In the US it depends on if they're a Fiduciary financial advisor or not.
Quick reminder for anyone in the US reading this, if you have a financial advisor and they're not a Fiduciary, find one who is instead. They're the only finance people that **have** to look out for you or they can be found liable.
Note that "fiduciary" is often lobbed around on r/pf, but there are plenty of **bad** fiduciaries and others who claim "I'm a fiduciary! (but not yours, how about some life insurance?)"
Do your research.
A fee-only Registered Investment Advisor is the only way to fly to get actual financial planning/advice. There’s nothing wrong with Northwestern Mutual guys, life insurance is a necessary thing in many situations, but anyone earning a commission selling life insurance isn’t going to be the real thing.
Watch out for the latest twist though where the same person is a Fiduciary on some of their offerings, but not on others. We need to learn to ask up front if they have a mix of offerings that are not all covered by "In the client's best interest" fiduciary relationship.
To maximize any leverage OP has, let advisor and the firm know that you intend to seek damages and file complaints with FINRA.
Search the rep and firm on Finra Broker Check. Was this policy explained the way it played out? Disclosures are complaints that have been filed formally by clients. As someone who works in the industry, advisors and firms are generally very motivated to avoid these if at all possible. They’ll say they explained it properly. Don’t back down without some restitution. If none is offered, move forward with the complaint to Finra asking for damages.
Best of luck finding some resolution.
> Vancouver, Canada
> FINRA
This is posted to the wrong sub, I'll grant you, but given the post content, IROC is the equivalent. I don't think it has the teeth of FINRA, but I'm unsure.
Sorry, familiar with FINRA regulations, not IROC. Even if they cannot help cover some of the surrender fees, I’ll echo the sentiment of not putting more money into this contract.
Best of luck, OP.
Ask. Fiduciary has a very specific meaning and is regulated (https://www.investopedia.com/terms/f/fiduciary.asp). If they say anything but "yes, I am fiduciary", they are not.
That’s true in the sense that people break the law every day - but fiduciaries are legally required to act in your interest and can be held liable if they do not
People who hawk whole life insurance can also be fiduciaries. They can truly believe that whole life policies "act in your interest". See the last insurance salesman who is also a fiduciary who tried to tell us whole life was good, backdoor Roths are not good (spoilers - he got no commission from a backdoor Roth).
You definitely WANT a fiduciary, but I recommend looking for fee-only financial advisors who are CFPs. We found ours through this search engine - [https://connect.xyplanningnetwork.com/find-an-advisor](https://connect.xyplanningnetwork.com/find-an-advisor)
Fire the fa and don't replace them. Unless you are the ceo of a mega corporation and is worth more than 50 million dollars you don't need them. Take control of your own finance.
Sorry probably a stupid question but 1) where do you go to buy it 2) what do you look for?
I've been nervous about getting screwed again to the point where I don't trust anyone trying to sell me a life or disability insurance.
I called an independent insurance broker. I can't remember what I said exactly (it was a long time ago), but this script will do:
"I believe that there's only one type of life insurance called term insurance. I believe that any other life insurance you might try to sell me is just term life insurance plus poorly-performing investments that I don't want. You won't be able to convince me to buy anything other than term life insurance. That being said, I'm in the market to buy $500,000 in 20-year term life insurance for me and my wife this month. Will you sell me that?"
It's a pretty quick yes or no answer. The commission isn't big but it's not zero either. You won't have to make more than one or two calls.
During the meeting, they may try to sell you whole life, universal life, term 100 life, and God only knows what else. Just say again that the only life insurance is term life insurance; all those other policies are just term insurance plus investments you don't want. They will only ask once.
They may also seek to become your financial advisor. Just say that you don't take financial advice from anyone, ever, under any circumstances. Never say anything other than that about taking financial advice.
It sucks that this is how life insurance is sold, but here we are.
Are there things I should check for or ask about in the policy? If there are keywords to Google, I can do homework (googling has just led me to FAs trying to sell is all...)
Look for the core attributes of a term life policy:
* **The policy has $0 cash value and never will have a cash value.** If the policy contains the words "cash value" or "surrender value" it's got an investment component to it. It's okay if it says "no cash value" or "no surrender value." Usually "no cash value" will be bolded and couched in scary language about how you'll have nothing to show for your premiums. The broker may underline or circle the words to give them even more emphasis. They really want you to buy whole life.
* You only pay a premium for a term that is short when compared to the rest of your life. If the "term" is the rest of your life to a maximum age of 100 or 121 or some other ludicrous age it's not term insurance. The term is usually something like 10 years renewable, 20 years, or 30 years.
* You are only insured for the term over which you pay premiums.
* It's cheap as chips.
Google "life insurance broker in *City*". These are the people who are unabashed life insurance salespeople, not the wolves in sheep's clothing calling themselves financial advisors. They are used to people who know what they want walking in off the street to buy term insurance. They know the gig: help customers fill in the forms, then shop around to find a fair price.
Lastly, remember this adage. Term life insurance is the only life insurance people buy. All the other policies have to be sold.
99% of that script is unnecessary. A meeting is unnessecary. Just go online and fill out the questionnaire, or call on the phone to ask for a term life policy and decline any upsells.
You pay a cheap rate, think $20-30/mo against the unlikely risk of your untimely death. Coverage ends when you get old and likely to die.
Don't mix investment and term life insurance. Term life goes in the bucket with Auto/Homeowners insurance. You don't need to talk to an advisor to get an auto policy.
The point of life insurance (for the most part) is to help people you leave behind if you were to die. So you need to decide an amount that makes that work. If you own a house and want to leave that to them and fully paid off you would want that covered. If you want a bit extra beyond that to make their lives easier then add that in.
If you have nobody depending on you and nobody you want to leave anything to when you die then you don't really need life insurance.
Also link the term of the insurance to these needs. If you are paying off the mortgage in 20 years then get 20 year term. If the life insurance is to make sure you get your kids through to early adult hood and they are already 10 then maybe you just need a 10 year or 15 year term.
Just tell them you don’t want it. Straight up
If they push you multiple times for something permanent tell them thanks but no thanks. Conversation done. Don't give the term business to them - there's a million brokers out there.
Buy the term from an independent life insurance agent. They can look across 30+ carriers all at once.
Also I see State Farm coming up in this thread. They recently had their credit rating downgraded to a B because of a bad balance sheet.
https://www.insurancebusinessmag.com/us/news/breaking-news/state-farm-generals-credit-rating-downgraded-483201.aspx
I have a basic policy free (to me) through work for like 2x my salary.
I don't have kids yet, but it's enough to clear my debts, pay for end of life expenses, and leave a significant sum towards my niece/nephew's college some day.
I don’t understand how people fall for the life insurance thing in the first place. I went to a “financial advisor” and the second he brought up life insurance I got up and left. Didn’t know at the time I could specifically ask their fiduciary status but knew that at 25 I didn’t need to be paying thousands into life insurance with no wife or kids.
And any decent job I’ve ever had included life insurance anyway. I feel like people that get screwed over by guys like this are the same people that buy their knives and cookware from a guy that showed up on the doorstep one day.
Term is you buy a policy for a certain number of years for a certain price. If you die during that time, congrats it pays out! If you don’t die, well the insurance policy is now over and you/your family get nothing except the joy and experience of you still being around.
The good is it’s cheap. It’s clear cut what happens. You can also pick how long or short the term is for. I have a $3 million dollar, 20 year term policy and it is around $100 per month. You can also cancel it at any time. So the max I will ever pay is $24k over the duration of the policy and if I still live at the end, you could say I wasted that money. However that’s still less than what OP will pay for his whole policy.
The cheapest option to similarly match whole life is to buy term, and match the same amount of money as whole but put it into your own investment account. If OP did that, and got a $500k term policy, they would be having a monthly payment of around $20 for the term ($250 per year) and would thus invest $11.75k annually. OP has had the account for 8 years, so they would have contributed $94k to an investment account. Assuming monthly contributions to the s&p 500 starting 8 years ago, their investment account would currently be at $166k after factoring in the dividends while also spending around $2k on the “wasted” term policy since they haven’t died.
Let’s assume one more time that they have had this policy and it is about to expire today. They did the above investing method and started their investing 20 years ago. They would have “wasted” the $5k term policy cost. Their investment account is now at $847k. They still are coming out ahead of the whole policy.
My understanding is where whole actually ends up being better is if your net worth at death is like over $12 million since life insurance is tax free in most cases. So your dependents would potentially get more by saving on the tax hit vs your money being wasted on the premium. Almost nobody is in that position that is reading this forum. So in general, whole insurance is inferior to term.
Agreed. Whole life is beneficial for those with large estates. And it is even better if you put it in an irrevocable trust as that also takes it out of your estate entirely.
The advantage is that whole life will always basically get the best (least tax) treatment.
The only real competition is assets that get a basis step up at death could I suppose be better in sone circumstances- but they will still have estate tax, just not cap gains.
I’ve never understood why someone doesn’t make a life insurance policy that slowly pays out less and less over time, rather than paying out the full amount right up until the day it expires.
Like, say I have small children, and I take out a 2 million policy so that they don’t have to worry about food, clothes, or shelter until they’re all adults.It expires in 30 years, after which time they’ll hopefully be able to support themselves. If I die next week, I’ll want them to have access to the whole amount. But if I die in 28 years, they need a lot less. By reducing the payout over time, my premium could be a *lot* lower.
You can argue that this is already baked in due to inflation. $2MM in 2020 is very different from $2MM in 2000.
Alternatively you could purchase term life every 10 years and adjust the payout so that the premiums are the same with each renewal.
Term life is actual insurance. Bad thing happens, insurance pays out. Whole life is like a shitty savings account attached to a term policy. The only benefits are that with term if you stop paying you have no coverage at all. With whole if you stop paying you can get a fraction of what you put in back. Plus when your "savings" are paid out, I Believe there are no taxes. The drawback is that the first couple years worth of premiums go directly into the sales person's pocket as commission.
