All Life Insurance Tips

What whole life insurance policy is best for a 24 year old?

I have a policy from New York Life, but 2 of my friends who are financial planners, say Mass Mutual would be better... there's a bunch of baloney I'm not understanding i.e. guaranteed benefits, crap about withdrawing money for retirement. Altogether, it doesn't seem like I am getting that much from death benefits with the amount I am putting in ($1K/year until pretty much I'm 65). I don't want to pay forever for this... where in my policy does it say when I can stop paying?

Public Comments

1. you would really be better off buying a term policy and investing the difference in premiums in a mutual fund
2. You are better off putting your money into an IRA for retirement and purchasing term life insurance, if you need it. Whole life is merely an annuity program....you can make more money doing it yourself.
3. wow. you're 24 and have life insurance? do you have children? from what i remember about life insurance, at your age, term-life is better. it frees up more capital for investing.
4. I'll make it simpler for you. Whole life insurance is a waste of money. If you need insurance, by 10, 20, or 30 year level-term. then invest the difference in mutual funds, or some other, long term investment vehicle. I'm surprised your 2 friends did not tell you this, or did they just want the commisions? Any reputable financial professional will tell you this.
5. You need to work on your requirements before you decide on a policy such as how much can you pay for the premiums and how frequently. Does the policy covers hospitalization and medical expenses? What illnesses do it covers, etc... speak to several insurance agents and you'll get a better picture on what they offer before signing on the dotted lines.
6. I'm probably gonna get the business from another damned insurance salesman for saying this, but: DO NOT buy stupid whole life insurance. It is UNIVERSALLY OVERPRICED CRAP. If you are any good at managing your finances, a good 20yr term policy will be enough. Save for your own long-term needs & you will not need some dumb cash-value piece of junk that you have to pay on until hell freezes over. Get a copy of Dave Ramsey's "Total Money Makeover". He explains very clearly how to manage your finances so that you do not need insurance that lasts until Kingdom come. People (insurance salesmen & other hacks) will make fun of you & tell you Dave is a simpleton, but let's face it: Dave is a multimillionaire, your insurance salesman probably is not. I'm sticking w/ Dave. One last thought: If you do not have a family that depends on your income, you probably don't even need any life insurance. Dave talks about that in his book, also, I think.
7. Life insurance is not an investment contract. It is a insurance contract in which you agree to pay your premiums on time in order for your beneficiary to receive the death benefit in case you die. So your life insurance is never paid up. The only way its paid up is if you selected a payment option and it says 20-Pay Whole life or Life Paid at 60, which is not normal. This is where you pay more premiums now so that the premiums you would of paid for lifetime would be enough so that you can stop paying in the future date. If your whole life policy doesn't say this, then it is never paid up. There is nothing free in this world. Something has to give. If you stop paying at age 65, your cash value will be used to pay for the life insurance. As your cash value goes down, so does the death benefit. Some things you should know about whole life insurance: 1) No cash value is accumulated in first 2 years, so you have negative rate of return in the beginning. 2) Your cash value grows at a low rate of return of 3-4%. 3) You may borrow the cash value with a loan interest of 6-8%. This will lower the death benefit. 4) Cash value grows tax-deferred. 5) You lose all cash value when you die. For your situation, you should consider a 30 year or 35 year term insurance for yourself. I personally own a 30 year term insurance and bought it age 23. For $250,000 coverage, it only cost me around $30/month for it ($360/year). Even though I'm single and no one is dependant on my income, I bought it anyway for my parents. In case I die, they can use the extra money for retirement. You said you want to save money for retirement. You should open an IRA (depending on your income, you may qualify to open a Roth IRA as long as your Adjusted Gross Income is below $110,000 (if you are single. If you are married, it has to be below $160,000). I own a Roth IRA and put only three mutual funds into it. You can fund your IRA with any kind of investment as long as it is offered at the financial institution (you can put bonds, mutual funds, money markets, maybe CDs, and maybe even stocks). Though I don't recommend you put CDs or stocks into your IRA. CDs have a low rate of return of 3-5% and stocks are highly volatile. What I mean by volatile is that you can make lots of money or lose lots of money. Before investing into mutual funds, you should read the prospectus carefully. First you should find out what you want from your investments. Do you want high growth (for your age, this should be your objective)? Do you want the mutual fund to generate income while having some growth (meaning it pays out dividends and capital gains often)? Then you can narrow the choices of mutual funds that meets your investment objective. Now you need the prospectus. What to look for in the prospectus: 1) What is the mutual fund investment objective? 2) How did it perform in the past? 3) What is its expense ratio? (you want to pick the ones that has a low expense ratio) 4) What is its turnover ratio? (again, pick the ones that has a low turnover ratio) 5) Who manages the mutual fund and how much experience do they have? 6) What is its sales charge? To sum this all up, get rid of your whole life policy. Buy term insurance. Open an IRA (Roth or Traditional). Invest consistently, no matter how the stock market performs.
