Cost of Whole Life Insurance: Is It Too Expensive?
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- Опубликовано: 19 окт 2024
- Cost of Whole Life Insurance: Is whole life insurance too expensive?
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Is whole life insurance too expensive?
I'm sure you've probably heard this idea before, and maybe it even weighs on your mind.
You are interested in whole life insurance for various reasons, but you feel that it's too expensive. I want to challenge you to think about life insurance differently.
If you are looking at whole life insurance, there's undoubtedly a cash value component that grows inside the policy. Now, the cash value is like a savings or a storage tank, a place to store cash.
It's one of the most potent and profound savings tools.
I call it savings on steroids, and the reason is that you have this opportunity to put dollars into cash value.
By paying your dollars into cash value and that cash value is growing at a competitive rate of return, it is uninterrupted compound interest.
You can borrow against it, so you have liquidity and the use of your money, and it's very safe.
Now, I would never look at a savings account as expensive. I put my dollars in, and I'm able to use them. It's this storage place for money.
It's not expensive because I put the dollars in, I can get the dollars out. Now, I also don't think of an investment as expensive.
I put in a dollar, and it turns into $1.30. That's not expensive. It's making me money.
When we look at life insurance, specifically whole life insurance over a long period, it is not expensive because the cash value you can access and use is more than you put in.
There is a period at the beginning of the policy that we call the lack of liquidity years.
What's happening during that time frame of the policy? Well, the policy is paying for internal costs, things like the cost to run the company, the cost of paying out a death benefit, the cost of commissions.
So yes, there are costs inside the policy, and sometimes those are the things that make us think of it as being expensive.
Once you overcome that lack of liquidity, because most of those costs are front-loaded in the policy and you pay for them early, you have a policy that crosses over this breakeven point where you start having more cash value than you paid in premiums.
From that point forward, it's simply growth. I would say if I put a dollar in and I have $1.30 or $2, there was no cost to me.
Even though there's an internal cost to the policy, you need to think about the impact on you.
Maybe you're thinking whole life insurance is expensive because if I get $100,000 of death benefit with a term policy, I'm going to pay fewer premium dollars than if I get $100,000 of death benefit in a whole life insurance policy.
You will pay more for the same amount of death benefit in whole life insurance than you will in a term policy.
What's really important to understand is you are not comparing apples to apples.
If we look at term versus whole, term life insurance gives you a death benefit only. If you outlive the term, which most people do, you will get no dollars back from that policy.
Whether it was a 10-year or a 20-year, hopefully, you'll outlive that term, and you will then have no dollars to show for that term policy.
However, with whole life insurance, it's completely different.
You know that you will get a death benefit whenever you pass away, and you're building cash value in the whole process up until receiving the death benefit.
If you do happen to live past age 121, the policy will endow. Meaning your cash value and the death benefit will be equal to each other, and that full amount will be paid out to you personally.
Now, that's not at all the same thing as having a death benefit with a term policy that's in place for a specified short length of time.
In fact, with whole life, you're getting these tremendous living benefits, a place to store cash, growth on your money that you can use and borrow against, and a death benefit that's guaranteed to payout.
So saying whole life insurance is expensive is kind of a cop-out for really thinking clearly.
We don't have to investigate and get down to what it means.
Unfortunately, for so many people, this idea that whole life insurance is expensive has completely blinded them to understand the tremendous value that whole life insurance can be in your financial life.
I encourage you to move past that limiting idea that something is expensive and find out what value it gives you.
It doesn't make sense to call something expensive if you get more out than you what you put in.
#costofwholelifeinsurance #costofinsurance #lifeinsurancecost
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Thank you so much for explaining this. Very good explanation! I am wondering if I’m paying too much. I pay $230 for a $100,000 whole life where after the 20 yr mark I pay nothing more.
Glad it was helpful! We do not know enough about your policy and unique financial situation; additionally, we cannot advise you via RUclips comments. If you would like to speak with an advisor you can book a call here: themoneyadvantage.com/calendar
WOW!!! This was a very valuable video!! And I LOVE the way you explain things. You do it extremely well and the way you use your hands while doing so is AMAZING!! Thank you!!!! I think I will invest in a whole life policy for real!