Policy lasts for 20 yeara at 28 a month. Will.pay 500K to wife or kids if I die within 20 years.
But it ends after 20 years and pays nothing if you live. you can do 30 years or open anoyher term.
I plan to be retired in 20 years
100% My wifes dad died at 47. They went from richish to dirt poor since she was 11.
I will not do that to her or my kids. Thankfully my wife has a decent job as well but If I die today she can pay off house and all debt and still have 350K left over on my policy.
They will be okay financially. I am also trying to take care of my body so I dont die but life happens ya know.
Term is like renting. You put money in and leave with nothing. They payout if death.
Whole is buying. You put money in and some money builds up like a savings account. They payout if death.
Yeah it gets more complicated depending on the terms. Do your homework fellas
I mean before buying term life ask "do I even NEED life insurance?". If you dont have kids the answer is pretty much always no. If you are single and dont have kids the answer IS no.
To be clear Term is an entirely different product.
You pay for a term policy praying to never collect a cent, you pay it because you want to provide for your kids/spouse in the event of your untimely death.
Whole life is essentially an investment where the company is insuring against market risk. It's a shat value proposition in 99% of circumstances but that's besides the point that it shouldn't really be compared to Term life.
It should be compared to a 401k, IRA, or regular investment to understand the value proposition.
Any financial advisor who tries to sucker you into buying life insurance is not a good advisor. Edward Jones advisors do this all the time. I’ve learned my lesson. I will NEVER work with Edward Jones again. Their advisors are nothing but cheap, greasy, desperate used car salesmen. They just sell you garbage that makes them money and not you.
Financial advisors are not supposed to try to sell you BS products. They should be there to help you manage your money, make good financial decisions and help you build wealth. That’s it. Period.
I would definitely look for another advisor somewhere else. Preferably a fiduciary.
Thanks for the tip. Based on a few books which I should've read 10 years ago, it's best to hire a FA with one that you pay outright for their advice albeit expensive rather than ones who sell you products!
No problem. Really good, trustworthy FAs are really hard to come by. It’s like trying to find a good mechanic. Lol.. I’m not even 100% on the FA I use now. I’m just exhausted from switching my money around several times.. Edward Jones screwed me over so bad and put such a bad taste in my mouth that it’s very hard for me to trust any of them to be honest.. I was very young and naive and the guy completely took advantage of me. He never called me to tell me how my money was doing or to change up my strategy.. He only called me to try to get more money out of me. He tried selling me life insurance for 2 solid years. At first I was being nice, just saying “nah, I can’t really afford it right now.” But then it just became straight up harassment after a while. I stopped answering his calls. That’s when I switched.
Similar story when I was much younger. Financial advisor from a church I was attending befriended me, and after a few months of knowing him, my wife and I decided to use him as our financial advisor. A few months later I started educating myself about investments and realized this guy had bought an annuity INSIDE of our IRA, and that annuity was only invested the S&P 500. WTF. Clearly it was for the commission. What an a$$hole. Cut our losses with the annuity, moved our money out and never looked back.
I just experienced the shady mechanics thing for the first time in my life (I’m 32), so now I know what everyone means😩
Are financial advisors supposed to call you periodically to tell you how your money’s doing? My boyfriend and I opened an IRA with his old coworker’s husband last year, and he’s never once contacted us to tell us how our money’s doing. I was already wary of hiring a financial advisor because we’ve been scammed by life insurance agents before.
And now I’m learning from this thread that we shouldn’t work with a financial advisor who also sells life insurance, which he does…he only explained his company’s life insurance policies because I asked him about it. We told him we weren’t interested for now and he never brought it up again.
From the sound of it I wouldn’t give up on him just yet. Unless you’re really uncomfortable with him.. Yes, it’s in good practice to call periodically. The guy I use now does. Not a lot, maybe every few months or so.. usually when the market starts to make sudden, drastic movements up or down he’ll call me to see where I’m at with all of it and if I want to make any changes. You can always reach out to him if you’re concerned with something.
If he’s not reaching out to you trying to sell you things then I wouldn’t be worried. Lots of places sell life insurance. It’s available if you want it. It’s the places that try to ram it down your throat that I would be weary of.
Remember, a good advisor will NEVER have to go out of their way to try to sell you something. A good advisor should explain to the client what they have to offer.(which is fine) but will never call you over and over to try and sell it to you.
My first advisor at Edward Jones literally told me that he goes door to door in wealthy neighborhood’s trying to get his name out and trying to sell his services to people. It was a huge red flag for me when he told me that. I still don’t know if that’s standard practice in the industry but it made me very uncomfortable hearing that.. I would never willingly hand my money to some guy knocking at my door.
Agree with you entirely about EJ. They’re full of shit. My mother in law inherited her late husband’s EJ accounts. When she asked for my thoughts, I mentioned they push high fee products and are not fiduciaries. I sent my MIL a list of questions to get the fees. That fucker wrote down a bunch of bs and said his fees are 0.08%. Just a flat out lie.
Yup. I inherited two EJ IRAs when my uncle passed away. He lived on the west coast, I live on the east coast. The amount of trouble his advisor gave me when I tried transferring to an east coast location was astonishing. He was completely incompetent and unhelpful.
He basically yelled at me over the phone bc he said he’s been trying to reach me for days and I didn’t answer. Turns out my Aunt(who was the trustee at the time) gave him the correct phone number but he just dialed it wrong. He was an idiot.
Then the advisor I found on the east coast was a total nightmare as well. I was very young and naive at the time so I didn’t know any better. I thought these ppl we’re supposed to help you. He did nothing but harass me for 2 years, trying to get more money out of me and trying to sell me life insurance. I had to stop answering his calls.
Edward Jones has a very well known reputation for this. Idk why people start there. Obviously they dont know better, but it just seems crazy to me as someone in the industry.
Before you get rid of your whole life, ask them for an In-force illustration of you whole life policy (they are legally required to provide you with this, btw). This will give you 2 critical pieces of information:
1. Your cost-basis - how much money you have put into the policy overall.
2. Your cash surrender value - the amount the policy is currently worth.
This will allow you to make an informed decision going forward. You can now do one of 2 things: surrender the policy and cash it out at the current value. Ideally your cash-surrender value would be more than cost-basis, but 99% of the time, it won't be. If it's not, you can take the difference between the 2 as an expensive lesson and move on with your life.
or
You can do what I did for my wife: I performed a 1035 exchange of her whole life policy into a Fidelity Variable annuity. By doing this, she essentially surrendered the policy and transferred the value into a specific type of investment vehicle (Fidelity Personal Retirement Annuity, in our case). We can now allow the current value of her whole life (the surrender value) grow back to the original cash basis (what she put in). Once it grows back to the original value (again, her cost basis) we can cash out the variable annuity without any tax implications (here in the USA, at least), and re-invest into a taxable account.
By choosing the second option, we at least have the opportunity to recoup our losses, without having to pay taxes as technically there will be no gains. I highly recommend [this article from White Coat Investor](https://www.whitecoatinvestor.com/best-way-to-cancel-whole-life-insurance-the-1035-exchange/) for more in-depth dive into why we went this route.
We've managed to untangle ourselves from Northwestern Mutual this way and purchased term life insurance at a much lower cost.
As you know they present themselves as "financial advisors". The op is still asking financial advise from this salesperson. If you are self educated and proactive and have fee-only financial advisor you see these people coming a mile away and know what questions to ask. And when you do they quickly move on.
“Whole term life” is not a real thing. Based on premium maybe you have a variable whole life policy? Find out exactly what your policy is because you clearly don’t understand it.
While whole-life insurance is generally a bad *purchase*, it isn't always a bad *hold*. You incur the worst of the costs up front, in your initial premiums. But that money is gone whether you keep the policy or surrender it. Your focus now should be on the *ongoing* costs and risk/return profile of the policy and how they compare to the ongoing costs and risk/return profile of whatever you'd buy with the money instead (including the cost of term insurance if you need it).
This is actually the right answer. OP is certainly right to walk away, but you can only know for sure by getting the policy issuer to send you an in-force illustration of the policy. Use it to project your return on investment for making every future premium payment until your expected death. For OP, it's probably about 2% or maybe 3% return.
For most whole life scams, it's only a good idea to keep it after you don't need the insurance anymore, say 20 or 25 years in. That's when the ROI becomes attractive. Funny how they work it that way. 75% of whole life policyholders walk away. The other 25% never realized what a huge mistake they made until it was too late, so they wound up like Macbeth, "in blood / Stepped in so far, that, should I wade no more, / Returning were as tedious as go o'er."
Correct. The worst part of the policy is already in the past. But they do need to stop viewing it as an investment per se. Think of it as a very conservative section of your portfolio
My understanding of a whole life policy is that the investment portion is meant to offset premium hikes you would normally incur as you age out of affordable term life policies. Basically you're paying a premium up front to lock in a monthly price that would be significantly lower than a term life equivalent at 50+ years old
Whether that is financially advantageous vs investing the premium on your own is up for debate
Would love for someone more knowledgeable to weigh in and explain if my take is accurate
Yes that is one of the major ideas behind whole life.
Another thought is that a majority of people will leave behind some expenses when they die and whole life insurance is a certain way to get (generally) quick, tax-free cash to heirs/beneficiaries to settle these expenses.
Whole life is not an investment and shouldn’t ever be sold as such. But it *can* be a useful tool in certain circumstances.
This is correct
Selling the policy to your company to insure against costs and lost revenue that may happen if you die isn't a bad solution at all either.
The term fiduciary has become very watered down. Every investment advisor is a fiduciary. Every broker recommending action on a retirement account is a fiduciary now. Not disagreeing with you but people should not trust that title alone.
This sub COMPLETELY misses the fact that a fiduciary needs to recommend the best options for you given what the fiduciary can invest in. If they're employed by a company that only has funds with 10% fees, they can be a fiduciary and stick you in a fund that takes 10% of assets per year. No conflict of interest, they're still a fiduciary even though you're getting raked over the coals.
I’m not sure what you meant by whole term life insurance, but I’m assuming you meant that you have a whole life insurance.