8. Life insurance with cash value don't pay out cash value when you die! They say its a good way to build savings! How is that so if you lose it all and it doesn't go to anyone when you die? People say you can borrow it. Why do I want to borrow my own money that I paid for? Cash value = scams!
9. I don't care what these other folks say. I like whole life policies. I'll go as far as to say, they make MORE sense than term at a certain point. At some point your mortality exposure will become great and therefore cause term insurance premiums to go up so there is a time when taking on the extra mortality earlier makes sense. There are a lot of options when it comes to life insurance. GMDB, GMWB, UL, VUL... and the list could go on. I hate to be the one to break it to you like this, but if you want life insurance you've got to pay for it... unless you're like me and work for an insurance company then you get some for FREE.
10. No matter what company of those two you chose congrats on getting life insurance while you can and while you don’t need it. You never too young. As far as the companies are concerned both New York Life and Mass Mutual are fine companies. I don’t know how your friends can justify Mass Mutual being a better deal for you. I am going to guess that your friends have not backed their claim with any literature. I say this for the simple fact that anywhere you look New York life is rated higher than Mass Mutual. I would say that they are very comparable to each other. I am a client of Northwestern Mutual. Northwestern Mutual is the only company to have the highest ratings from A.M. Best, Standard and Poors, Fitch and Moody's Investors Service. They are also the only company of any industry in the world to receive the #1 ranking for their industry from Fortune Magazines Most Admired Company list all 23 years they have had this award. Not even Wal-Mart or Microsoft has done that. Northwestern Mutual also just surpassed 1 trillion dollars of in force life insurance. Last year they paid a 4.3 billion dollar dividend to their policy owners. You could take the next five companies dividends combined and it would not equal Northwesterns. Just for fun run some of that by your friends. There was a study done by Don Anntonette starting in 1974. Don started 7 exactly identical policies with 7 different companies. Northwestern Mutual, Mass Mutual, and New York Life were among the companies. As your question asked you wanted to know how long you would have to pay your premium. Well in Anntonettes study as of this year his total cost (Total return minus yearly premium) for whole life over the last 30+ years was: New York Life=$2624.05 Mass Mutual=$1556.30 and Northwestern Mutual=$431.30. Rather large gap. If you want the study I will be more than willing to email it to you in PDF format. Northwestern is the best. No matter what though go with someone you trust. Just to reinforce your decision on buying whole life instead of term I have given the below reasons why you are doing the right thing. No matter what these other responses say, cash value is the best way to go. Buy term and invest the difference. Many suggest mutual funds. The problem here is many buy term and spend the rest not invest the rest. Also life insurance is not taxed. To get a 9% after tax return you need around an 11-13% taxable return. Check market history and that may be very hard to do. With all investments you have a risk. Over the last 30 years common stock has had a rate of return of 8.99% with a standard deviation (risk) of 18 and Northwestern Mutual whole life was 9.07% with a deviation of 2. Not to mention how would you fund these investments if you became disabled. How would you contribute to your Roth, 401 k etc.? Northwesterns cash value policy pay for themselves if you become disabled and you still have access to all the cash value as if it was you paying in the whole time. And for you term lovers it also pays to convert your term to whole life. The reason you buy life insurance is to pay a benefit when you die. The fact is only 3% of death claims are term contracts. Tell me again where the insurance company makes their money? The best life insurance to have is the life insurance you have in force when you die. Term doesn’t guarantee that because it expires. If your friends wanted more commissions they would sell you term and take those commissions and then in 5 years when you realize your investing the difference isn’t working they would convert your term to permanent getting paid again. They are your friends by not wasting your money on term. Not only does your cash value grow at 7-10% (not 3-4%) you also can use your cash value to collateralize at a bank for loans. This helps you negotiate points off your loans. Banks do not typically take any investments as collateral due