Thank you for the kind words. If you would like to explore how this could work for you, then please book a call with our team here: themoneyadvantage.com/calendar
@@TheMoneyAdvantage hey! You are most welcome! And thank you for the Link ☺️
Ok but people still want to know whats thr general average cost because its still a price to psy monthly
Thanks for watching! There are quite a few factors that go into the cost of whole life insurance. How much death benefit you are purchasing, health, age, etc., all play a part. Also, you can design a policy to be high cash value which would mean you intentionally pay a higher premium to boost the cash value, but this means you are giving up some death benefit to do so. All of these things play a part, and each person's situation is different. There is not substitute for working with a competent advisor who can help you design a policy that is custom-tailored to you and your unique situation.
I wish I could get a idea of the monthly cost. I keep hearing expensive but it's for life & not 30 years. I would hate to out live my policy at 70 trying to get a new 1 with new payments.
Thanks for watching! There are quite a few factors that go into the cost of whole life. How much death benefit you are purchasing, health, age, etc., all play a part. Also, you can design a policy to be high cash value which would mean you intentionally pay a higher premium to boost the cash value, but this means you are giving up some death benefit to do so. All of these things play a part, and each person's situation is different. There is not substitute for working with a competent advisor who can help you design a policy that is custom-tailored to you and your unique situation.
I don't pay to have a saving account. You have to pay something to get life insurance and thats the issue. Not what you put in that you can take out after paying for the insurance.
Thank you for watching! Structured properly you’ll have more cash value to use than you pay in premium.
Cash value is not like a savings account. When you die, your savings account is still there for beneficiary, etc. When you die with cash value, you lose it...
You also don’t have to borrow your own money with a savings account. It’s called a withdrawal...
Thank you for watching!
There's a common misconception about whole life insurance that the cash value and death benefit are two separate buckets of money.
With whole life insurance, the cash value is a portion of your death benefit. The longer you have the policy, the more of your death benefit is available to you in the form of cash value until all of it is available to you at the end of the policy (usually age 121).
Let's say that you are 30 years into your policy and your death benefit is $1,000,000, and your cash value is $500,000. This means that of the total $1M death benefit, $500K is available to you to use. The total here is $1M, not $1.5M. In this case, you could use up to $500,000 while you are still living.
Say you chose to do nothing with the cash value, and let it sit in the policy. If you died, your heirs would receive the full $1M death benefit. If you took a loan for $500,000 and died with an outstanding loan balance, the remaining death benefit of $500,000 would be distributed to your beneficiaries.
Another way to think about this is that the cash value in whole life insurance is similar to the equity in a house. The cash value is a portion of the death benefit, the same way equity is a portion of the value of your house. Let's say after 30yrs you have paid your mortgage, your house is worth 300K and you decide to sell it. You would not expect to get the value (300K) of the house plus all your mortgage payments back.
If the policy is structured properly, while you are living you will be able to access and utilize more cash value than you pay in premium. When you die your beneficiaries will also receive more than you pay in premium.
Regarding borrowing vs. withdrawal:
You are earning uninterrupted compound interest, even while you borrow against your policy. This is not happening if you pay cash or finance. themoneyadvantage.com/life-insurance-loans-and-why-we-use-them/
Additionally, it is important to remember the Interest Principle: You are always paying interest. You either pay interest when you finance, or you give up the interest you could have earned when you pay cash. (themoneyadvantage.com/opportunity-cost-the-invisible-cost-of-financing/#h-you-finance-everything-you-buy)
Thanks for the reply!
Know of any mutual insurance companies that have set up these types of whole life policies? And typically how long before you can borrow from, on a million policy?
@@naturechandler9927 Yes we work with several of the top carriers. You can borrow as soon as the check clears. To find out more you can book an appointment with our advisory team here: themoneyadvantage.com/calendar
The fees I am seeing on my policy is 30% of my premium. The promise return rate 4-6% is still a wish within recent years. Then it will take tens of years to build up cash value reaching the break-even point.