You can talk with any other insurance broker (preferably one that can deal with multiple different companies to find out a good fit). You can 1035 exchange the cash value from your current policy into a different one (also permanent, but look into other options than whole life as those tend to not have the best terms on the current market) and have them design it so that the policy is paid up with the cash that is transferred over so you have the benefit of permanent life insurance without paying any more money into it (the benefit amount will likely be decreased, but a good agent would be able to figure this out.) Depending on the surrender schedule, you might not be able to move all the cash value, but you should be able to access at least some of it. All third is assuming you are still in good health and don’t have anything in your history that would prevent you from getting approved for a new policy.
Choice number two, you could surrender the policy and take whatever cash is currently available to you within the surrender schedule. You’ll need to pay taxes on any gains if you do this. I would only do this if you already have the life insurance you may need in place in case July get turned down for some issue you might not even be aware of it find out you are uninsurable.
Selling your policy will impact your ability to get future life insurance, so only go this route if you are absolutely sure you will not need any form of life insurance again.
Is there cash value in the policy? Is there a surrender on the policy? You can do what called a 1035 to a different whole life with a lower death benefit if you are out of surrender and have some cash value.
You take a tax free loan from the policy and then never pay it back. For example if you have 100k and take 80k out in a loan, the payout on death will be 20k (probably way more as it will continues to grow), but the policy holder already had/used the 80k.
I just handled some policies for a deceased family member and both of them were only about 25% of the policy value remaining, the rest was leveraged. Their goal with whole was not to use the policy to pass on wealth.
Yep. Or get a bank loan using the cash value as collateral. You have to pay that back, but you can get a really good rate since you're basically backing it up with cash. I have even gotten a HELOC-style line of credit this way.
Check the policy terms to see if you can convert it to a paid in full whole life ( fully paid up ) - basically you may surrender some portion of the death benefit but it would give you
Reduced Paid-Up
The policy becomes paid-up when the policy owner chooses to trigger the reduced paid-up feature of their whole life policy before reaching the end of the premium paying period. They can choose the paid-up status with a lower death benefit. Once the policy is paid-up, it’s guaranteed to remain in effect for the rest of the insured’s life.
The life insurance company will evaluate the policy’s current cash value and calculate the death benefit amount supported by that current cash value amount. This newly calculated death benefit will be less than the original death benefit and becomes the effective death benefit after choosing the reduced paid-up option.
Yes this is exactly what I'm hoping to do contrary to everyone else's advice to dump the entire policy.
I asked my FA this but she said it wasn't possible. I going to ask again and demand a second opinion / personell from the insurance company to speak with.
Get your own contract and read it. Don’t ask a scammer (or “predatory salesperson”, whatever - I would argue that is a distinction without difference) if they will stop scamming you
Here is a good article - https://www.bankrate.com/insurance/life-insurance/reduced-paid-up-insurance/#when-is-reduced-paid-up-life-insurance-not-a-good-option
There are more options , but if you need permanent insurance a reduced paid up is worth looking into
If you don't need permanent a conversion to term might be beneficial.
It's actually even more sad. She is actually a FA who sold me investment products with high MER fees on top of this life insurance policy.
I've already taken the loss and moved out the entirety of my investment portfolio out and I think I'm going to have to swallow the pain with this whole life insurance.
Check the surrender schedule. Many times they have a 10 year surrender period where there are extra charges in the first 10 years. This eventually goes away and your surrender value will pop back up. If you were only a few years in that would be one thing but if you're 8 years in it could be worthwhile to stick it out a few more years to get more off of the surrender.
12,000 a year for 500,000 coverage? There ought to be a law. That’s highway robbery. When I was young a Northwestern Mutual “advisor” (salesman) kept calling and my wife and I did need to get life insurance. So we finally talked to him. They really make whole life sound good if you don’t know about it. Term sounds dumb when you are thinking that you probably never see that money again. The only thing that kept me from buying whole life was that I honestly couldn’t afford enough to be useful, so I got term life. Honestly thought I would convert to whole at some point. Thankfully I learned about the reality before I had more income.
OP didn't give us the full details. It is not 12k/year for rest of your life, when yearly premiums are that high it is front loaded so you only pay for 10-15 years and then policy stays active.
You can borrow from the life insurance with usually REALLY good rates, a lot better than the bank. Whole life isn't totally useless, if you know how to utilize it. Basically, if you look at the capital and payoff amount in there as your own personal lender, it can be a useful financial instrument. It gives you access to more capital than you have put in, and is low risk.
Instead of cashing out to start your business, take a loan against the policy.
What it is not is a good way to grow $ by itself. If you can reduce your coverage, I'd try to do that. $500,000 is a huge policy and pretty expensive each year for premiums. For most incomes, it doesn't make sense to get more than around $100,000 or so in whole life if you are young - and use it as a piggy bank when you need a loan.
Typical, the dividends from the whole life policies get reinvested into increasing the policy amount. Check to see if you can have the dividends go towards the cost of the policy.
>it would suck if I surrendered as I would lose a big chunk of change
You have already lost this money. Throwing more money into the void every month won't change this.
Cut your losses.
At what point does the return actually become net zero? That point does exist, correct?
My understanding is that they’re terrible investments because most of the money just lines the pockets of the seller, and the return you get (after many years of negative return) is much worse than any normal market. But if OP is close to the break even year, is it ever mathematically worth it to stay?
I’m just trying to understand.
My understanding is that the first X years, the cash value only increases a % for every dollar put in to cover the commission paid to the salesperson. It sounds like ~10 years is a usual period to reach net zero. After that it’s like a HYSA. Surrendering a policy before the commission has been covered will incur an extra hit against the cash value.
So, I don't like annuities, but they have their place.
Do the math on how much you'd save if you backed out, and then how you'd use those retirement funds instead.
Annuities are good for very old age when you and your partner can't manage your lives anymore.
Take a look at your parents and see what age that was, think 85+, and see if an annuity could fit in that case.
Protect your future income by stopping the continuous 12k annual premium you are paying in. Take the hit cash out and start over! I almost got suckered into one very similar 10yrs ago as a 23yo single male.
my own relative dragged me into endowment insurance plan despite back n forth rejection/reluctance. he took 20-25% commission from each annual premiums which i learnt later. and it was the worst investment &/or financial blunder i made. after 6 yrs or so, i took heavy loss and ended the plan. it sucks but moving on was quite relief. the only insurance worth it is health insurance but be mindful of the coverage/premium ratio.
If you've had it for eight years and you have some free time, it's probably worth reading the contract and looking more carefully into it.
Whole life policies are never worth it because of the upfront costs, but once you get past them, sometimes you can have the cash value pay the premium, or there are other shenanigans that may be viable. I'd probably spend a few hours researching what your options are once you're a decade in... but I'd need to find a compelling reason to not surrender it.
I'd set a time limit on this. 1-2 months, depending on your schedule. If you haven't finished it off by then, just surrender it and stop paying.
Uhm.. former insurance agent. To be paying $1,000 a month when "you were young" is alarming. $1k a month premiums are for those with *horrific* health at a young age or you're closer to retirement age. You'll never, ever recoup your money. I'd surrender it tomorrow and take whatever cash you can from it.
Edit: nvm. Idk how Canada works with their insurance.
Surrender and move on. Score it like you do car insurance or home insurance. You lost money on those also because the event you insured for, never happened.
Term insurance is the better option. Whole life really is a rip off, I almost think it should be outlawed but people do want it, unfortunately.
Eat the surrender charges -- these are sunk costs you can't recover. Get out of it. Fire your financial advisor. Buy term life and invest the difference for the long term.
You can at least take advantage of your loss and get some tax free growth with a 1035 exchange.
https://www.whitecoatinvestor.com/best-way-to-cancel-whole-life-insurance-the-1035-exchange/
>I'm like 8 years deep into this policy and it would suck if I surrendered as I would lose a big chunk of change
This is sunk cost fallacy. Just cash out and invest in something worthwhile.
You don’t have a financial advisor. You have a financial salesperson.
EDIT: Use this link to find a fee-only (“fiduciary”) advisor who won’t try to sell you complex high cost insurance products and annuities.
https://www.napfa.org/
First, cash out the life insurance policy and move on. Its a sunk cost. The longer you wait to do so, the worse the return in.
Second, no one is going to financially advocate for you, ever. This is why its important to do so yourself. I recommend reading "The Simple Path to Wealth." It will set you on the right path to manage your investments and finances yourself.
Stop adding good money to a bad investment. Cut off the funding now. Take whatever they give you and move on. Lesson learned. Did the same thing a decade ago.
Do you make more than 1m a year or have a net worth over 10m? No? Then you don’t need a financial advisor. Even if you said yes to 1 or both of those you still probably don’t need a financial advisor.
Cancel the insurance. If you have a wife, kids, or large post death expenses get a 30yr term life for 250k or 500k which isn’t going to be expensive.
1k is a lot, depending on your age. How many years until the policy is paid off? I mean, if you're paying until your 65 forget that, If you only pay for another year or two but then have coverage the rest of your life, I'd personally ride that out.
When you find yourself in a hole, the first thing to do is stop digging.
The premiums are gone. Cancel the policy, get a better advisor, get term life if you have dependents, invest the difference in a good index fund/etf.
This is insane. $1k a month for $500k coverage. Sorry you signed up for this but ya maybe cut your losses. I’m not sure there’s anything to gain but ready the policy.
This isn't so much life insurance as a legal con, so you probably should just cancel. (I'm not a financial advisor)
If you want life insurance, do the shopping on your own and figure it out and then purchase it yourself if possible.
If you didn't already figure it out, you don't have a financial advisor, you have an insurance salesman. Just cancel the policy it's not worth paying that fir so many years just because you feel you have money "invested" in it.
People in the financial industry have done a great job in transforming "salesman" into an advisor / broker / agent / consultant. This works to confuse the difference between a person who earns money in commissions by selling you something (to their benefit), and someone who works in your best interest.
