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  • No commission whole life

    I understand your your biggest objection to whole life is the sales process and commission. I agree. By eliminating this by using a company like AAFMAA (available to military, no commission), does it make more sense now? I bought a single premium policy for $85000 four years ago and it is now worth over 100k (it was worth 89k after year 1). I am looking for some diversification from my portfolio which is heavily weighted in stocks and I don't want to touch bonds at this current time. Seems like almost a good cash alternative with actually some pretty good return. And if I get hit by a bus tomorrow, a 200k life insurance payout goes to my family. Am I missing anything in my thought process?

  • #2
    You couldve bought a 2 million 30 year term life policy for ~500/year and invested the other 84500 in VTSAX. Then if you got hit by a bus tomorrow your family would get (2 million + the growth of that 84500) - 1500 paid for the other 3 years.

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    • #3
      Insurance and investing don't mix. That has nothing to do with commissions. Our biggest objection is that it's a horrible product for the vast majority.

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      • #4
        Originally posted by Hogdriver10 View Post
        I understand your your biggest objection to whole life is the sales process and commission. I agree. By eliminating this by using a company like AAFMAA (available to military, no commission), does it make more sense now? I bought a single premium policy for $85000 four years ago and it is now worth over 100k (it was worth 89k after year 1). I am looking for some diversification from my portfolio which is heavily weighted in stocks and I don't want to touch bonds at this current time. Seems like almost a good cash alternative with actually some pretty good return. And if I get hit by a bus tomorrow, a 200k life insurance payout goes to my family. Am I missing anything in my thought process?
        Yes, its absolutely terrible all around.

        Had you done what billy said, you'd not only have 10x the death benefit but the total return on VTI from 4 years ago and todays date is 92.5% so you'd have a 2M benefit and an additional 162,662 dollars invested.

        Whole life is just garbage. You say you arent interested in bonds, yet where do the "returns" on whole life come from but less than if you bought them? If you said bonds, you'd be right.

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        • #5
          $200k is not adequate life insurance for most physicians. $1 million would be the minimum for a doc with a spouse and no children IMO. Add in kids and many docs carry $2-4 million term life policies.

          If you got hit by a bus tomorrow you just financially hosed your family.

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          • #6
            AAFMAA and Navy Mutual are relative good guys as far as whole life goes. For folks currently on active duty, their term policies are superior to SGLI, but you probably want both a term policy from AAFMAA or Navy Mutual as well as SGLI or another commercial policy that doesn’t have acts of war and acts of terrorism exclusions.

            All that said, you still don’t want to mix life insurance with investing. Get good term coverage for 20 to 30 years, then build your net worth to the point where you don’t need life insurance anymore. If you stay on active duty or participate in a reserve component long enough to earn a pension, do the math on the survivor benefit program vs. one of the “pension max” life insurance sales schemes. Consider the low probability of dying well before your spouse and also the social security survivor benefits that your spouse might have if you die early. (If you have a special needs child who will need lifetime care, crunch those numbers as well. Don’t forget to consider a special needs trusts and/or a 529 ABLE before giving too much consideration to the sirens song of a life insurance salesman.)

            Don’t forget - whole life is the answer!
            (What was the question?)

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            • #7
              The commission is by no means the biggest objection to whole life or any other similar insurance product. The commissions are the tip of the iceberg that will sink your returns. The reason the insurance company can pay those big commissions, is because of how high the margins are on whole life and similar products.

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              • #8
                Hogdriver10 , post #1, welcome to the forum. Don’t take it personal, every comment is directed at the product. Insurance has a purpose, but investing for returns is not one of them. Feel free to argue your point, contribute or pose other questions or if you wish advice.

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                • #9
                  Originally posted by Tangler
                  What’s the difference between whole life and a bucket of poo? 💩
                  You know what you're getting with one

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                  • #10
                    Cash value policies have worked out for some people who bought them decades ago during times of high interest rates. Those policies guaranteed minimum rates that were low by the standards of the time but now are good for a low risk investment now. The people sho bought them might have been better off had they bought long term bonds back then but are now getting a good return.

                    Buying cash value life now is essentially betting that history repeat. Rates are so low now that a repeat would require decades of severely negative market rates. This seems improbable.

                    There are some who claim that the tax deferral options make the cost of WL worth it. Although I have seen the claims, I have never seen anyone work through the calculations to show they are right. I have a seen a few attempts that were based on gross errors about returns or taxation.

                    At best, WL is a way to get safe, low bond returns. There are far less expensive ways to do this.

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                    • #11
                      I apologize. I was mean. not helpful. Hang in there. i have done much dumber than whole life for basically my whole life and it ain’t over yet (still messing it up!)
                      The WCI himself bought some whole life at one point and it is a common occurrence among docs.
                      Hang in there.
                      Tangler

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