Life Insurance: Avoid Universal and Variable Policies

I am a licensed insurance professional with New York Life. This article is bogus and the author clearly does not know what he is talking about. Also, on the buy term and invest the difference idea, my question is this...what are you going to invest the difference in that has any sort of guarantees? Society today buys Term and SPENDS the difference. Term insurance is a great product, but at the end of the day owning a true whole life policy from a "mutual insurance company" i.e. New York Life, Northwestern Mutual, or Guardian, is a much better product because your cash value and death benefit always grow while you pay the same. Mutual Life insurance companies pay dividends that are paid into your whole life policy, it does take time to build but once it gets going, it's like a freight train! Compare the differences between a "stock life insurance company" and a "mutual life insurance company" and you will clearly see the difference of how it works.

There is a place for every type of life policy. Based on the person needs and experiance and finally budget.

Unfortunately it is all a scam to take the average persons money. It's just a way for the average person to pay more than they get. A benefit to few, a life of paying in much more than they get to the majority. If ever there was something the government was involved in to help the average citizen this might be it (of course they would find a way to screw the pooch on the whole deal).

It's amazing how those of us in the Insurance industry are required by law to hold an insurance license however if you are a "mass media" type you can spout off any nonsense you desire and are not held accountable. May I suggest that anyone reading this article do their research. Talk to "licensed" insurance professionals and ask for suggestions with different type policies. I assure you that the Insurance industry did not think up these polices and sell them to a bunch of dummies who were taken in by the insurance agent/company. Many professionals who own life insurance do so with much planning from accountants, tax lawyers, insurance agents, etc.. Don't listen to people like this who pretend to know what they are talking about when they apparently know VERY LITTLE.

Buy Term Invest long term. All other policies do what you dont with your money. You give it to them they turn around and make that money work and give you a small amount and they keep the rest.

I can't even believe anything this author has wrote, when in his 3rd and 4th sentence, he is incorrect with his "facts". There are more than two types of life insurance. My guess is the author doesn't have his insurance license to even be claiming such facts, but of course there is no mention of what background he has, or credentials. I think he's also quoting the agent that sold him the insurance which I guess was an unsuitable investment. Namely, a variable universal life insurance contract, which is different than a universal or adjustable life insurance contract. Be sure not to confuse the two, as again, there are more than two types of life insurance. Anyway, I feel sorry for the people that get scammed. My advice is to ask more questions, and not only about the investment or insurance you're lookin at, but also about the agent or advisor's "credentials". Also, I would never buy variable life insurance, unless I had more than $1000 per month to use as a premium. .....Just my two cents....

Buy whole life from a great company (like Northwest mutual) when you are in your 20's, by the time you are in your 50's, it has accumulated more Cash Value than you put in, Insurance has doubled, The returns i am getting are 6% per year, while increasing the death benefit.

I went to the Mutual Fund Store website to understand their planning model. The majority of this article is untrue. The two types of life insurance are Term and Perm. Variable and Universal are a combination of Term and Perm. Stanc is correct when he states that the insurance company allocates your premium to mutual funds or other short-term investments. Additionally, many large insurance companies own real estate (income property), planes (rent out to Fedex, UPS), among other assets. As far as only being able to pick 20 or 30 funds within a variable life insurance contract is a flat out lie. Many companies Pru, NYL, NML, Guardian offer several different fund families to choose. Inside of these fund families are 15- 20 different funds. These funds offer there service to the life insurance company at a discount. Therefore, the insurance company can pass this savings to the investor. The overall operating expense to own these types of products is anywhere from 150-250 (1.5-2.5%) basis points. The average expense The Mutual Fund store charges is similar as well. This is why people should not go to the Mutual Fund store or Edward Jones with their 50k rollover. They flat out do not know what they are doing. They will sell you a mutual fund, which in their opinion is the correct thing to do. Which for the average family it most likely is, but they heavily lack on the "planning" side of finance. People need to understand planning is a long-term process. Do not get your account churned by Mutual Fund Store or Edward Jones. Both companies will state we charge a wrap fee which allows us to change funds without any load. Which is true but the wrap fee will be much more expensive than just owning the funds outright.

The writer of the article does have some holes in the article, but nothing that's misleading. Basic there are two types of life insurance policies term or cash-value. If would he would have said cash value, he would have covered all of those (whole-life, variable-life, and Universal life). As for insurance, term is the way to go for life insurance for majority of Americans. Cash-values policies do have their place in the universe, but they're not for every. The premium difference between term and cash value policies does provide an opportunity for the client to save that difference. Investments and insurance should be kept separately.