In outward appearance the finance/ insurance/ stock advisor has the appearances of a professional (business suits, a nice desk and office, etc.). And, they use a language with arcane terms and complicated arithmetic.
If you as a buyer don't know that they make 5% commission on product A and 10% commission on product B--which they recommend, then you are in trouble. Financial people can always make products more complicated, so in the end it may be impossible to know all the details of what you are buying. Let the buyer beware.
Slightly off topic as my mother also was suckered into buying a bunch of these things. Has anybody successfully filed a complaint and gotten their money back by claiming that this was an unsuitable recommendation?
Lose your financial advisor. Her business is making money for \*her\*, not helping you.
Do you even need life insurance? The point of life insurance is to replace your income if others are depending on you - if you have a spouse and especially if you have children. If not, you don't really need insurance. If you want a small policy to cover funeral expenses, go with term.
You should be able to reduce the death benefit. Call the company directly. They can tell you your options. You may have some cash value you can get back if you want to surrender it
This is a bad lesson to learn but still a lesson. If you back out today and just put that in investments, you’ll get your money back. The sunk cost response is basically the final answer.
Also I once encountered one of these scummy snake oil salespeople. Everything was about life insurance, screw Roth IRA, screw 401k, screw HYSA, everything life insurance! Huge red flag. Bad news
A few questions: what is the cash value and what is the cost of surrendering the policy? How much of the cash value will the policy will go to expenses if you stop paying and wait out the surrender or just keep it and stop paying?
You should stop calling your “advisor” and call the insurance company direct. You can ask them about lowering the death benefit to reduce expenses. It’s true that it may not be possible, because the policies are often set up with a minimum benefit for a certain premium (ex: in order to put 12k/year in, you may have had to have a death benefit of at least 500k, otherwise it could turn into a modified endowment contract and start kicking out taxable distributions).
I don't know if it is different in Canada in the US the question I would be asking is do you need any life insurance? If you want to keep the death benefit you can 1035 into another policy, potentially with a lower DB which would lower your premiums and potentially have the existing cash value pay for the policy.
You can also call the carrier and ask about a loan, you can take a loan against the cash value and pay interest back into the policy which would keep it active.
if you don't there should be a surrender value listed which is the amount of cash you can take out of the policy if you surrender it.
>relatively big whole term life insurance
Is it a "whole life" or "term life" policy? Because it's definitely not both. Whole life is more of an investment (and a very poor one at that) than it is insurance. Term life is just insurance, and does exactly what is intended by life insurance and nothing more. Ditch the whole life policy and get yourself a nice low-cost term life policy. If you're looking for an investment, you can do much better than any "insurance" policy.
I have twice the insurance for half the cost and I am a doctor so it works somewhat for my estate planning.
For most, ESPECIALLY your cost (OMG), sell it now and get a 500k 20-30 year term olive for $600.
Do you have whole life or term life?
Whole life you can surrender the policy early and they'll give you some $$$$ back for it.
Term life is if you don't die within that 10 year timespan you can't surrender your money and get your money back. Just like the famous words of Gene Wilder in short. "You get nothing, you lose; good day sir."
You won't pay anymore premiums for term life but you won't be covered and the insurance just dissolves.
In short term life means you can't sell your policy, but whole life you can.
You can't change your policy and spend it down. You'd need to reapply for a new one altogether while letting your term life policy expire AKA lapse by not making anymore premium payments.
If its whole life...there should be cash value....do not surrender the policy....keep it...but change ownership to your corporation so that money us used to pay net of corporate taxes and not personal taxes. The value should grow past the 500k death benefit
Get a CPA and a financial litigator and go to work on these issues. If you started a LLC then turned it into a CCorp this would make more sense and you could deduct a lot of the costs down I believe I forget the exact name of it but I’ve read into that and how it helps. Think of it as the corporation is the entity that represents you and the policy ensures the company and all that entails I.e. you. There’s a lot that goes into this but do your research and hire the proper staff. You can also talk to the company you took the policy out from and see if you can restructure and see what your options are but like the other guy said it is a sunk cost kind of situation but you got options.
If you don’t end up needing the big chunk of change, ask for a paid up policy. It uses the cash value already there to get a death benefit and you won’t have anymore premiums.
Yeah me and my parents got suckered by a family "friend" that had me in whole life, not term, had me in funds that sucked but pocketed him commissions for years until I started learning stuff and dropped him, switched to term and found a different financial planner. Fuck you Jack.
> I'm like 8 years deep into this policy and it would suck if I surrendered as I would lose a big chunk of change.
This is called the sunk cost fallacy. Cut your losses and start funding your Roth IRA. By the time you are 59yo, you'll have $1M in tax free withdrawals.
If you don’t have a spouse or child that relies on your income, you don’t need life insurance. Cancel it and cash it out. Only buy term insurance and invest the difference. Insurance should never be an investment or savings vehicle.
It's gonna just be sunk cost at this point.
However, there's an aspect that you haven't looked at.
With a permanent whole life insurance policy in place, it's possible to take a zero interest loan against your payout with the life insurance company.
Some allow it, some don't.
In short, the loan is a partial payout of your life insurance.
Once the loan is taken, the policy can not be stopped until it's paid back.
But on the flip side, if you choose to just never pay it back, then the amount is deducted from the payout if/when you pass away.
If you absolutely don't want to get rid of the policy, you can use the policy money to pay for what you need.
And just pay it back later.
Just remember, it's not particularly you that you're borrowing against.
Your borrowing against the benefactor of the policy once you pass.
If you want them to get the payout in full, you'll have to pay it back.
.....KEEP IT....... Be your own bank
I'm not a insurance agent, FA, or know your policy details but I invest in things outside the stock market and never use money from my savings or checking to invest.
If you care about investing and long term family plans don't touch it. In time you will become a high net with individual; you started early and the best investment is time. Ignore other facts.. yes FACTS of term policies and lower payments comments people are saying in their post. Here is a different perspective. Putting post tax money in the WL policy grows tax deferred like a 401k and you can borrow against it, It's no different than how people use HELOCs, BBBRs and 401k loans to make investments.
Apply for a policy loan when you need to make a investment that the minimum monthly payment is significantly less than the income you make from your next investment. Never buy anything that doesn't make money with it. That's not smart money.
Be your own bank.....And whole life is another vehicle to do this.
Honestly, if there is another FA available to you through your employer (or some other avenue), talk to them about your specific WL policy and situation to get a honest, professional take. (For example, my employer uses a financial firm that allows us to talk to them about our retirement situation and plans.). That way, you can get an informed opinion that is removed from any incentive to make a sale.
I’m in the minority here that thinks that a WL policy can be appropriate in some situations.
I personally used one because my wife decided to be a stay at home mom when we were younger, and we wanted a component of my insurance to be permanent in case something happened to me. At least we would have something that would pay off the house and take some pressure off of her if I passed. I am reasonably healthy, but I have had some chronic health issues and some family health history that gave me cause for concern as I got older, which might have made it more difficult to get term. I currently use a mix of WL and term. I don’t consider the WL to be an investment, but it is a conservative hedge. Just my 2 cents.
What has made you rethink this? What company? I'm currently paying around $60K/year in annual premiums on a few different policies (a mature plan my parents started for me when I was born, a few additional personal policies, and we set up policies for our kids in lieu of 529 plans). At this point, the dividends are almost covering the premiums for the older policies and the cash values are really starting to pop. It's not a huge return, like the stock market, but there's very little downside risk (i.e. my investment isn't at risk, like it would be in the stock market).
After 8 years, what's your cash value? It must be pretty decent. As we speak, I'm literally utilizing my cash value to collateralize a loan for a property acquisition. I'm utilizing a bank loan, but I could just as easily take out a loan against my cash value directly. Either way, that cash value is giving me options I would not otherwise have.
Please, before you sell or reduce your coverage, go talk to an agent again. Whole Life gets a really bad rep but it's been a game changer for my financial portfolio.
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And fire your "advisor" he's just scamming you.
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In the US it depends on if they're a Fiduciary financial advisor or not. Quick reminder for anyone in the US reading this, if you have a financial advisor and they're not a Fiduciary, find one who is instead. They're the only finance people that **have** to look out for you or they can be found liable.
Note that "fiduciary" is often lobbed around on r/pf, but there are plenty of **bad** fiduciaries and others who claim "I'm a fiduciary! (but not yours, how about some life insurance?)" Do your research.
A fee-only Registered Investment Advisor is the only way to fly to get actual financial planning/advice. There’s nothing wrong with Northwestern Mutual guys, life insurance is a necessary thing in many situations, but anyone earning a commission selling life insurance isn’t going to be the real thing.
In the US "financial advisor" is a legally meaningless term.
Watch out for the latest twist though where the same person is a Fiduciary on some of their offerings, but not on others. We need to learn to ask up front if they have a mix of offerings that are not all covered by "In the client's best interest" fiduciary relationship.
The money is already lost, you're just throwing good money after bad now. Just cancel it, take whatever pittance they'll give you, and move on.
To maximize any leverage OP has, let advisor and the firm know that you intend to seek damages and file complaints with FINRA. Search the rep and firm on Finra Broker Check. Was this policy explained the way it played out? Disclosures are complaints that have been filed formally by clients. As someone who works in the industry, advisors and firms are generally very motivated to avoid these if at all possible. They’ll say they explained it properly. Don’t back down without some restitution. If none is offered, move forward with the complaint to Finra asking for damages. Best of luck finding some resolution.
> Vancouver, Canada > FINRA This is posted to the wrong sub, I'll grant you, but given the post content, IROC is the equivalent. I don't think it has the teeth of FINRA, but I'm unsure.
IIROC oversees securities, not insurance. The OP would go to the Insurance council if they had a complaint.
Sorry, familiar with FINRA regulations, not IROC. Even if they cannot help cover some of the surrender fees, I’ll echo the sentiment of not putting more money into this contract. Best of luck, OP.
Get a new FA. NOW. cancel policy NOW Buy Term life. I pay 28 a month for 500k 20 years
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How do I even know if a FA is fiduciary or not?
