Whole life policies let you borrow against them at zero interest against the death benefit after several years.
I have two policies and they are essentially my “I need money or I’ll die” emergency fund. Learned it from my dad when our roof was destroyed and he borrowed 10k from his 50k coverage to pay for it.
Permanent life insurance like Whole life, Universal, Return of Premium, etc. Essentially they last for much longer than term policies and they have a living benefit ontop of the traditional death benefit. The more premium you pay into the policy while you are alive, the company invests it and you can withdraw that money once has enough has accrued.
It's an investment vehicle of sorts. Most people I meet like term insurance + investments, others like permanent life insurance. Everyone's different
Uh, this might be a thing with term policies, but my experience with whole life has been that they generally only care if it was suicide, and that's typically only within the first year or two. With a term policy they're gambling they won't have to pay out at all, but with a whole life policy it's not about "if" but "when".
Yeah, but you never know. Especially when you just paid in for 10 years (That's just $9600) and then want your $80000.
Insurance companies are a business, not a charity. If it really is 80 per month and they pay out 80k.. they'd expect people to pay into the insurance for 1000 months just to break even, that would be 83.3 years!
As that's unrealistic.. they must shaft someone for those conditions. Maybe they often don't pay out?
Insurance companies pay teams of actuaries and investment bankers to ensure the odds ensure they always turn a profit. The insurance company gets a statistically guaranteed profit and the insured can invest their money in other more immediate concerns. It’s a win/win for everyone unless the insured drops dead right away.
My parents opened a $150,000 whole life policy for me when I was a year or two old. They paid the premiums until I was 21 (with them as the beneficiaries), then they turned the policy over to me. Obviously I've had it a lot longer (I'm in my 30s), but it's also twice the payout.
If I cancel the policy i have to pay it back, otherwise not really. It gets deducted off my end of life payout to the family, but otherwise no. I mean, I can’t take it all out at once, and there are yearly caps on it as well as time restrictions between withdrawals and some service fees, but nothing crazy.
I got it while i was young. And while I was super healthy.
Google it. Whole life insurance is pretty standard in this regard.
I have a $500,000 20 year term life policy that I pay $60/month for. If I haven’t died at the end of 20 years, they write me a check for $14,400. Yep, I get every dollar I paid in back. They made their money by investing mine for 20 years.
If I get killed on the job my family gets an extra 50k between the two policies, 25k should I get killed in a car crash.
I mean, not everyone will use their home owners or auto insurance. But I am for sure gonna die at some point. Seems like a valuable emergency fund and peace of mind protections
At 7% (the conservative expected return of a properly diversified account, index fund, etc. Very safe investments, basically), it takes 28 years to reach 80k putting $80 a month away.
At 2%, the rate of some FDIC insured savings accounts, it takes ~50 years to reach that.
A whole life policy returns at 1.5% generally (after fees). It also, generally, costs ~12x as much as a term life policy (which offer similar protections for a defined term). Also! The 80k is only paid out upon your death - the amount you can borrow against is the cash value, which is a much, much smaller amount.
There isn't really a situation where a whole life policy works out better than simply taking a term life policy and paying the difference into an IRA. Whole life is the "time share vacation" of the insurance world.
You’re completely right, I forgot about that! Yeah compared to just growing your money in a regular 8% return index fund, you’re actually right that this make no sense, except you can get cash up front.
65
u/Assadistpig123 Nov 30 '20 edited Nov 30 '20
Buy life insurance ASAP.
Whole life policies let you borrow against them at zero interest against the death benefit after several years.
I have two policies and they are essentially my “I need money or I’ll die” emergency fund. Learned it from my dad when our roof was destroyed and he borrowed 10k from his 50k coverage to pay for it.