Thank you for watching! I think you are talking oranges, and we are talking apples. Not all insurance companies are equal, not all life insurance products are equal, and not all life insurance policy designs are equal. What you are describing is not at all what we are experiencing personally over the last 60 years, nor what our clients are experiencing. Here are a couple of videos where we show real life examples: ruclips.net/video/ghvEU4tXzw8/видео.html and ruclips.net/video/S54uejv8g-Q/видео.html
Thanks but no thanks. It's the confusion. The link is for multi-million dollar net-worth person to enter the game of double play; not applicable to normal person.
@@ToanLe-nj5iu Properly designed dividend-paying whole life insurance policies from a mutual insurance company work the same regardless of the size of the premiums. Has nothing to do with one's net worth.
great video - super easy to follow!
Glad you think so! Thank you for watching!!
What will happen toh the cash value if the policy owner dies. Will it go to the beneficiary along with death benifits?
There's a common misconception about whole life insurance that the cash value and death benefit are two separate buckets of money.
With whole life insurance, the cash value is a portion of your death benefit. The longer you have the policy, the more of your death benefit is available to you in the form of cash value until all of it is available to you at the end of the policy (usually age 121).
Let's say that you are 30 years into your policy and your death benefit is $1,000,000, and your cash value is $500,000. This means that of the total $1M death benefit, $500K is available to you to use. The total here is $1M, not $1.5M. In this case, you could use up to $500,000 while you are still living.
Say you chose to do nothing with the cash value, and let it sit in the policy. If you died, your heirs would receive the full $1M death benefit. If you took a loan for $500,000 and died with an outstanding loan balance, the remaining death benefit of $500,000 would be distributed to your beneficiaries.
Another way to think about this is that the cash value in whole life insurance is similar to the equity in a house. The cash value is a portion of the death benefit, the same way equity is a portion of the value of your house. Let's say after 30yrs you have paid your mortgage, your house is worth 300K and you decide to sell it. You would not expect to get the value (300K) of the house plus all your equity.
Isnt your base the amount you pay every year? So if I want a 50k base I have to pay 50k a year right. How can a working class person pay 50k a year if thats what the median make.
Thank you for asking! The amount of required premium depends on the amount of base premium and paid-up additions. For example, I have a policy with a 30K annual premium, but only 40% is a base premium, so my minimum required premium is approximately 12K annually for that policy. No life insurance company would let you start a policy with a premium equal to your income. The companies we work with limit your annual premium in whole life insurance to a percentage of your income.
@@TheMoneyAdvantage Thanks for answering 💗. Ok, that makes since that it would be a percentage of your income. What is your split for cash value and death benefits? And how much would you beneficiaries get if you 🤔 give up the ghost 🤭?
I want to get a whole life insurance policy who do I have to get in contact with just turned 18 and I’m super interested!
Thanks for watching! You can book a call with our advisory team here: themoneyadvantage.com/calendar
At 65 universal whole life policy cost for say 100k
Thank you for watching! We design policies differently for each client. The best way to find out how this could work for you would be to book a call with our team: themoneyadvantage.com/calendar
Say you dont use any of the savings and you die before the age of 121 will the full amount of your policy be paid out.
Also how much does it cost to get started give me an example.
When you die, the full death benefit is paid to your beneficiary. How much depends on you and what you are trying to accomplish.
Can you get a 25000 policy????
Thank you for watching! Are you asking if it’s possible to buy a whole life policy with $25,000 of death benefit?
"expensive" refers to comparing the total cost of whole life vs term insurance and investing the difference.
Thank you for watching! We explore this topic further here: themoneyadvantage.com/the-cost-of-whole-life-insurance/
@@TheMoneyAdvantage that post keeps saying things like "no cost if you get more than you put in." that is not the question. the question is how does it compare to other options. the "cost" is the difference between your net worth if you only do whole life vs. doing term life and investing the difference. If your net worth is greater if you buy whole life only, then your point is valid, but if buying whole life instead of term and investing the difference costs you $500K in net worth, then whole life IS expensive. this is called the opportunity cost in economics.
@@TheMoneyAdvantage in short, The Cost of Whole Life Insurance IS the opportunity cost; what would your net worth be if you did term life and invest the difference.
While life is not an investment it’s a place to store cash between deals (emergency/opportunity fund). We use the cash value to invest in other opportunities earning a return in two places at the same time.