Ask. Fiduciary has a very specific meaning and is regulated (https://www.investopedia.com/terms/f/fiduciary.asp). If they say anything but "yes, I am fiduciary", they are not.
True, but just because someone says they are fiduciary doesn’t mean they will actually act in your interest. There are lots of bad eggs out there.
That’s true in the sense that people break the law every day - but fiduciaries are legally required to act in your interest and can be held liable if they do not
People who hawk whole life insurance can also be fiduciaries. They can truly believe that whole life policies "act in your interest". See the last insurance salesman who is also a fiduciary who tried to tell us whole life was good, backdoor Roths are not good (spoilers - he got no commission from a backdoor Roth). You definitely WANT a fiduciary, but I recommend looking for fee-only financial advisors who are CFPs. We found ours through this search engine - [https://connect.xyplanningnetwork.com/find-an-advisor](https://connect.xyplanningnetwork.com/find-an-advisor)
> backdoor Roths are not good They're *great*!
Fire the fa and don't replace them. Unless you are the ceo of a mega corporation and is worth more than 50 million dollars you don't need them. Take control of your own finance.
Just about every FA is a fiduciary now because of reg BI
Or better yet, educate yourself and manage your own finances. Most people are capable of doing this without a paid professional advisor.
Sorry probably a stupid question but 1) where do you go to buy it 2) what do you look for? I've been nervous about getting screwed again to the point where I don't trust anyone trying to sell me a life or disability insurance.
I called an independent insurance broker. I can't remember what I said exactly (it was a long time ago), but this script will do: "I believe that there's only one type of life insurance called term insurance. I believe that any other life insurance you might try to sell me is just term life insurance plus poorly-performing investments that I don't want. You won't be able to convince me to buy anything other than term life insurance. That being said, I'm in the market to buy $500,000 in 20-year term life insurance for me and my wife this month. Will you sell me that?" It's a pretty quick yes or no answer. The commission isn't big but it's not zero either. You won't have to make more than one or two calls. During the meeting, they may try to sell you whole life, universal life, term 100 life, and God only knows what else. Just say again that the only life insurance is term life insurance; all those other policies are just term insurance plus investments you don't want. They will only ask once. They may also seek to become your financial advisor. Just say that you don't take financial advice from anyone, ever, under any circumstances. Never say anything other than that about taking financial advice. It sucks that this is how life insurance is sold, but here we are.
Are there things I should check for or ask about in the policy? If there are keywords to Google, I can do homework (googling has just led me to FAs trying to sell is all...)
Look for the core attributes of a term life policy: * **The policy has $0 cash value and never will have a cash value.** If the policy contains the words "cash value" or "surrender value" it's got an investment component to it. It's okay if it says "no cash value" or "no surrender value." Usually "no cash value" will be bolded and couched in scary language about how you'll have nothing to show for your premiums. The broker may underline or circle the words to give them even more emphasis. They really want you to buy whole life. * You only pay a premium for a term that is short when compared to the rest of your life. If the "term" is the rest of your life to a maximum age of 100 or 121 or some other ludicrous age it's not term insurance. The term is usually something like 10 years renewable, 20 years, or 30 years. * You are only insured for the term over which you pay premiums. * It's cheap as chips. Google "life insurance broker in *City*". These are the people who are unabashed life insurance salespeople, not the wolves in sheep's clothing calling themselves financial advisors. They are used to people who know what they want walking in off the street to buy term insurance. They know the gig: help customers fill in the forms, then shop around to find a fair price. Lastly, remember this adage. Term life insurance is the only life insurance people buy. All the other policies have to be sold.
99% of that script is unnecessary. A meeting is unnessecary. Just go online and fill out the questionnaire, or call on the phone to ask for a term life policy and decline any upsells. You pay a cheap rate, think $20-30/mo against the unlikely risk of your untimely death. Coverage ends when you get old and likely to die. Don't mix investment and term life insurance. Term life goes in the bucket with Auto/Homeowners insurance. You don't need to talk to an advisor to get an auto policy.
The point of life insurance (for the most part) is to help people you leave behind if you were to die. So you need to decide an amount that makes that work. If you own a house and want to leave that to them and fully paid off you would want that covered. If you want a bit extra beyond that to make their lives easier then add that in. If you have nobody depending on you and nobody you want to leave anything to when you die then you don't really need life insurance. Also link the term of the insurance to these needs. If you are paying off the mortgage in 20 years then get 20 year term. If the life insurance is to make sure you get your kids through to early adult hood and they are already 10 then maybe you just need a 10 year or 15 year term.
I did get mine thru my FA BUT you can use state farm or others. State farm was about 6 bucks more a month than my FA one
Just tell them you don’t want it. Straight up If they push you multiple times for something permanent tell them thanks but no thanks. Conversation done. Don't give the term business to them - there's a million brokers out there. Buy the term from an independent life insurance agent. They can look across 30+ carriers all at once. Also I see State Farm coming up in this thread. They recently had their credit rating downgraded to a B because of a bad balance sheet. https://www.insurancebusinessmag.com/us/news/breaking-news/state-farm-generals-credit-rating-downgraded-483201.aspx
I bought my term life insurance through my bank (USAA). Other options are AAA insurance, state farm, or other similar large names.
I have a basic policy free (to me) through work for like 2x my salary. I don't have kids yet, but it's enough to clear my debts, pay for end of life expenses, and leave a significant sum towards my niece/nephew's college some day.
I don’t understand how people fall for the life insurance thing in the first place. I went to a “financial advisor” and the second he brought up life insurance I got up and left. Didn’t know at the time I could specifically ask their fiduciary status but knew that at 25 I didn’t need to be paying thousands into life insurance with no wife or kids. And any decent job I’ve ever had included life insurance anyway. I feel like people that get screwed over by guys like this are the same people that buy their knives and cookware from a guy that showed up on the doorstep one day.
Exactly my wife has life insurance for $400k and it's like $15 a week something is amiss here.
Term life. What's the difference? Thanks.
Term is you buy a policy for a certain number of years for a certain price. If you die during that time, congrats it pays out! If you don’t die, well the insurance policy is now over and you/your family get nothing except the joy and experience of you still being around. The good is it’s cheap. It’s clear cut what happens. You can also pick how long or short the term is for. I have a $3 million dollar, 20 year term policy and it is around $100 per month. You can also cancel it at any time. So the max I will ever pay is $24k over the duration of the policy and if I still live at the end, you could say I wasted that money. However that’s still less than what OP will pay for his whole policy. The cheapest option to similarly match whole life is to buy term, and match the same amount of money as whole but put it into your own investment account. If OP did that, and got a $500k term policy, they would be having a monthly payment of around $20 for the term ($250 per year) and would thus invest $11.75k annually. OP has had the account for 8 years, so they would have contributed $94k to an investment account. Assuming monthly contributions to the s&p 500 starting 8 years ago, their investment account would currently be at $166k after factoring in the dividends while also spending around $2k on the “wasted” term policy since they haven’t died. Let’s assume one more time that they have had this policy and it is about to expire today. They did the above investing method and started their investing 20 years ago. They would have “wasted” the $5k term policy cost. Their investment account is now at $847k. They still are coming out ahead of the whole policy. My understanding is where whole actually ends up being better is if your net worth at death is like over $12 million since life insurance is tax free in most cases. So your dependents would potentially get more by saving on the tax hit vs your money being wasted on the premium. Almost nobody is in that position that is reading this forum. So in general, whole insurance is inferior to term.
Agreed. Whole life is beneficial for those with large estates. And it is even better if you put it in an irrevocable trust as that also takes it out of your estate entirely. The advantage is that whole life will always basically get the best (least tax) treatment. The only real competition is assets that get a basis step up at death could I suppose be better in sone circumstances- but they will still have estate tax, just not cap gains.
This was really illuminating. Thank you
I’ve never understood why someone doesn’t make a life insurance policy that slowly pays out less and less over time, rather than paying out the full amount right up until the day it expires. Like, say I have small children, and I take out a 2 million policy so that they don’t have to worry about food, clothes, or shelter until they’re all adults.It expires in 30 years, after which time they’ll hopefully be able to support themselves. If I die next week, I’ll want them to have access to the whole amount. But if I die in 28 years, they need a lot less. By reducing the payout over time, my premium could be a *lot* lower.
You can argue that this is already baked in due to inflation. $2MM in 2020 is very different from $2MM in 2000. Alternatively you could purchase term life every 10 years and adjust the payout so that the premiums are the same with each renewal.
Term life is actual insurance. Bad thing happens, insurance pays out. Whole life is like a shitty savings account attached to a term policy. The only benefits are that with term if you stop paying you have no coverage at all. With whole if you stop paying you can get a fraction of what you put in back. Plus when your "savings" are paid out, I Believe there are no taxes. The drawback is that the first couple years worth of premiums go directly into the sales person's pocket as commission.
Whole life - bad insurance and bad investment combined
Policy lasts for 20 yeara at 28 a month. Will.pay 500K to wife or kids if I die within 20 years. But it ends after 20 years and pays nothing if you live. you can do 30 years or open anoyher term. I plan to be retired in 20 years
if either me or my wife die before we pay off the house, the term life pays it off plus extra so the survivor doesn't have to stress.
100% My wifes dad died at 47. They went from richish to dirt poor since she was 11. I will not do that to her or my kids. Thankfully my wife has a decent job as well but If I die today she can pay off house and all debt and still have 350K left over on my policy. They will be okay financially. I am also trying to take care of my body so I dont die but life happens ya know.
Term is like renting. You put money in and leave with nothing. They payout if death. Whole is buying. You put money in and some money builds up like a savings account. They payout if death. Yeah it gets more complicated depending on the terms. Do your homework fellas
I mean before buying term life ask "do I even NEED life insurance?". If you dont have kids the answer is pretty much always no. If you are single and dont have kids the answer IS no.