Best way to go... Buy Term Invest the difference!!

I guess this writer is not appointed with any insurance companies that offer indexed universal life policies. What the writer wants you to do is purchase mutual funds, sell mutual funds, purchase mutual funds...well you get the picture. He is in a transactional business and thats how he earns a living; off the emotions of his clients, and the ups and downs of the market. I guess anyone can write an article in Yahoo Finance.

Yes, there are fees, and so is everything else. But Adam forgot to mention that there is the best form of life insurance which is an index universal life and global index universal life. This products are protected from the downturn of the market and has a better historical rate of return than mutual funds and maybe structured in a way that has a tax free withdrawal. Look into this. Adam obviously doesn't know enough about life products.

He only explained 3 types of Life Insurance's. He explained the crappy ones. whole life is a rip off bcuz of the small rate of return and the cost of insurance. Universal Life is a rip off too cuz the most insurance you get the majority of the time is 100k. The best policy is the Index Universal Life!! or even better the Global Index Universal Life with Western Reserve Life.

EVERYONE WATCH THIS!!!!

plantowinnow.com
explains everything!

Apparently, anyone can post an article these days whether or not they know what they are talking about. What a hack. We all know what they say about opinions...

The negative comments are assuming that a term policy is a 10 or 15 year, which is what most people are sold after they demand a term policy. I know a company that offers a 35 year term policy, that is inexpensively renewable to age 95. If people are taught how much more money they could have at the end of the term by investing the differance of the cost of a Whole life or Universal life policy in a mutual fund that fits their needs, they would see that they would be self insured and wouldn't even need the term policy after the term ended. As far as investing in Mutual funds, what do you think the Whole life and Universal life companies are investing part of your premium money in? Among other things, mutual funds! Any time you can by pass the middle man as a client, it is a no brainer that the client is better off! In any other case, you would defend your ignorance but ignorance causes people to be ignorance. It is a mathematical equation that buying term and investing the differance is better off for the client. As far as self control, ever heard of a PAC or automatic debit?

Adam you need to clarify whom you are speaking to, which is someone living hand to mouth. You are obviously not a financial planner (The Mutual Fund Store?) and not speaking to someone with more financial capacity in this article. First, you need to identify their goals. I would strongly suggest many consider allocating (just like investments) between BOTH perm and term for exactly what some have mentioned below if the need is just death benefit. That is what we call planning. And for an investment? If you fit the criteria that I look for (Under 50, making more than 250k a year, 10 year time horizon, maxing out their 401k, 10k a year to contribute) there is nothing better and more efficient than an overfunded insurance policy. I talk to CPAs and business managers about this all the time. You see Adam, when structuring this you are transferring a tax cost (which is what you get with any other investment) for an insurance cost (life insurance). You can also get the same type of mutual funds in a life contract as you would directly from an advisor and get them at institutional rates, thus saving mutual funds expenses
For someone making over 250k, and while structuring the product correctly, that is a more than fair trade off. You should review an Internal Rate of Return calculation and incorporate income tax and capital gains taxes. The life insurance contract is dramatically more effective than an annuity or mutual funds when used purely for income, AND would have a death benefit that could pay off the spouse.
Its people like you, Suzy Orman, and Liz Westom of the LA Times than bring your generalism to planning that have no idea how to plan for someone making more than 50k to 100k a year if income.

Unreal! My mom had wholelife policy for 9 years. Paid over 6k a year for 5 policies. 1 for every member of the house..lol only had around 3k of Cash value AFTER 9 yrs and after the surrender charge it was practicly nothing! everyone only had 100k each even 3 kids all under 14 yrs. Should that be illegal or what? I think is a rip off!

Wow, what horrible advice. In a "perfect" world, this concept might work, but most people buy the term and spend the difference. And then at the end of the term period, they cannot afford the new premiums, and therefore go without life insurance at the end of the term. There is a reason that 99% or term policies never pay out a death benefit. It is that people cannot afford it when they get older and actually need it. There is a place for term, but everyone should have some type of permanent policy in place. Plus, he soes not address the business aspect of life insurance, like key man insurance and buy sell agreements. This is a narrow minded view of life insurance.

There is a place for all types of insurance. The key phrase in this article is "I think..." While I respect Mr. Bold's ability to discuss investments (I've never seen/researched investment returns from The Mutual Fund Store), this is just his opinion. I own a variable universal life policy, and believe it fits very well into my personal financial gameplan. I also own a term insurance product. Thanks for the thoughts, Mr. Bold.

Whole life should be illegal.