Did you say 121 years. Age?
Thank you for watching! Yes, age 121.
the cost of insurance is expensive, my friend pays $400 A month and from that $400 only $150 goes to his premium and the rest is the cost of insurance..
Thanks for watching! What you are describing is a product/design issue. Not all whole life insurance is equal.
As the cash value accelerates in a properly structured whole life policy, the gap between paid-in premiums and available cash value shrinks. Once you have more cash value than the total premiums you’ve paid, there’s no more cost to you. Every year afterward, you’ll always have more cash value than what you’ve paid in, so the felt impact to you is that the insurance no longer has a cost.
If I put dollars in and get more dollars out, expensive is a word that doesn’t suit the situation, because it doesn’t even require an assessment of value. Whole life guarantees you’ll have a death benefit payout that is much higher than the premiums you’ve paid in.
However, this isn’t true with term life insurance, which rarely pays out because most people outlive their term life policies. And because term life insurance is priced for the block of years you have the policy, younger starting ages, and shorter-term lengths it appears the cost is relatively little. However, if you continued to renew a term life policy throughout your lifetime, you could easily pay more in premiums than you’d get out in death benefit.
On the other hand, whole life’s level internal cost, guaranteed growth, ownership benefit of dividends, and guaranteed payout create the stability you need to be the lowest true cost to you for the highest quality life insurance product. themoneyadvantage.com/the-cost-of-whole-life-insurance/
Bottom line, it is about the necessary time to reach the break even point building up cash value. All the illustrations is around the unrealistic 6-7% return rate which is a wish for recent years, pretty sure for coming years. Then it takes tens of years reaching out the even. Who has the stamina?
It is too expensive, the premium is so much more than Term if people have a mortgage to pay and car payments, etc... How can the average person afford an extra $350 a month when most people are working paycheck to paycheck?
Thanks for watching! Whole life insurance is not for everybody. If someone is living paycheck to paycheck, then whole life is not for them. Having said that:
As the cash value accelerates in a whole life policy, the gap between paid-in premiums and available cash value shrinks. Once you have more cash value than the total premiums you’ve paid, there’s no more cost to you. Every year afterward, you’ll always have more cash value than what you’ve paid in, so the felt impact to you is that the insurance no longer has a cost.
If I put dollars in and get more dollars out, expensive is a word that doesn’t suit the situation, because it doesn’t even require an assessment of value. Whole life guarantees you’ll have a death benefit payout that is much higher than the premiums you’ve paid in.
However, this isn’t true with term life insurance, which rarely pays out because most people outlive their term life policies. And because term life insurance is priced for the block of years you have the policy, younger starting ages, and shorter-term lengths it appears the cost is relatively little. However, if you continued to renew a term life policy throughout your lifetime, you could easily pay more in premiums than you’d get out in death benefit.
Once your term runs out, the policy becomes annually renewable, meaning the cost of insurance rises every year, and every year, you pay an increased premium to cover it.
All forms of universal and variable life insurance are built on this annually renewable term life insurance model, with an annually increasing cost of insurance. That’s why the cost becomes a critical, focal point because in the later years, the costs can become substantial, even to the point of surpassing the growth of the policy and collapsing the policy.
On the other hand, whole life’s level internal cost, guaranteed growth, ownership benefit of dividends, and guaranteed payout create the stability you need to be the lowest true cost to you for the highest quality life insurance product. themoneyadvantage.com/the-cost-of-whole-life-insurance/
so around 350 a month is the cost of whole life insurance would be?
@@TalootB Yes/No/Maybe. The cost depends on multiple factors, such as age and health. Also, there is policy design, meaning if you are structuring a policy for high cash value, then you intentionally pay a much higher premium for the same death benefit for the purpose of increasing the cash value. The way to find out how much it would cost you is to work with an advisor.
Awesome vid. Thanks for the great info about the cost of whole life.
Really glad that you found this valuable!
Do you sell whole life policies?
Thank you for watching! Yes we do.
Nice 👍
Thank you for watching
i really hard time getting past your personality annoying me , but stuck it out ... good video
Thank you for watching
Wow that's rude 👿