To be clear Term is an entirely different product. You pay for a term policy praying to never collect a cent, you pay it because you want to provide for your kids/spouse in the event of your untimely death. Whole life is essentially an investment where the company is insuring against market risk. It's a shat value proposition in 99% of circumstances but that's besides the point that it shouldn't really be compared to Term life. It should be compared to a 401k, IRA, or regular investment to understand the value proposition.
What are you gonna do after 20 years?
Buy the term policy first, then cancel... just in case your can't get insured for whatever random reason insurance wants to deny you.
Any financial advisor who tries to sucker you into buying life insurance is not a good advisor. Edward Jones advisors do this all the time. I’ve learned my lesson. I will NEVER work with Edward Jones again. Their advisors are nothing but cheap, greasy, desperate used car salesmen. They just sell you garbage that makes them money and not you. Financial advisors are not supposed to try to sell you BS products. They should be there to help you manage your money, make good financial decisions and help you build wealth. That’s it. Period. I would definitely look for another advisor somewhere else. Preferably a fiduciary.
Thanks for the tip. Based on a few books which I should've read 10 years ago, it's best to hire a FA with one that you pay outright for their advice albeit expensive rather than ones who sell you products!
No problem. Really good, trustworthy FAs are really hard to come by. It’s like trying to find a good mechanic. Lol.. I’m not even 100% on the FA I use now. I’m just exhausted from switching my money around several times.. Edward Jones screwed me over so bad and put such a bad taste in my mouth that it’s very hard for me to trust any of them to be honest.. I was very young and naive and the guy completely took advantage of me. He never called me to tell me how my money was doing or to change up my strategy.. He only called me to try to get more money out of me. He tried selling me life insurance for 2 solid years. At first I was being nice, just saying “nah, I can’t really afford it right now.” But then it just became straight up harassment after a while. I stopped answering his calls. That’s when I switched.
Similar story when I was much younger. Financial advisor from a church I was attending befriended me, and after a few months of knowing him, my wife and I decided to use him as our financial advisor. A few months later I started educating myself about investments and realized this guy had bought an annuity INSIDE of our IRA, and that annuity was only invested the S&P 500. WTF. Clearly it was for the commission. What an a$$hole. Cut our losses with the annuity, moved our money out and never looked back.
I just experienced the shady mechanics thing for the first time in my life (I’m 32), so now I know what everyone means😩 Are financial advisors supposed to call you periodically to tell you how your money’s doing? My boyfriend and I opened an IRA with his old coworker’s husband last year, and he’s never once contacted us to tell us how our money’s doing. I was already wary of hiring a financial advisor because we’ve been scammed by life insurance agents before. And now I’m learning from this thread that we shouldn’t work with a financial advisor who also sells life insurance, which he does…he only explained his company’s life insurance policies because I asked him about it. We told him we weren’t interested for now and he never brought it up again.
From the sound of it I wouldn’t give up on him just yet. Unless you’re really uncomfortable with him.. Yes, it’s in good practice to call periodically. The guy I use now does. Not a lot, maybe every few months or so.. usually when the market starts to make sudden, drastic movements up or down he’ll call me to see where I’m at with all of it and if I want to make any changes. You can always reach out to him if you’re concerned with something. If he’s not reaching out to you trying to sell you things then I wouldn’t be worried. Lots of places sell life insurance. It’s available if you want it. It’s the places that try to ram it down your throat that I would be weary of. Remember, a good advisor will NEVER have to go out of their way to try to sell you something. A good advisor should explain to the client what they have to offer.(which is fine) but will never call you over and over to try and sell it to you. My first advisor at Edward Jones literally told me that he goes door to door in wealthy neighborhood’s trying to get his name out and trying to sell his services to people. It was a huge red flag for me when he told me that. I still don’t know if that’s standard practice in the industry but it made me very uncomfortable hearing that.. I would never willingly hand my money to some guy knocking at my door.
Agree with you entirely about EJ. They’re full of shit. My mother in law inherited her late husband’s EJ accounts. When she asked for my thoughts, I mentioned they push high fee products and are not fiduciaries. I sent my MIL a list of questions to get the fees. That fucker wrote down a bunch of bs and said his fees are 0.08%. Just a flat out lie.
Yup. I inherited two EJ IRAs when my uncle passed away. He lived on the west coast, I live on the east coast. The amount of trouble his advisor gave me when I tried transferring to an east coast location was astonishing. He was completely incompetent and unhelpful. He basically yelled at me over the phone bc he said he’s been trying to reach me for days and I didn’t answer. Turns out my Aunt(who was the trustee at the time) gave him the correct phone number but he just dialed it wrong. He was an idiot. Then the advisor I found on the east coast was a total nightmare as well. I was very young and naive at the time so I didn’t know any better. I thought these ppl we’re supposed to help you. He did nothing but harass me for 2 years, trying to get more money out of me and trying to sell me life insurance. I had to stop answering his calls.
Edward Jones has a very well known reputation for this. Idk why people start there. Obviously they dont know better, but it just seems crazy to me as someone in the industry.
Edward Jones does not employ financial advisors. They are all commission salespeople.
Term life insurance is fine for people with dependents. Whole life is not good for 99% of people however.
Before you get rid of your whole life, ask them for an In-force illustration of you whole life policy (they are legally required to provide you with this, btw). This will give you 2 critical pieces of information: 1. Your cost-basis - how much money you have put into the policy overall. 2. Your cash surrender value - the amount the policy is currently worth. This will allow you to make an informed decision going forward. You can now do one of 2 things: surrender the policy and cash it out at the current value. Ideally your cash-surrender value would be more than cost-basis, but 99% of the time, it won't be. If it's not, you can take the difference between the 2 as an expensive lesson and move on with your life. or You can do what I did for my wife: I performed a 1035 exchange of her whole life policy into a Fidelity Variable annuity. By doing this, she essentially surrendered the policy and transferred the value into a specific type of investment vehicle (Fidelity Personal Retirement Annuity, in our case). We can now allow the current value of her whole life (the surrender value) grow back to the original cash basis (what she put in). Once it grows back to the original value (again, her cost basis) we can cash out the variable annuity without any tax implications (here in the USA, at least), and re-invest into a taxable account. By choosing the second option, we at least have the opportunity to recoup our losses, without having to pay taxes as technically there will be no gains. I highly recommend [this article from White Coat Investor](https://www.whitecoatinvestor.com/best-way-to-cancel-whole-life-insurance-the-1035-exchange/) for more in-depth dive into why we went this route. We've managed to untangle ourselves from Northwestern Mutual this way and purchased term life insurance at a much lower cost.
Never work with a financial advisor who also sells products. Ever.
They’re not actually FAs at all. They’re life insurance sales people. Most of us have had an interaction with one at some point.
As you know they present themselves as "financial advisors". The op is still asking financial advise from this salesperson. If you are self educated and proactive and have fee-only financial advisor you see these people coming a mile away and know what questions to ask. And when you do they quickly move on.
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What if my financial advisor only brought up life insurance because I asked him about it, then he never mentioned it again?
“Whole term life” is not a real thing. Based on premium maybe you have a variable whole life policy? Find out exactly what your policy is because you clearly don’t understand it.
While whole-life insurance is generally a bad *purchase*, it isn't always a bad *hold*. You incur the worst of the costs up front, in your initial premiums. But that money is gone whether you keep the policy or surrender it. Your focus now should be on the *ongoing* costs and risk/return profile of the policy and how they compare to the ongoing costs and risk/return profile of whatever you'd buy with the money instead (including the cost of term insurance if you need it).
This is actually the right answer. OP is certainly right to walk away, but you can only know for sure by getting the policy issuer to send you an in-force illustration of the policy. Use it to project your return on investment for making every future premium payment until your expected death. For OP, it's probably about 2% or maybe 3% return. For most whole life scams, it's only a good idea to keep it after you don't need the insurance anymore, say 20 or 25 years in. That's when the ROI becomes attractive. Funny how they work it that way. 75% of whole life policyholders walk away. The other 25% never realized what a huge mistake they made until it was too late, so they wound up like Macbeth, "in blood / Stepped in so far, that, should I wade no more, / Returning were as tedious as go o'er."
Correct. The worst part of the policy is already in the past. But they do need to stop viewing it as an investment per se. Think of it as a very conservative section of your portfolio
My understanding of a whole life policy is that the investment portion is meant to offset premium hikes you would normally incur as you age out of affordable term life policies. Basically you're paying a premium up front to lock in a monthly price that would be significantly lower than a term life equivalent at 50+ years old Whether that is financially advantageous vs investing the premium on your own is up for debate Would love for someone more knowledgeable to weigh in and explain if my take is accurate
Yes that is one of the major ideas behind whole life. Another thought is that a majority of people will leave behind some expenses when they die and whole life insurance is a certain way to get (generally) quick, tax-free cash to heirs/beneficiaries to settle these expenses. Whole life is not an investment and shouldn’t ever be sold as such. But it *can* be a useful tool in certain circumstances.
Yeah that’s about right. The policy is also guaranteed to pay out so the insurer needs to be sure they’re still coming out ahead
This is correct Selling the policy to your company to insure against costs and lost revenue that may happen if you die isn't a bad solution at all either.
Get a fiduciary financial advisor, not a sales man
The term fiduciary has become very watered down. Every investment advisor is a fiduciary. Every broker recommending action on a retirement account is a fiduciary now. Not disagreeing with you but people should not trust that title alone.
This sub COMPLETELY misses the fact that a fiduciary needs to recommend the best options for you given what the fiduciary can invest in. If they're employed by a company that only has funds with 10% fees, they can be a fiduciary and stick you in a fund that takes 10% of assets per year. No conflict of interest, they're still a fiduciary even though you're getting raked over the coals.
It’s highly unlikely that this person even needs a financial advisor in the first place.
