My insurance agent contacted me recently about switching some of my term life insurance to whole life.

I have to admit this all confuses me. Can you tell me what the advantages of would be of switching my term-life to whole? And should I keep any term-life, or convert it all? I am male, 32, married with 1 child,

Asked by Brian

13 Answers

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Answered by Donald Kowalski, Insurance Agent in Salem, OR
Brian, the reason you buy life insurance is to provide a benefit to a survivor. So think in terms of what your family would need today, if you were out of the picture...how much insurance would they need to keep their head above water, until they can get their lives back in order. So if that amount is 500k and all you can afford is term, then so be it. Converting to whole life would be nice for the long run, but can you seriously afford 500k in whole life? Only you can answer that question. The bottom line is make sure you have enough to cover your needs for today, and reassess this every couple of years. | 07.21.15 @ 15:50
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$commenter.renderDisplayableName() — {comment} | 12.11.16 @ 02:38
Whole life is a policy that has premiums that stay the same your entire (whole) life. Term insurance has premiums that stay the same for that term (10, 15, or 20 years). I usually recommend Term while kids are still dependent. It is the least expensive coverage to get. I would recommend you keep the term at least until the term is up any you get your premium increase notice.

It may make sense to add a Whole life policy. As you age, your term insurance will become too expensive to keep. You pay the lowest whole life premiums the younger you start and the healthy you are. Often people want some insurance for their loved ones to cover their final expenses or to replace their income or to pass on wealth avoiding probate and inheritance taxes. As with all insurance, shop to find the best rates. | 07.21.15 @ 16:15
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$commenter.renderDisplayableName() — {comment} | 12.11.16 @ 02:38
Answered by Phillip Christenson, CFA in Plymouth, MN
Don't do it! They usually try to sell you on "Owning your Insurance versus Renting it." The fees are outrageous. Keep your investments separate from your life insurance. Keep the term policy and if you have any extra money invest it in an IRA, 401k, or even a taxable brokerage account would be better than whole life insurance. | 07.28.15 @ 20:15
Comments 2  
Willard R. Brumbaugh, LUTCF in Victorville, CA — Investing in an IRA instead of accumulating these funds in a competitive WL policy is a fool's errand. There is no tax-savings in IRAs, only postponement. | 08.04.15 @ 19:51
Phillip Christenson, CFA in Plymouth, MN — Life insurance is not an investment. It's meant protect you from large unexpected events. You will not grow wealthy using a whole life policy...although the life salesman might. | 08.04.15 @ 20:46
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$commenter.renderDisplayableName() — {comment} | 12.11.16 @ 02:38
Answered by Willard R. Brumbaugh, LUTCF in Victorville, CA
A properly funded Whole Life policy with a loan interest rate close to the rate being generated inside the policy is the most fruitful of your financial choices. Even though I am not connected with Certified Bank On Yourself Agents, I believe you can gain tremendous value in the information found in Pamela Yellen's book, The Bank On Yourself Revolution.
| 08.04.15 @ 19:56
Comments 2  
Phillip Christenson, CFA in Plymouth, MN — You may not be affiliated with Bank on Yourself but I bet you will sell a similar type of policy without hesitation. Bank on Yourself is just an overhyped insurance policy. A quick google search will tell you that it is a very questionable strategy. (Also called infinite banking) | 08.04.15 @ 21:02
Saving in WI — Term life insurance is your best option Brian. Whole life insurance will not benefit you. It will only benefit the insurance agent selling it to you. | 08.10.16 @ 17:16
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$commenter.renderDisplayableName() — {comment} | 12.11.16 @ 02:38
Answered by Pamela J. Horack, , CFP®PRO+ in Lake Wylie, SC
Hi Brian! Here's a question for you - why would your insurance agent contact you to switch from a less expensive policy to a more expensive policy? Is he so thoughtful of your and your family that he feels the need to expand your coverage? While there are some very compelling uses for whole life insurance, a call from out of the blue is probably not one of them. Being sure you have the right type of coverage based on your needs and goals is the right way to go. Check with an independent planner to be sure. | 08.04.15 @ 20:21
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$commenter.renderDisplayableName() — {comment} | 12.11.16 @ 02:38
Answered by Rob Jupille, Financial Adviser in Santa Monica, CA
Did you communicate a change in your circumstances that would lead your agent to recommend this change? If not, this is merely a way for your agent to generate additional revenue from you. Without knowing your specific insurance needs, I couldn't tell you if it's a good idea or not, and it may well be, but I'm certainly skeptical of an unsolicited call to change policies. | 08.04.15 @ 20:27
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$commenter.renderDisplayableName() — {comment} | 12.11.16 @ 02:38
Answered by John Cole, Insurance Agent in Indian Trail, NC
Sir, I really don't know your financial status but at any rate a blend of whole life with living benefits such as an IUL policy that would provide you income in retirement and a term policy with living benefits if you would get sick you could leverage the face value at 90% to get your family through the hardship. This would then most likely leave this policy as a burial policy. At the same time the IUL will keep growing for your retirement. This strategy works for most age groups. Of course we would need to look at your income to debt ratio. If you need help we are to serve you. Thanks Much.
| 08.04.15 @ 22:19
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$commenter.renderDisplayableName() — {comment} | 12.11.16 @ 02:38
Answered by Nirav Desai, Financial Adviser in Los Angeles, CA
The advantages are that your insurance agent will make 10 times the commission.

