That’s literally what I did and what lead me to post. Hoping I could find some redeemable quality in it. No dice. Cancelled policy and sadly cancelled friendship.
OP, it is possible the friend really thought this would be mutually beneficial. Some people get brainwashed by this stuff and it’s possible your friend doesn’t realize what a bad investment this is for your wife. I’m a physician myself and I’m often the target of whole life insurance pitches. Just out of med school I got fooled once - never again. It was Northwestern Mutual. If the friend did know, then yeah, I’d cancel that friendship.
Edit: after reading som first hand accounts of former insurance salesmen, it seems they absolutely know what they’re doing and are up against quotas to get things song and often extort their friends and family for this. Yes. Fuck this person. Friendship over in my opinion.
Thank you. I believe it was northwestern mutual. I hate how she has been preyed on because folks automatically assume physician equals rich. Happens when we bought cars, got house work, etc. Looks like it works for some, but it’s very few and far between.
Northwestern Mutual is an absolute joke of a company. They’re the Plexus/multi-level marketing company of insurance products. They hire young salesmen to go dupe their young friends into getting garbage insurance products, and while they’re at the meeting, they get that friend to give them 5 names of people to go exploit.
Terrible business model.
Any company that advocates for or encourages employees to sell to friends and family is a fucking scam. It’s an obvious conflict of interest that can only benefit the company and hurt the people involved.
I lost a friend from college because I wouldn't sign up for his northwestern mutual BS. Sat through his entire pitch and I was like "dude I got 80k worth of college debt and no family, why the fuck do I care what happens when I die?"
Had a friend from HS reach out and tell me he was "starting his own business" as a financial advisor. I thought "cool, I've been needing some financial advice." We jumped on a call with his handler and within 5 minutes were arguing about fiduciary responsibility and bias and how that all relates to NWM, and I couldn't continue any further in the conversation. Sad really. If this HS friend had really been doing his own thing, I would have been happy to support him.
Many large financial advisor companies do this. NWM one ups it by hiring interns, paying them a shit stipend, and having them cold call people for days on end.
Fresh college grads are hired and task number one is to fill out a form with 100 personal connections and their phone number for you (or the company) to use as leads
Interviewed with NYL same song and dance. Showed up to their Dallas office in my suit and tie for a regional manager interview. I get called into the office and there are 6 of us in there for a presentation and group “interview”. I raised my hand…I’m here for the regional manager position? The presenter answered we post it that way to get more candidates. I just got up and left and asked them not to call me. They called me for months.
I bartended at a country club in college and I was wondering why the NWM guy was basically salivating as he looked at my resume. Went to one orientation and noped out when I realized what I was getting into.
Yup. They got me. I ended up surrendering an insane policy I was in. But you gotta F that sunk cost fallacy. Probably already made it back in diverting premiums to VT
Some guy from Northwestern reached out to me, claiming he was friends with my friend and they suggested me for "financial advice"
First thing I did was call my friend and ask what the fuck he's giving out my phone number for. But he had good intentions and thought his buddy might have some good financial advice.
So fine, as a courtesy to my friend I decided to hear the guy out from Northwestern Mutual. He went into a whole long financial picture speech and after politely discussing a number of things things he mentioned "whole life insurance" and told me a few reasons he thought it was better for me. I knew what Reddit had to say on it so I politely just said the numbers don't add up for me versus term insurance and he started insisting I give him exact figures so he can show me the numbers will work out in my favor.
It was at this point that it became very clear that I was right from the beginning, my friend had been conned into a scam. But the thing is, just like an MLM, the guy from NWM believed (or really wanted to believe) what he was saying, he thought it was beneficial.
I politely said I don't think we are a good fit and left it at that.
If you look at the number of hours most physicians have to work versus their pay, I made a lot more as an engineer; one never hears a mother telling her daughter “marry an engineer”…
My aunt married a pharmaceutical engineer (bio-chemical?) Who worked for J&J for 30 years and they are retired just fine. He's a nice guy but super nerd, like makes Big Bang Theory nerds look cool. At least his coke bottle glasses came back in style.
I worked with a women whose husband was a doctor. It got to the point that they had to hide that fact when getting bids on yard work, house cleaning, etc. She always was facing the plus 15% because you are a Dr.