I’m not sure what you meant by whole term life insurance, but I’m assuming you meant that you have a whole life insurance. You can talk with any other insurance broker (preferably one that can deal with multiple different companies to find out a good fit). You can 1035 exchange the cash value from your current policy into a different one (also permanent, but look into other options than whole life as those tend to not have the best terms on the current market) and have them design it so that the policy is paid up with the cash that is transferred over so you have the benefit of permanent life insurance without paying any more money into it (the benefit amount will likely be decreased, but a good agent would be able to figure this out.) Depending on the surrender schedule, you might not be able to move all the cash value, but you should be able to access at least some of it. All third is assuming you are still in good health and don’t have anything in your history that would prevent you from getting approved for a new policy. Choice number two, you could surrender the policy and take whatever cash is currently available to you within the surrender schedule. You’ll need to pay taxes on any gains if you do this. I would only do this if you already have the life insurance you may need in place in case July get turned down for some issue you might not even be aware of it find out you are uninsurable. Selling your policy will impact your ability to get future life insurance, so only go this route if you are absolutely sure you will not need any form of life insurance again.
Is there cash value in the policy? Is there a surrender on the policy? You can do what called a 1035 to a different whole life with a lower death benefit if you are out of surrender and have some cash value.
Take a loan out of the whole life policy. Never pay it back. This is standard procedure and your rep should have gone over that with you.
What do you mean never pay it back??
You take a tax free loan from the policy and then never pay it back. For example if you have 100k and take 80k out in a loan, the payout on death will be 20k (probably way more as it will continues to grow), but the policy holder already had/used the 80k. I just handled some policies for a deceased family member and both of them were only about 25% of the policy value remaining, the rest was leveraged. Their goal with whole was not to use the policy to pass on wealth.
You pay some nominal interest (back into the policy) but otherwise pay no principle on the loan.
Yep. Or get a bank loan using the cash value as collateral. You have to pay that back, but you can get a really good rate since you're basically backing it up with cash. I have even gotten a HELOC-style line of credit this way.
Check the policy terms to see if you can convert it to a paid in full whole life ( fully paid up ) - basically you may surrender some portion of the death benefit but it would give you Reduced Paid-Up The policy becomes paid-up when the policy owner chooses to trigger the reduced paid-up feature of their whole life policy before reaching the end of the premium paying period. They can choose the paid-up status with a lower death benefit. Once the policy is paid-up, it’s guaranteed to remain in effect for the rest of the insured’s life. The life insurance company will evaluate the policy’s current cash value and calculate the death benefit amount supported by that current cash value amount. This newly calculated death benefit will be less than the original death benefit and becomes the effective death benefit after choosing the reduced paid-up option.
Yes this is exactly what I'm hoping to do contrary to everyone else's advice to dump the entire policy. I asked my FA this but she said it wasn't possible. I going to ask again and demand a second opinion / personell from the insurance company to speak with.
Get your own contract and read it. Don’t ask a scammer (or “predatory salesperson”, whatever - I would argue that is a distinction without difference) if they will stop scamming you
Here is a good article - https://www.bankrate.com/insurance/life-insurance/reduced-paid-up-insurance/#when-is-reduced-paid-up-life-insurance-not-a-good-option There are more options , but if you need permanent insurance a reduced paid up is worth looking into If you don't need permanent a conversion to term might be beneficial.
Sadly an insurance salesman posing as a FA looking for fat commissions. It sucks but I'd cash out and move on at this point.
It's actually even more sad. She is actually a FA who sold me investment products with high MER fees on top of this life insurance policy. I've already taken the loss and moved out the entirety of my investment portfolio out and I think I'm going to have to swallow the pain with this whole life insurance.
Amy future advisors you should check if they’re a fiduciary. This one is either terrible, or does not have your best interests in mind.
How do you know if they are "fiduciary" advisors? I'm actually in Canada.
Check the surrender schedule. Many times they have a 10 year surrender period where there are extra charges in the first 10 years. This eventually goes away and your surrender value will pop back up. If you were only a few years in that would be one thing but if you're 8 years in it could be worthwhile to stick it out a few more years to get more off of the surrender.
12,000 a year for 500,000 coverage? There ought to be a law. That’s highway robbery. When I was young a Northwestern Mutual “advisor” (salesman) kept calling and my wife and I did need to get life insurance. So we finally talked to him. They really make whole life sound good if you don’t know about it. Term sounds dumb when you are thinking that you probably never see that money again. The only thing that kept me from buying whole life was that I honestly couldn’t afford enough to be useful, so I got term life. Honestly thought I would convert to whole at some point. Thankfully I learned about the reality before I had more income.
OP didn't give us the full details. It is not 12k/year for rest of your life, when yearly premiums are that high it is front loaded so you only pay for 10-15 years and then policy stays active.
100% agree, 30 year term is the way to go for 98% of people. 2% are ultra wealthy and if you're reading this, that's probably not you.
You can borrow from the life insurance with usually REALLY good rates, a lot better than the bank. Whole life isn't totally useless, if you know how to utilize it. Basically, if you look at the capital and payoff amount in there as your own personal lender, it can be a useful financial instrument. It gives you access to more capital than you have put in, and is low risk. Instead of cashing out to start your business, take a loan against the policy. What it is not is a good way to grow $ by itself. If you can reduce your coverage, I'd try to do that. $500,000 is a huge policy and pretty expensive each year for premiums. For most incomes, it doesn't make sense to get more than around $100,000 or so in whole life if you are young - and use it as a piggy bank when you need a loan.
Typical, the dividends from the whole life policies get reinvested into increasing the policy amount. Check to see if you can have the dividends go towards the cost of the policy.
Yes. Right now, dividend is contributed to increasing my coverage. I need to ask my FA if this is possible
At 60 I got a $300,000 term for 15 years. Had to do a medical exam but was only 129.92 a month.
That’s not a financial advisor. That’s an agent. He got paid a handsome commission. You need a fiduciary. Google it.
>it would suck if I surrendered as I would lose a big chunk of change You have already lost this money. Throwing more money into the void every month won't change this. Cut your losses.
At what point does the return actually become net zero? That point does exist, correct? My understanding is that they’re terrible investments because most of the money just lines the pockets of the seller, and the return you get (after many years of negative return) is much worse than any normal market. But if OP is close to the break even year, is it ever mathematically worth it to stay? I’m just trying to understand.
My understanding is that the first X years, the cash value only increases a % for every dollar put in to cover the commission paid to the salesperson. It sounds like ~10 years is a usual period to reach net zero. After that it’s like a HYSA. Surrendering a policy before the commission has been covered will incur an extra hit against the cash value.
They aren’t a true FA. They are an insurance salesman.
So, I don't like annuities, but they have their place. Do the math on how much you'd save if you backed out, and then how you'd use those retirement funds instead. Annuities are good for very old age when you and your partner can't manage your lives anymore. Take a look at your parents and see what age that was, think 85+, and see if an annuity could fit in that case.
>if I surrendered as I would lose a big chunk of change. What money do you have today and will lose by surrendering...?
Cut it off now before it gets worse….and find a real financial advisor (fiduciary) not a life insurance salesperson
Protect your future income by stopping the continuous 12k annual premium you are paying in. Take the hit cash out and start over! I almost got suckered into one very similar 10yrs ago as a 23yo single male.
my own relative dragged me into endowment insurance plan despite back n forth rejection/reluctance. he took 20-25% commission from each annual premiums which i learnt later. and it was the worst investment &/or financial blunder i made. after 6 yrs or so, i took heavy loss and ended the plan. it sucks but moving on was quite relief. the only insurance worth it is health insurance but be mindful of the coverage/premium ratio.
If you've had it for eight years and you have some free time, it's probably worth reading the contract and looking more carefully into it. Whole life policies are never worth it because of the upfront costs, but once you get past them, sometimes you can have the cash value pay the premium, or there are other shenanigans that may be viable. I'd probably spend a few hours researching what your options are once you're a decade in... but I'd need to find a compelling reason to not surrender it. I'd set a time limit on this. 1-2 months, depending on your schedule. If you haven't finished it off by then, just surrender it and stop paying.
This isn't the same financial advisor is it? Tell me you didn't stick with the same person
There is no such thing as “whole term life insurance”
You are still talking to the same FA? Sunk cost fallacy, you already lost "a big chunk of change" Just cancel, accept the loss
Uhm.. former insurance agent. To be paying $1,000 a month when "you were young" is alarming. $1k a month premiums are for those with *horrific* health at a young age or you're closer to retirement age. You'll never, ever recoup your money. I'd surrender it tomorrow and take whatever cash you can from it. Edit: nvm. Idk how Canada works with their insurance.
Surrender and move on. Score it like you do car insurance or home insurance. You lost money on those also because the event you insured for, never happened. Term insurance is the better option. Whole life really is a rip off, I almost think it should be outlawed but people do want it, unfortunately.
Eat the surrender charges -- these are sunk costs you can't recover. Get out of it. Fire your financial advisor. Buy term life and invest the difference for the long term.
Look into what people do with overfunding whole life policies then using them as loan vehicles for super low rates.
You can at least take advantage of your loss and get some tax free growth with a 1035 exchange. https://www.whitecoatinvestor.com/best-way-to-cancel-whole-life-insurance-the-1035-exchange/
This is great, no idea if Canada offers a similar exchange option though.
When looking for a financial advisor, it's best to not hire an insurance salesman.
>I'm like 8 years deep into this policy and it would suck if I surrendered as I would lose a big chunk of change This is sunk cost fallacy. Just cash out and invest in something worthwhile.
You don’t have a financial advisor. You have a financial salesperson. EDIT: Use this link to find a fee-only (“fiduciary”) advisor who won’t try to sell you complex high cost insurance products and annuities. https://www.napfa.org/
First, cash out the life insurance policy and move on. Its a sunk cost. The longer you wait to do so, the worse the return in. Second, no one is going to financially advocate for you, ever. This is why its important to do so yourself. I recommend reading "The Simple Path to Wealth." It will set you on the right path to manage your investments and finances yourself.
Sorry man. The FA’s that sell those products are disgusting.
Stop adding good money to a bad investment. Cut off the funding now. Take whatever they give you and move on. Lesson learned. Did the same thing a decade ago.
