although many of you have learned to take my titles as advice enough i’ll go on to explain anyway, and piss off your insurance agent to boot.
Whole life insurance is expensive, we all know that, but your broker/agent told you the benefits and it sounded pretty convincing so here we are.
Benefit 1- Your premiums will never change.
Problem 1- Your coverage might. Take a look at the fine print and make sure that as you age, there aren’t changes to your coverage. As you get older you are offered higher pricing for the same coverage levels, so if price does not go up, coverage may go down.
Benefit 2- Im covered for life and never have to worry again.
Problem 2 – Most policies are cancelled in the first ten years. There are dozens of reasons for this which I will cover in future posts but for now let’s focus on the two most comon issues.
Your policy may lapse. If you fail to make a single payment you can have your coverage cancelled and may not be allowed a grace period for buying back in. It’s in the companies interest to have you buy a new, more expensive plan.
Things change. You may have a child, buy a home, lose a home, or god forbid, lose a child. Dozens of other reasons again,but I’ll explain later. The point is that life insurance is supposed to be based on your current and foreseeable needs. a policy that is life long can not possible take all these things into account unless they sell you a MASSIVE umbrella style, all encompassing policy, which you most likey don’t need and can’t afford.
If these are not reasons enough to avoid whole life take into consideration that on average a whole life policy can cost more than 10 times that of an equal value term policy and the”investment” portion nets average returns of 2-3% industry wide. that’s no more than a decent savings account which by the way you can access with out penalty or wait times.
Buy term and leave the investments seperate, you’ll thank me.