Without my income, Tim would have less than $350 left over each month after the mortgage payment and utilities — and that’s only because his parents pay $400 rent for the guest house. (And that’s assuming we win this damn disability appeal.)
The $350 would have to cover food, medication and copious doctor visits, not to mention home repairs and replacing appliances as they die.
In short, I was determined not to leave him vulnerable like that. So I looked into insurance options. Not surprisingly, the insurance agent was ardently advocating the benefits of whole, rather than term, life insurance.
I didn’t know much about either option, but my BS detector went on high alert as she described the merits of whole life insurance. Well, the one merit really: Your money doesn’t vanish.
She pointed out that at the end of term life insurance your money’s just gone. You don’t see it again. But whole life insurance? Well, it’s always there. It’s invested — it’ll grow — and you can even borrow against it if you need to!
Um, what? I have this policy to protect my loved ones. The whole point is to leave them money, not use it to pay for medical treatment. If said treatment doesn’t work, I’ll die having used up the money Tim needs. Thereby defeating the entire point of the insurance.
And as for “investment” she wasn’t terribly clear about returns. I think insurance agents just hope the word “investment” will make people think it’s, well, a good investment.
Even if I had been on the fence, I’d have hopped right off when she told me the premium rates. Whole life insurance was about triple what term life was. And because of my medical conditions my premiums are already high.
Just to be safe I looked around the Internet, and my opinion was confirmed. Experts say that whole life insurance is generally a bad idea. Returns are low compared to the stock market. Heck, right now I could almost get the same return just putting the money in a friggin’ CD!
So thanks but no thanks. I’ll pay $53 a month (told you it was high) rather than $170 a month for $150,000 of coverage for the next 30 years. Well, about 27 at this point.
I know that’s not a huge premium, but our mortgage is low. Tim can pay off the house and have about $75,000 left over. That will be a good cushion (along with any savings we have) as life expenses come up.
Also, I’ve told him to get roommates to further ease finances. And that I’ll haunt him if he blows the money on something like a nice car. Which at this point he’s too smart to do, but I also know grief warps the ability to think and plan.
Still not convinced whole life insurance is a bad idea? Mosey on over to The Whole Life Insurance Rebellion, which inspired this post. It’s filled with fascinatingly terrifying statistics about whole life insurance.
It turns out there’s a good reason why so many insurance agents push so hard for whole life insurance. (Hint: money. A lot of it.) You’ll see a great breakdown of why it’s so rarely worth the money.
But you know what perhaps impresses me the most about this movement? The guy who created it actually sells insurance. He’s probably losing a lot of money by taking this stance, but apparently he’s just heard too many horror stories of people getting, to use the technical term, screwed over by whole life policies.
I think his kind of integrity and actual concern for his clients is pretty commendable and refreshing. I urge you to look the information over. Share it with your friends who don’t read finance sites. Spread the word to make people understand that they need to stop buying whole life insurance.
Note: I was not compensated for this post. I just think it’s an important message.
Do you have life insurance? Were you tempted to get whole life insurance?