It's not just your wife. The friend is really gullible and believes what they've been sold. I have a long time friend who tried to sell me on the same thing. She truly believed in it being a good investment. Shows how little some people know about investing
Going to put it here again Incase my comment gets buried:
Whitecoatinvestor.com. Doctor who has had to deal with all the predatory financial advice he's been given over the years.
Yeah I also work in a hosptial and won’t lie, there is a nurse or two who got into the life insurance thing and didn’t realize it was was a scam. Like she legit thought she was vibging and doing good by getting people plans.
Hijacking comment to bring a perspective. I work within the personal finance industry with fiduciary licenses and clients whose finances I manage. I have no skin in this and I don’t know your situation. I will say that depending on the needs of your situation it may have been warranted, but again I don’t know. I work in wealth management and we have an portfolio of amount of high earners where permanent life policies are beneficial to their financial estate/situation/portfolio. **It is a specialized product/solution that should be looked over with your fiduciary advisor** (notice I did not say “a fiduciary” I said **your** fiduciary). I recommend getting with your advisor and looking over different options against the reason of why the policy was set up. The “why” is the most important piece. If there’s a mismatch in the why and what the policy seeks to solve, then yeah, that’s wrong.
Should you have a policy? I have no idea. Likely based on assumed income levels, but I’m not sure let alone what kind.
Example: I have a client who is a high earning surgeon and when planning out his finances based on his needs and wants we did get a few different policies and his premium is in the $3k range. We talked about the pros, the cons, and he’s happy with it.
Disclaimer: I do not write life/health/disability policies; I only advise clients about them. If mods need proof, I can provide. This means do not get paid on policies written nor do I take referral fees. If anything, I lose out when a client signs up for a policy since that’s less money that I potentially can manage. But that’s what a fiduciary is for: thinking of client needs ahead of my own.
I completely agree with you. Physician also and for years it was not worth it and my advisor did mention it and explained that I had better options. Eventually debts somewhat reduced and other tax advantaged accounts maximized. It became a good plan per him. Amd he did have 5 years of trust built up.
I can give you redeeming qualities if you think the friend may have done it honestly. There are specific products called "Final Expense" and they are designed to ensure that there's some amount of money for families to handle funeral expenses no matter what. They're whole life so that they will absolutely pay out. A lot of people think term is a scam because the vast majority of term policies never pay out. So some people don't care that it's more expensive they want to makes sure someone somewhere is getting the money they paid their money. I do have to say that seems to be geared towards people who are unlikely to have enough money laying around to pay for their funeral and burial, so it still probably wasn't a good idea for your wife, but people like them because they HATE the stock market and can not stand the idea aof losing any of their hard earned money.
Also one of the richest guys I knew, (retired well before fifty, owned a multimillion dollar home, kids all went to private school) said he had a lot of luck with life insurance. He claimed to have taken out a bunch of different policies and then .... I have no clue. Hebworked some weird magic and he could do whatever he wanted most days of the week. I never got the details of how he did it, but I don't think any of it was term because, he'd say stuff to his kids like "if I'm ever vegetable, do whatever it takes to keep my heart pumping for as long as they possibly can. That's the deal I signed. The money keeps coming as long as I'm alive"
Sounds like he had some annuities but like I said I never got the system details. The point is the friend may not have understood . The friend should have asked about risk tolerances and goals for the money Etc. Because if someone is comfortable with the ups and downs of the market, then yeah, whole-life isn't a good fit. By the way, If you cancel it within 6 months or a year, depending on the company, the friend will likely also have to pay back their commission.
Those burial policies aren't usually for 350k, are they? I know folks of my grandparents age often had polices like that and the "insurance man" would come and get the payments.
And maybe the person should have to pay back the commission. No sense in OP throwing good money after bad to pay an outrageous commission.
No, absolutely not. Those are usually a range from a couple thousand to like 30k. My point is that there are some valid uses of whole life. The main reasons that I think people get them is that they really hate the idea of paying for something they'll get literally nothing for, which is what happens most times with a term policy. It doesn't matter to them that a whole life has returns thst are lower than the stock market because they think the stock market is a rigged system that primarily benefits the ultra wealthy and is just some voodoo bullshit or worse "wolf of wall st" Bernie Madoff scam for upper middle class country club wannabes (a somewhat understandable position especially if you grew up poor). So they don't care about maximizing returns. They want to "establish an estate" to pass on to their family after their gone and they don't want to deal with the vicissitudes of the market.
