago I allowed a salesperson, who called himself a "financial advisor" to "sell" me, and it cost me dearly. Then a couple years later I was "churned" to death by a "stock broker" (salesman). In both cases, they were just "doing their jobs" as they were trained to do, and selling the products that the companies they work for are "pushing" at that time. They made a GREAT paycheck, while I lost most of my savings. At the same time I bought life insurance that I didn't need (I was single, with no dependants) and later I found that this insurance was the most expensive policy of it's kind. At least I didn't fall for the whole life lie.

So, I have very little patients when sales professionals call themselves "Financial Advisors" or "Financial Planners", and if this came out in another thread, and I offended anyone, I AM TRUELY SORRY!!!!

Keep up the good work 4jacks. It is best if I stay out of this discussion!

[4jacks]

4jacks... I am pleased that you are so informed on this stuff, and are capable of respectfully sorting through the point of view of a successful salesman.

It's not complicated. It's simple Math.


And I can sell you this Mathz for the low low price of 4 easy installments of $199.89. Secure your Financial Future with Mathz! The revolutionary new systems of counting money and other junk. CALL NOW!!!!

[tim_v]

There are lots of numbers being thrown about here and some of them are going to depend on the individual's situation.

I think the salary payout method can be a useful way to receive the insurance benefit but I'm concern it's promoted because it makes comparison shopping more difficult. The great advantage of term insurance is it makes comparing different products much easier.

Before buying an insurance policy with a salary payoff (for example $3500/month for 20 years) I would ask several questions.
1) How much will it cost?
2) How much would it cost to buy an income annuity that paid $3500/month for 20 years? (My estimate is 20 year annuities should return ~7%)
3) How much would it cost to buy an income annuity that paid $3500/month for life? (My estimate is life annuities should return ~5%)
4,5) Using the lump sums from 2&3 how much would it cost to buy lump sum term to cover the purchase of these annuities?
It should be possible to get multiple quotes for questions 2-5 and from there you can determine if the cost presented is reasonable.

The salary payout is basically a decreasing benefit which could be fine for many people since they are paying off mortgages and saving for retirement but I would expect to pay less than for a level benefit plan.

For the comparison given:
Choice A: $350k for $996/year
Choice B: $200k + $3500/month for $1032/year.
I would choose B but those choices seem expensive to me.

[bchbumm23]

Spent an hr reading thru these threads. Yep, you all seem to be good at math so you've figured out I'm not the fastest reader. Some made me laugh, some made my stomach knot. I did have a question though...

Given the new landscape of the economy and market, most of these assumptions were based on the 8% conservative average gain the market experienced through the baby boomer generation. I'd be more than happy to secure a cost effective, guarenteed 8% no matter what the vehicle. Any suggestions?

[pochax]

i am not aware of an investment vehicle that will guarantee 8% annualized return through the life of the investment that in retrospect did not turn out to be a Ponzi Scheme or similar fraudulent activity. best of luck though finding one.

[4jacks]

I agree, you're not going to find an 8% gauranteed return. Legit one anyway.

[mptpro]

For those researching Primerica Term Life Insurance (still the largest term-only salesforce), I created a YouTube video (in 2 parts) that is an in-depth expose at the inner workings of Primerica's Term Life Insurance.

The announcement and links are here: http://goo.gl/qqmT

Feedback welcome. Feel free to discuss any facts I have wrong.

[4jacks]

I thought you were pro-primerica?
An 'expose' would be an anti-primerica thing.

expose means to make open for attack.

[mptpro]

"I thought you were pro-primerica? "

What gave you that idea?


"An 'expose' would be an anti-primerica thing. "

Did you watch the videos?

[jpcg]

This has been a long debate in the industry and community for the middle class, but the wealthy have for generations enjoyed the full benefits of whole life insurance. For the past ten years they have been enjoying the benfits of universal life!!
Most could get the full benefits of a UL policy though it is a lack of understanding that holds them back. Term can eventually get too expensive as well, and it is designed to at around age 50. Insurance can be used as a great TAX FREE INCOME AT RETIREMENT OR TO ASSIST WITH HEALTHCARE OR SOMETHING TO MAKE THE INSURED'S LIFE BETTER OR LONGER. Life insurance doesn't have to be death insurance -- that is not a wealth building nor wealth preservation mindset.

[cvaughn]

I am going to say this. I own both... why? I am saving what I think is enough for retirement and other than that I don't care about me. I buy term and lots of it for its price alone. I buy WL because I want a guarantee that my family will have access to funds almost immediately after my death. Life Insurance is the ONLY product that bypasses probate and goes directly to beneficiaries. And here is a great fact for you only 1% of term insurance is ever paid out in claims and term makes up about 80% of all insurance sales. If you look at premiums collected via policy type... the best deal for the insurance company is to sell term (1% to claim).

[mptpro]

@cvaugh
I can appreciate your opinion. However, I have to disagree.

You said, "WL because I want a guarantee that my family will have access to funds almost immediately after my death. Life Insurance is the ONLY product that bypasses probate and goes directly to beneficiaries."

A mutual fund, a variable annuity and any number of other investments will be accisible for your family upon death - in fact, quicker than life as they do not have to wait for the claim to be processed, accepted and paid out.

All of the above investments can avoid probate by putting them inside of a Living Trust. In addition, the variable annuity has a built-in death benefit whereby your family will receive the GREATER of your principle or the value of the account. Also, you could add an income-rider so that your beneficiaries will recieve a guaranteed income until THEY die, while the balance in still invested in the great companies of the world. And, variable annuities even avoid probate in most states WITHOUT being in a living trust.