It is silly to say term life is better since commission is less. Same with EIUL, as your agent how much percentage he will make on your first year premium. Surprisingly, almost all insurance company will give 100% of the first year premium to marketing/agent.
term is like renting apt. and after 20 yrs there is no cash value. Perm. life is like buying a house, your loved ones will eventually get the "house" unless you don’t have any loved ones.
some companies has guarantee feature, for instance, John Hancock has a program that for a 35 yr old male, you invest ~0 a month for 10 yrs, it will guarantee 0,000 insurance payout.
What’s more, if you invest in Fidelity or Vanguard, you may lost 30~50% of your investment, but in Equity Index UL, you may not lose a penny. For instance, Transamerica in New York (TFLIC) gives 1% minimal guarantee when you invest in the S&P 500 Index. In other words, last year you would be able to beat market by +38%.
Buy term and invest the difference is an old, old concept, I can’t believe someone still using it. After 80’s it is a mistake if you still use it.
Mahala Q 2:03 pm on December 24, 2009 Permalink
Life insurance covers lots of different things. Since I live in Oregon I’m not sure about New York laws and regulations, so I recommend you call a local life insurance agent. http://www.americaschoicetoday.com/Life-Insurance.html They will be able to help you.
jlf 2:03 pm on December 24, 2009 Permalink
"Buy term and invest the difference" is in fact the better deal for most people. Even more so now since term rates have declined considerably. You sound like an insurance sales person.
mbrcatz 2:03 pm on December 24, 2009 Permalink
Same way you compare a hammer and a screwdriver. They are both tools, but both designed for different jobs.
Sure, you can hammer a nail in the wall with your screwdriver, but . . . it’s not the most effective way.
It’s impossible to effectively compare tools, without first DEFINING THE JOB. Sure, if you’re going to live in a place 30 years, buying is better. But if you’re only going to be there six months, you’re NUTS to buy – renting is definately the way to go.
On your guaranteed death payout – If you have to pay in for 10 years, before you get the payout, well, if I’ve paid in $72,000 (cost of insurance over 10 years at that price), I’m not really BUYING a half million, am I? It’s more like $400,000. AND, it doesn’t even pay out, unless I DIE, which likely won’t happen until I’ve paid in another $144,000 – total paid in, HALF the payout, and only if I die?
Buy term invest the difference is still being used, because IT MAKES SENSE. Buying life insurance as an INVESTMENT product, is like buying a pair of $800 Prada heels, to bang that nail into the wall. It will make a lot of money for the agent, and even MORE money for the insurance company.
And once the customer’s paid in a few years, they’ll realize what a dumb investment tool LIFE insurance is, and that’s why 95% of universal life or whole life polices, stay in force five years or less.
car253 2:03 pm on December 24, 2009 Permalink
You answered your own question. But I don’t agree with your answer.
Not all insurance agents do investments. That requires a different license. Investment advisors are the ones that give investment advice. You might repost your question under "personal finances". And, most of the time the stock market bounces back.
mob442 2:03 pm on December 24, 2009 Permalink
You’re right on Ed! I agree wholeheartedly with you. Buying term and investing the difference can be a disaster!!
lani 2:03 pm on December 24, 2009 Permalink
I am a customer service rep. Can’t tell you how frustrating it is to deal with clients who bought term policies on that flawed concept of "buy term, invest…."
These agents are out of the business or refuse to return the clients phone calls when the level period has ended & now the ART has started & the clients cant afford the new period & the conversion rates to UL or WL is as equally unaffordable. Then on top of this, the "investments" are not performing as promised.
A lot of these people are no longer insurable or on fixed incomes, so they end up just losing their policies.
Another trend that I am seeing is that agents are rolling over perfectly performing UL, both standard & variable into new policies, that may give the client a higher interest rate than they are currently making, but this is only for a temporary period, then the minimum guaranteed interest rate on the new policy is 2% if their lucky, where as the minimum gtd interest rate on their original policy is anywhere from 3%-5%, then on top of this most of these clients are in their 50’s & 60’s, so the coi is much higher than their original policies. The only person who benefits from this is the agent, not the client. This is just another form of churning.
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The best way to use term is, as the purpose it was originally created for, young couples, or people who needed a large amount of coverage for limited period (i.e. business loans, key man policies…). Regardless, term is meant to be a short term solution & agents need to keep that in mind.