Hey there! Philip here with InvestaWOW!
Are you looking to make a GREAT return on your money, but you’re worried about an
economic crash?
Why yes I am!
What if I told you that there’s a secret investment strategy of the rich and famous?
A safe, secure place to stash your money, while receiving dividends of 4, 5, even 6%
per year… even when the market dips!
That sounds incredible!
But that’s not all.
With InvestaWOW, your money grows tax-deferred from one year to the next.
Buzz off, Uncle Sam!
You could use all the wealth you build to plan for retirement.
Or for little Jimmy’s college tuition.
Or a new car!
In fact, some people are so wild about this investment, they’ve used it as a replacement
for banks, lending institutions, insurance, and more!
Ooh! I want one! What's it called?
Whole Life Insurance!
Huh?
Stop us if you’ve heard this one.
You’re been thinking about beginning your investment journey.
You sit down with your local financial adviser, and they throw you a curve ball:
Whole Life Insurance as an investment solution.
When we asked, 30% of you said you’ve had a financial expert recommend it.
The rest of you might be thinking, “Life Insurance?
As an investment?
What are you talking about?!”
Well, as strange as it may appear on its surface, Whole Life Insurance as an investment has
been around for generations.
It’s life insurance that never expires, but that’s just the beginning.
It has an investment component too, that’s protected from the stock market and pays attractive
dividends.
Heck, the first book on investing I ever read extolled the amazing virtues of Whole Life Insurance.
Let’s start with Life Insurance 101.
Way back in 1583 Richard Martin purchased the first recorded life insurance policy in
England on his buddy William for 30 pounds.
One year later, when William died, Richard received a 400 pound payout!
Nice for him, not so nice for Will.
Today, the principal purpose of life insurance is to protect those left behind if a family
member dies.
It’s a standard component of modern financial planning with 59% of people in the US owning
some kind of life insurance.
Here’s how it works: you pay a regular “premium” to insure somebody’s life.
If that person dies while the policy is still in force, the insurance company pays out a
cash “death benefit”, usually hundreds of thousands or even millions of dollars.
This money is meant to help those they leave behind.
The most common type is Term Life.
You have flat, monthly premiums for a set “Term”; usually 10, 20 or 30 years.
At the end of the term, if you’re still breathing, premiums jump dramatically, and
it’s not uncommon to cancel your policy at that point.
But Whole Life Insurance is different.
It has consistent, flat premiums for your “whole life”.
How can they afford to do that?
By charging a much higher premium.
Part of that goes toward the cost of insurance, and part of it into an investment account
called the “cash value,” which pays a dividend of 4-6% per year.
The purpose of this account is to offset the increasing cost of insurance as you get older
so your premiums stay flat.
Unlike Term Life, if you cancel a Whole Life policy, you might get some money back… depending
on how long you’ve had it, you could even get more than you paid into it!
Some advisers recommend that instead of borrowing from a bank, you could take out LOANS against
your cash value while keeping the insurance in place--a practice dubbed “Infinite Banking”
Advocates of Whole Life treat it a financial silver-bullet for your needs.
Life Insurance without an expiration date!
An tax-deferred investment for your future!
Fire your banker and loan money to yourself!
How can Term Life possibly hold a candle to this?
I think it’s time to…
RUN THE NUMBERS!
Tia and Tamera are twins, both age 40 and are shopping for life insurance.
Tia picks Whole Life while Tamera picks a 30 Year Term Life.
The death benefit for each is $500,000.
Tia will be paying $563 per month for a Whole Life Policy, according to US averages.
That’s pretty steep, but Tia was attracted to the cash value growth.
She’s thinking this will count as some of her investing each year, and that 5.5% is
a pretty good return.
But hold on, Tia!
The 5.5% dividend only applies to your cash-value portion… not the full $563 payment.
According to a 2015 Consumer Reports study, after costs like commissions and fees, the
average Whole Life investment return was closer to 2%.
If Tia lives to age 70, she’ll have paid $202,680 in premiums.
But her policy will have a cash value worth almost 280 grand!
She’s been insured her whole life and made money!
Sounds like a win to me!
Now Tamera’s 30 Year Term Life is costing her $52 each month.
If she also lives to 70, she gets nothing back.
So Tamera decides to invest the difference between her premium and what she might have
paid for a whole life policy.
And if she invests in a basic stock index fund she’ll probably average over 7% for
the next 30 years.
At 70 her life insurance policy will be worthless.
But her investment with be over $600,000!
That’s twice as much as Tia got with her Whole Life policy.
So with high premiums and underwhelming returns, why is Whole Life recommended by brokers and
advisers across the country?
One word: Commissions.
See, agents and advisers typically receive a commission of 80-100% of the annual premium.
So Tamera’s agent made only $600, but Tia’s made around 6 grand.
When I first started my financial career, I too drank the Koolaid.
It was clear that our commissions would be much higher for recommending any insurance
product with an investment component.
Our clients were often unaware of this conflict of interest.
To be fair, there are some situations that might make whole-life insurance a good fit.
Like a family with a special needs child who needs a lifetime of support.
Or owning a complicated family business, or a sizable estate with substantial taxes.
But these are special cases.
It’s not the one-size-fits-all remedy it’s made out to be.
It’s best to do your own research, read the fine print and make sure you’re seeking
objective advice from somebody that doesn’t have financial skin in the game.
But wait! There's more!
And that’s our Two Cents!
If you have any experience with Term or Whole Life Insurance, share it with us in the comments section!