pricespector

I'd love to see the policy he compared in the blog analysis. I noticed that it it wasn't mentioned that by year 20, the whole life would paid up forever with an INCREASING death benefit and no more premiums due.

Also, if you did continue to pay into it, the age 60 cash values would be closer to $55,000, not $40k and the death benefit of the whole life would be around $130,000. At age 80, the cash values would be about $176,000, where in the example, he sates that cash values equal $100,000 at age 100. At age 100, the death benefit and cash values would be closer to $450,000. As far as the cost analysis goes, the death benefit at age 80 is about $225,000. So, to be fair, you would have to take out a $200,000 20 year term at age 60 to receive a comparable benefit. This would raise your term costs from his stated $1500 per year to $2500 per year for a cost of $50000 and this assumes the same health as the primary insured 30 years ago. And oh yeah, you will have no death benefit at age 81 with the term option. "Options" are the key here, because proper planning is all about options later in life.

Also ignored is the waiver of premium feature that will continue to pay into cash values of a whole life (and yes, you can spend it...it is yours) should you become disabled and your invest the rest strategy falls to pieces due to lost income. There is no other savings vehicle that will contribute funds for you if you become disabled. To make the cost calculations remotely even, you would also have to factor in the costs of a comparable disability insurance policy that would equate to the same savings ability to age 65.

And to make this clear, whole life is not an investment...it is insurance. Comparing to investments is a folly. It ensures that you will have a death benefit. It insures your benefit will keep pace with inflation. It ensures you will be able to continue to save despite a disablity. It ensures that you can increase your death benefit at a 1:3 premium to benefit ratio using your right to overfund the policy and purchase paid-up additions regardless of your health. PUA ensures that someone diagnosed with cancer can achieve a ~300% annual rate of return on excess premiums in each of the years leading up to their demise in the form of PUAs, which will be included in the benefit for the family. by It ensures that will be able to pass assets in the most efficient manner, and also allows you to do so later in life by transferring investment assets into it. It ensures that you will receive a positive rate of return on your money (safe money) guaranteed. It ensures you will never be turned down for coverage due to health changes. So, if any portion of your portfolio is allocated to conservative investments, then it makes perfect sense to make a whole life part of your overall porfolio and be more aggressive with other outside investments.

Not to mention the fact that the opportunity cost of your whole life premiums are included in the cash value calculations. To be completely fair, you would have to calculate the opportunity cost of the premiums paid for term at an assumed rate of return to determine the true cost of the term premiums. This is due to the fact that the portion of premiums you are paying for term could also be invested, but in the end they bring you nothing. What the whole life premiums provide that the term premiums do not, is the permanent life insurance benefit.

So, have you quantified all of these benefits of a whole life in your "buy term and invest the rest" calculations? Until you do, you are simply reiterating an unproven and grossly misunderstood mantra.

Not really cut and dried, is it?