to the high risk. If push comes to shove you can borrow up to 90% of your cash value at 8% (after 7.5% dividend net rate of .5%) and pay it the loan back when ever you want. What is also nice is your dividend can pay your premium for you. Term normal gets more expensive as you get older and become more of a risk to the insurance company. With your cash value you should be able to stop paying your premium around year 13 or so. The number one priority is figuring out your need and budget and establishing a death benefit that fits in your budget no matter what level of permanent and term it takes to do so. Anyone who says you are too young or have no need are right. But get it while it’s cheap and while you can. There is a catch up to your Roth and other investments but there is no catch up with life insurance. Life insurance is not the only answer its just part of the overall plan. You should cover all your risks before you start trying to accumlate wealth. Get good disabilty insurance, health insurance, and start a Roth. Also make sure you are doing up to your employer match on your 401k. Anyone who says buy term invest the difference has never been properly or effectively shown the power of cash value life insurance from a quality company. Congrats on your purchase and good luck with your decision.
11. I totally agree with MATT.p point of view, thanks god that some one came out and say the right thing for you and all of us. Which one better ? you make your call after you read this. Ask yourself you want to live in appartment forever or own the apportment and rent is out for cash flow income for life time. That is what difference between term and whole life, you go with Term, you rent the appartment, when you left, you have nothing on hand, when you getting old that time for some reseon, you still need a lot of coverage for your family that time, your cost of insurance will be huge even you have a good health, insurance company make money on term life most of the time due to people live longer than before. If you go with Whole life, mean you buy appartment and after you paid off your mortgage, you will own the appartment forever and collect cash flow income ( cash Value ) forever. tule that whole life premium is a lot higher than Term, most of the whole life premium need to pay for life of the policy term, But... You can chose the type of only need to pay premium for 10 or 15 years whole life policy, that its, limit time premium pay whole life, after 10 years done, just like you paid off mortgage, you done with your obalication and get your dividend cash flow every year and enjoy. the longer you live, the more cash value you will have and you don't need to worry you insurance again for life. Here is the best part, in order to get the best dividend cash flow, you much buy whole life policy from mutual life company, not from stock company, that ways you will earn big dividend for the policy. Massmutual is better than new yoke, may be because new yoke spend a lot of money on own commerical, that why they will pay less dividend than massmutual or northwest mutual company, this just my point of view, as long as your in mutual company, your find for that. I like massmutual 10 payments policy, northwest mutual may have one. A lot of people like to say, buy Term and investment the different, but how many people make money on equity market?even you make money, you still need to deal with Tax. as long as your in equity market, you can not say you make money unless you run away with winning cash and never invest back to the market. If you can , Keep whole life with you, and extra money invest it in Roth IRA account, put money in 401K up to the company math up only. and you still have extra money, than you can buy raw land in CA, but much be vrey colse to the town, never buy out of two mile from the town. ** never buy VUL. Good Luck Source(s): northwest mutual insurance comapny Massmutual insurance cmopany New yoke life company This three are the best in mutual life company
12. Just as a heads up - almost all of the above answers that say "never" or "always" are probably a little bit shaky because they do not have any information on your particular situation other than the one paragraph that you provided. Generally speaking, whole life or any other type of "cash value" life insurance product only makes sense in certain unique situations. Chances are that at 24 years old you are not too interested in doing any heavy duty estate planning (nor should you be) so whole life is probably not the best choice for you at this point - especially if you are still at all fuzzy about some of the features. Depending on your particular goals, why not maybe compare some term life insurance quotes (which will be much much cheaper) and see if that can meet your life insurance need?