The draw back is that you are likely to be severely under-insured.

Wholelife is a complicated product that mixes insurance and investing. And when it comes to finance, complexity is bad for the consumer since it masks all sorts of fees.

Without knowing more about your personal situation (like income and asset level) it's hard to judge whether it is beneficial...but if you're not in the top 5% of income earners it most probably does not. | 08.05.15 @ 02:33
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$commenter.renderDisplayableName() — {comment} | 12.11.16 @ 02:38
Answered by James Pupillo, CIMA, CIMC, C(k)P, GFS, TFMC in Scottsdale, AZ
Philosophically I believe insurance should be used as a tool to mitigate risk not as an investment.. Consequently in most cases, not all, term insurance is a low cost efficient and provides effective risk mitigation. There are lower cost vehicles for accumulating cash values, investment returns such as tax efficiently structured taxable investment accounts and tax deferred IRAs, 401k accounts, etc. with the same tax deferred benefits absent the additional expenses associated in Insurance and Annuity contracts. | 08.05.15 @ 03:17
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$commenter.renderDisplayableName() — {comment} | 12.11.16 @ 02:38
Answered by Richard Eddy, Financial Adviser in La Verne, CA
Brian, you'll find some good information, some bad information, and some irrelevant information from the advisors posting on this page. It's up to you to decide which is which, so let me approach your question a different way.

First, what is it that you want to accomplish? Why are you buying life insurance? Despite the protests of various agents and advisors here, "whole life" isn't evil, and "whole life" isn't the end-all-be-all financial product. Neither is term, IUL, or any other flavor of life insurance. Each is designed for a specific purpose. And YOUR purpose should dictate which kind of life insurance you should buy.

Second, it's common for a GOOD life insurance agent to approach you from time to time about making changes to your coverage. The fact that your agent wanted to get you to convert SOME of your TERM to Whole Life tells me a little bit about how he approaches life insurance planning. And his way isn't "wrong". I'm not saying it's "right" either. But have him explain to you what his philosophy is, and why it will benefit you.

Just a few things to think about. Good luck with your decision. | 08.13.15 @ 20:02
Comment 1  
Michael Zaino, Retirement Specialist, President & CEO in Charlotte, NC — Great answer Richard! | 02.15.16 @ 23:47
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$commenter.renderDisplayableName() — {comment} | 12.11.16 @ 02:38
Answered by Willard R. Brumbaugh, LUTCF in Victorville, CA
Heed what Richard Eddy says. As for agent motivation, much more commission can be made by the serial re-writing of Term life insurance. That is, until the client becomes uninsurable. Those that make blanket statements condemning Whole Life either are ignorant of or choose to ignore the vast range of reasons that Whole Life is well worth having. | 08.13.15 @ 20:29
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$commenter.renderDisplayableName() — {comment} | 12.11.16 @ 02:38
Answered by James Pupillo, CIMA, CIMC, C(k)P, GFS, TFMC in Scottsdale, AZ
Term is the most cost effective way to go. Insure the liability. Take the difference in the term life premium and a whole life and in vest it a lower cost investment vehicles. | 08.14.15 @ 04:04
Comments 2  
Willard R. Brumbaugh, LUTCF in Victorville, CA — Mr. Pupito, I used to believe as you. However, real life experience and exposure to other ramifications has taught me that simply promoting "Buy Term and Invest the Rest" does a dis-service to your clients. | 11.27.15 @ 21:11
Saving in WI — Brian, James Pupillo is giving you the best advice. Insurance agents are the only ones that endorse Whole Life policies instead of Term policies. Life insurance is not an investment strategy! | 08.12.16 @ 15:15
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$commenter.renderDisplayableName() — {comment} | 12.11.16 @ 02:38
Answered by Larry Gilmore, Insurance Agent in Marysville, WA
You have a wide variety of answers here because there really isn't a single way to go. Personally I own whole life and have for around 25 + years now. I also own securities and other investments. My life insurance has been the most consistently true to it's promise than anything else I have done. It's slow, boring and consistent. It's low risk, low return product that can't go backwards, unlike my real estate and securities investments can.

Your decision should be based on your needs and goals. Whole life locks your cost in and gives you control of your insurance. Other products are fine, but they have limited durations (they end before you do) and you really don't control the price, the insurance company does.

You may want to look at converting some coverage as that converted coverage most likely will still be there 30-50 years from now.

But do what works for you. There is no right answer only yours.

| 04.15.16 @ 06:01
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$commenter.renderDisplayableName() — {comment} | 12.11.16 @ 02:38
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