Over the last two years i had started investing and looking into options for life insurance and the like because I was a contracted worker without benefits. I bought a whole life insurance policy that is about 900,000 in value. I was under the impression it would grow over the years and the cash value would be worth it if I ever needed liquid asset in the future. Well now I’m second guessing it. It’s expensive and I wonder if I just invested the money I pay per month if it would be better. My advisor said I should keep it since I’ve been paying for it for two years and otherwise it would be money lost BUT fixing the mistake now is better than 5 years from now.
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Insurance should never be viewed as an investment. The only time it makes sense to use whole life insurance as a savings tool is after you’ve maxed out tax-advantaged retirement accounts, and only if you have a low risk tolerance. Insurance is meant to protect you from financial loss.
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Insurance can absolutely be used as an investment, perhaps you just don’t know anything about VULs or PPLI?
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So then perhaps term would be better
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To cover mortgage and my student loans for my husband. Is that what most people do?
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Without knowing more about your monthly premiums and how long you have to pay (like for 10 years or until age 65), it’s hard to give professional advice. However, I can share that life insurance should bring you peace of mind.
As someone who has sold a lot of whole life, term, and disability insurance to RNs, both 1099 pay-for-service and W2 employees, I have some insights.
First, whole life insurance can be expensive in the early years because more of your money goes toward the cost of insurance. With whole life, you’re buying insurance, not renting it like with term insurance. Renting isn’t bad; it’s just different.
Clients like me who choose whole life see it as buying real estate instead of renting. Renting is fine, but some people want more control over their future and want to create a legacy. Whole life insurance allows for that. When you die, you leave behind either wealth or debt, and it’s tough to die with nothing in your bank account.
An added benefit of owning whole life insurance is that later in life, you can use some of the cash value to supplement your retirement income, start a business, or pay for a grandchild’s college education. It’s like having your own bank.
If your life insurance limits your ability to invest elsewhere and isn’t acting as an investment vehicle, it might be time to explore other options with someone other than your current agent, who may be worried about losing their commissions on your policy.
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Thank you for your detailed response! To provide some context, I recently took a pay cut, and it’s been challenging to save while covering this expense. I’m paying $500 a month and wonder if it would be better to invest that money in my mutual funds or savings instead. I plan to pay into this until I’m 65, which is another 32 years.
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As a life insurance agent and registered representative (Financial Advisor), here are my thoughts:
There are many types of life insurance that serve different purposes beyond just providing a death benefit. If you want insurance to cover large expenses like mortgages or significant personal or business loans, I usually recommend term insurance for those specific needs.
I also suggest having some form of permanent insurance because funeral costs are rising, and receiving a death benefit can greatly impact your beneficiary’s life. The type of permanent coverage you choose depends on your personal goals and budget. There are many options available based on your situation and goals. I rarely write permanent policies larger than $400,000 unless a client is using them for tax advantages or specific business needs.
You have several options, but it might be a good idea to consult another agent to get a different perspective.