Often times it seems the world out there is anti-whole life insurance, and radio has done a great job at promoting term insurance as the end all and best insurance out there. However, most of these so called “gurus” are being paid to promote term insurance. If term insurance is so good, do we really need whole life insurance?
Let’s take a look at whole life insurance and some of the advantages and see if we can’t find something good in what paid spokesman are calling “crap.”
Whole Life Insurance Exists
Whole life insurance exists for a reason. I mean really, if it was completely useless would it still be available? The obvious answer is no. However, there is more to it than just existing.
By definition whole life insurance is meant to last your entire life. The problems is the mentality we have in America today, and the radio is doing a great job at promoting it.
People really believe that it is easy to get a 12 percent rate of return on their money. This is a huge flaw in our thinking. So what happens, people are buying term insurance at a younger age, and then turning to whole, or permanent, insurance when they are older.
What is the problem with this though? Well, insurance gets more expensive as you get older. So, people turn to term insurance when they are young, and then as they get older, and they see that they aren’t going to be able to retire when they thought they would, they still need insurance.
The problem is that insurance is much more expensive. This is a huge blow to them.
The World Today
Many American’s today cannot retire. Why? Because they ate up the buy term and invest the difference mentality and it killed them.
Now they are working and many of them cannot afford insurance anymore. I’m not here to discuss the financial aspect of their decisions, so I’ll avoid that. But let’s talk about insurance.
Term insurance is extremely expensive once you hit 60 plus. So what happens if you are in debt and still working at 70? Insurance to cover these debts is astronomical.
So you just go uncovered and, if you die with debt, your family gets nothing. This is an unfortunate ending to a precious life.
Many of these people believed their investments would do so well that they would be millionaires by the time they were 65. However, the markets weren’t so nice to them.
Whole Life Insurance
So how does whole life insurance help this sad tale turn around a bit? Simple, it’s always there.
If you bought whole life insurance when you were young the cost would be higher than term insurance, however, that cost would not change. You would have that insurance for the rest of your life.
However, there are some other benefits to whole life insurance you may not be aware of.
Earnings On Your Money
Most people are not aware that after around 15-20 years of owning a typical whole life insurance policy, they have build up a cash value equal to their premiums. What does this mean? Well it means you really haven’t lost any money if you put in the time.
Whole insurance is meant to have a cash value, and that cash value is meant to grow. This can be a huge plus for you.
There is also a way to shorten this time frame and actually use whole insurance as an investment, a strategy known as Becoming Your Own Bank, but you can look into that on your own.
I often find that there is a different mentality with people who buy whole insurance. Often times these people are preparing for the future, not just right now.
I am not saying whole life will change you, however there is something to the fact that many of these people are very “tomorrow oriented.” There is a huge need for us in American to be planning for our future, a thought process that we lack today.
Your Entire Life
The last point is that whole life insurance lasts your entire life, no matter what. I’ve never understood arguments against having insurance. If you knew that by putting 100k away over your lifetime you were guaranteeing you would pass 300k on to your heirs, where is the downside in that?
Having the insurance to cover debts while you are young, and then just having it as a nest egg once you are debt free, is a very effective strategy-one that you and your family can be happy about.
This nest egg will be guaranteed to be there when you die, whether young or old.
Whole Insurance Is Not The Devil
In the end permanent insurance must be viewed as a tool. It is a very proper tool for certain types of people. In my opinion people need to understand permanent insurance more, and how whole life insurance companies work. You will find pretty quickly that many major banks invest their most trusted capital in whole life insurance companies because of the stability.
Whole life insurance has some amazing benefits, and by looking into it yourself, you may find something new, and something that fits you well, that you never knew existed.
Joshua Thompson is an insurance professional who has been