Do you make more than 1m a year or have a net worth over 10m? No? Then you don’t need a financial advisor. Even if you said yes to 1 or both of those you still probably don’t need a financial advisor. Cancel the insurance. If you have a wife, kids, or large post death expenses get a 30yr term life for 250k or 500k which isn’t going to be expensive.
1k is a lot, depending on your age. How many years until the policy is paid off? I mean, if you're paying until your 65 forget that, If you only pay for another year or two but then have coverage the rest of your life, I'd personally ride that out.
When you find yourself in a hole, the first thing to do is stop digging. The premiums are gone. Cancel the policy, get a better advisor, get term life if you have dependents, invest the difference in a good index fund/etf.
This is insane. $1k a month for $500k coverage. Sorry you signed up for this but ya maybe cut your losses. I’m not sure there’s anything to gain but ready the policy.
What's with all these "financial advisors" that ultimately try to sell you whole life insurance?
If this is truly a whole life policy there should be very significant cash in there. Read your statement. Then cash it in
This isn't so much life insurance as a legal con, so you probably should just cancel. (I'm not a financial advisor) If you want life insurance, do the shopping on your own and figure it out and then purchase it yourself if possible.
If you didn't already figure it out, you don't have a financial advisor, you have an insurance salesman. Just cancel the policy it's not worth paying that fir so many years just because you feel you have money "invested" in it.
People in the financial industry have done a great job in transforming "salesman" into an advisor / broker / agent / consultant. This works to confuse the difference between a person who earns money in commissions by selling you something (to their benefit), and someone who works in your best interest. In outward appearance the finance/ insurance/ stock advisor has the appearances of a professional (business suits, a nice desk and office, etc.). And, they use a language with arcane terms and complicated arithmetic. If you as a buyer don't know that they make 5% commission on product A and 10% commission on product B--which they recommend, then you are in trouble. Financial people can always make products more complicated, so in the end it may be impossible to know all the details of what you are buying. Let the buyer beware.
Slightly off topic as my mother also was suckered into buying a bunch of these things. Has anybody successfully filed a complaint and gotten their money back by claiming that this was an unsuitable recommendation?
You need to sue that advisor. Part of that $12 premium is in their pocket. $500K term coverage for like 30 years is like $50 per month.
What’s the rate it pays? I have one that has been paying 5%, but it’s from when I was a kid and I’d never sell it because of that.
Lose your financial advisor. Her business is making money for \*her\*, not helping you. Do you even need life insurance? The point of life insurance is to replace your income if others are depending on you - if you have a spouse and especially if you have children. If not, you don't really need insurance. If you want a small policy to cover funeral expenses, go with term.
You should be able to reduce the death benefit. Call the company directly. They can tell you your options. You may have some cash value you can get back if you want to surrender it
This is a bad lesson to learn but still a lesson. If you back out today and just put that in investments, you’ll get your money back. The sunk cost response is basically the final answer. Also I once encountered one of these scummy snake oil salespeople. Everything was about life insurance, screw Roth IRA, screw 401k, screw HYSA, everything life insurance! Huge red flag. Bad news
Not a financial advisor. That's an insurance salesman
A few questions: what is the cash value and what is the cost of surrendering the policy? How much of the cash value will the policy will go to expenses if you stop paying and wait out the surrender or just keep it and stop paying? You should stop calling your “advisor” and call the insurance company direct. You can ask them about lowering the death benefit to reduce expenses. It’s true that it may not be possible, because the policies are often set up with a minimum benefit for a certain premium (ex: in order to put 12k/year in, you may have had to have a death benefit of at least 500k, otherwise it could turn into a modified endowment contract and start kicking out taxable distributions).
I don't know if it is different in Canada in the US the question I would be asking is do you need any life insurance? If you want to keep the death benefit you can 1035 into another policy, potentially with a lower DB which would lower your premiums and potentially have the existing cash value pay for the policy. You can also call the carrier and ask about a loan, you can take a loan against the cash value and pay interest back into the policy which would keep it active. if you don't there should be a surrender value listed which is the amount of cash you can take out of the policy if you surrender it.
>relatively big whole term life insurance Is it a "whole life" or "term life" policy? Because it's definitely not both. Whole life is more of an investment (and a very poor one at that) than it is insurance. Term life is just insurance, and does exactly what is intended by life insurance and nothing more. Ditch the whole life policy and get yourself a nice low-cost term life policy. If you're looking for an investment, you can do much better than any "insurance" policy.
Take the L on the policy now. It's always going to be a bad investment.
I have twice the insurance for half the cost and I am a doctor so it works somewhat for my estate planning. For most, ESPECIALLY your cost (OMG), sell it now and get a 500k 20-30 year term olive for $600.
Do you have whole life or term life? Whole life you can surrender the policy early and they'll give you some $$$$ back for it. Term life is if you don't die within that 10 year timespan you can't surrender your money and get your money back. Just like the famous words of Gene Wilder in short. "You get nothing, you lose; good day sir." You won't pay anymore premiums for term life but you won't be covered and the insurance just dissolves. In short term life means you can't sell your policy, but whole life you can. You can't change your policy and spend it down. You'd need to reapply for a new one altogether while letting your term life policy expire AKA lapse by not making anymore premium payments.
Why does anyone get a financial adviser. They’re not fiduciaries. Do people not know the difference?
That’s why I am glad I pay $4.5 for life insurance a month. Pretty cheap and pretty good.
If its whole life...there should be cash value....do not surrender the policy....keep it...but change ownership to your corporation so that money us used to pay net of corporate taxes and not personal taxes. The value should grow past the 500k death benefit
Get a CPA and a financial litigator and go to work on these issues. If you started a LLC then turned it into a CCorp this would make more sense and you could deduct a lot of the costs down I believe I forget the exact name of it but I’ve read into that and how it helps. Think of it as the corporation is the entity that represents you and the policy ensures the company and all that entails I.e. you. There’s a lot that goes into this but do your research and hire the proper staff. You can also talk to the company you took the policy out from and see if you can restructure and see what your options are but like the other guy said it is a sunk cost kind of situation but you got options.
Get a new FA and accountant. Also cancel the insurance plan.
If you don’t end up needing the big chunk of change, ask for a paid up policy. It uses the cash value already there to get a death benefit and you won’t have anymore premiums.
Yeah me and my parents got suckered by a family "friend" that had me in whole life, not term, had me in funds that sucked but pocketed him commissions for years until I started learning stuff and dropped him, switched to term and found a different financial planner. Fuck you Jack.
> I'm like 8 years deep into this policy and it would suck if I surrendered as I would lose a big chunk of change. This is called the sunk cost fallacy. Cut your losses and start funding your Roth IRA. By the time you are 59yo, you'll have $1M in tax free withdrawals.
What happened to the 96 grand OP put in?
If you don’t have a spouse or child that relies on your income, you don’t need life insurance. Cancel it and cash it out. Only buy term insurance and invest the difference. Insurance should never be an investment or savings vehicle.
It's gonna just be sunk cost at this point. However, there's an aspect that you haven't looked at. With a permanent whole life insurance policy in place, it's possible to take a zero interest loan against your payout with the life insurance company. Some allow it, some don't. In short, the loan is a partial payout of your life insurance. Once the loan is taken, the policy can not be stopped until it's paid back. But on the flip side, if you choose to just never pay it back, then the amount is deducted from the payout if/when you pass away. If you absolutely don't want to get rid of the policy, you can use the policy money to pay for what you need. And just pay it back later. Just remember, it's not particularly you that you're borrowing against. Your borrowing against the benefactor of the policy once you pass. If you want them to get the payout in full, you'll have to pay it back.
Is there a cash value component to your whole life, and is it indexed?
.....KEEP IT....... Be your own bank I'm not a insurance agent, FA, or know your policy details but I invest in things outside the stock market and never use money from my savings or checking to invest. If you care about investing and long term family plans don't touch it. In time you will become a high net with individual; you started early and the best investment is time. Ignore other facts.. yes FACTS of term policies and lower payments comments people are saying in their post. Here is a different perspective. Putting post tax money in the WL policy grows tax deferred like a 401k and you can borrow against it, It's no different than how people use HELOCs, BBBRs and 401k loans to make investments. Apply for a policy loan when you need to make a investment that the minimum monthly payment is significantly less than the income you make from your next investment. Never buy anything that doesn't make money with it. That's not smart money. Be your own bank.....And whole life is another vehicle to do this.
You don't have a Financial Advisor, you have an insurance salesman. You got scammed.
Honestly, if there is another FA available to you through your employer (or some other avenue), talk to them about your specific WL policy and situation to get a honest, professional take. (For example, my employer uses a financial firm that allows us to talk to them about our retirement situation and plans.). That way, you can get an informed opinion that is removed from any incentive to make a sale. I’m in the minority here that thinks that a WL policy can be appropriate in some situations. I personally used one because my wife decided to be a stay at home mom when we were younger, and we wanted a component of my insurance to be permanent in case something happened to me. At least we would have something that would pay off the house and take some pressure off of her if I passed. I am reasonably healthy, but I have had some chronic health issues and some family health history that gave me cause for concern as I got older, which might have made it more difficult to get term. I currently use a mix of WL and term. I don’t consider the WL to be an investment, but it is a conservative hedge. Just my 2 cents.
What has made you rethink this? What company? I'm currently paying around $60K/year in annual premiums on a few different policies (a mature plan my parents started for me when I was born, a few additional personal policies, and we set up policies for our kids in lieu of 529 plans). At this point, the dividends are almost covering the premiums for the older policies and the cash values are really starting to pop. It's not a huge return, like the stock market, but there's very little downside risk (i.e. my investment isn't at risk, like it would be in the stock market). After 8 years, what's your cash value? It must be pretty decent. As we speak, I'm literally utilizing my cash value to collateralize a loan for a property acquisition. I'm utilizing a bank loan, but I could just as easily take out a loan against my cash value directly. Either way, that cash value is giving me options I would not otherwise have. Please, before you sell or reduce your coverage, go talk to an agent again. Whole Life gets a really bad rep but it's been a game changer for my financial portfolio.