Also, I was not suggesting that op allow the person to keep their commission. I just saw some other people saying to do something extra about it, and my point was that cancel is punishment enough.
>he'd say stuff to his kids like "if I'm ever vegetable, do whatever it takes to keep my heart pumping for as long as they possibly can. That's the deal I signed
Dude sold credit default swaps on his own life.
>There are specific products called "Final Expense" and they are designed to ensure that there's some amount of money for families to handle funeral expenses no matter what.
So even these are sort of dumb.
1. Buy term life insurance in an amount that will cover your funeral and other expenses. Term will always be cheaper then whole life by a lot
2. Invest some of the difference
In the unfortunate event you die early well your term policy will pay out . In the event you die at an old age, well you just have saved for 20-30 years and invested the money and now you should have no problem covering final expenses
I would get 70% first year premium. Plus an override/bonus of 150-170% of that depending on which company.
So $1000 annual premium would pay me. $700 first year commission and $1190 override for a total of $1890.
Maybe not that big. I have a "friend" who is new in his company's game and they get a significant percentage of the gross for the first year, but the way you really build income over time is that you get a small and decreasing percentage of the premium every year for every policy you sold that stays active. Keep at it a very long time and those small slices from hundreds of clients add up. But it's a straight hustle at the beginning and I assume a lot of the newbies don't make it long because the income is so low unless you're a great salesman.
Its actually quite likely he got the full 12 months upfront and would have to pay back the commission if you returned the policy. Most companies have a “free look” period where you can return the policy and get all of your premium back.
I mean that in itself might be a flag but not the issue. If the friend actually sold a useful product that was good who cares if they got a big commission
The problem is whole life insurance is a crap product except for some very narrow reasons and even then you have to be careful on what policy you choose as most are still crap products
Its almost always better to just buy term life and invest the difference
I swear that industry just _ruins_ people. Out of work, really need the money and get what they think is a boring office job only to discover they're suddenly a salesman who has to scramble to make quotas. So they end up *using up* all their friends and acquaintances when their soul-crushing cold calls net them bupkis.
A year or two later when all of those "leads" dry up, all they've got to show for it are the commissions they basically scammed from friends (and friends of friends), no job, and a lot fewer people who will return their calls.
And of course the real scammers heading up the business consider that a success.
Can confirm did this. Almost sold my mom a whole life policy cuz my boss and team thought it was a good idea. No salary all commission. Got out of that job fast.
I've got a friend at NWM now. They almost always sign up for these policies themselves, and are sold a lot of BS about how these products genuinely help people plan for the future. Some of them do, but not the ones the company makes the most money on (and therefore pushes you to sell). My friend turned down a job I offered him in the industry he came from because he wants to be doing something that helps people.
That sounds like a vacuum cleaner sale scam.
Get new “salesmen.” Tell them they have to do 5 “demos” for friends and family before they are “official.”
After the demo the company asks to speak to the family member to “see how you did.”
But it’s just a high pressure sales attempt with their loved one standing right there in the room. Such a scam.
Northwestern Mutual has an office in my area and a few friends interned with them.
The internship? Come up with a list of 100 contacts, provide this to your management team, get basic licenses, and sell contracts.
So gross
Oh shit, I just commented about this on another comment in here. I interviewed with them right out of school, everything seemed great until the contact form haha.
> I swear that industry just ruins people. Out of work, really need the money and get what they think is a boring office job only to discover they're suddenly a salesman who has to scramble to make quotas. So they end up using up all their friends and acquaintances when their soul-crushing cold calls net them bupkis.
I just went through *exactly* this. Like verbatim. Former coworker was laid off and panicking for a little while, then ended up selling life insurance. I have no idea how he plans on getting leads once he burns through his friends. It's like being a realtor I guess, but so much less useful. I could see how certain people who really know how to network could make good money hustling like that, but the vast majority have to be left with no income security and eventually burn out.
I unfortunately was in this postion. Graduated and got in at NWM and was excited to help people and teach financial tools. Went through "training" and was constantly asking management about securities licenses for stocks but they kept pushing back saying I had start with insurance first. After training they had me list out all my contacts and dial....They said shoot for 40 calls per day and set up some meetings with people I knew to go through a questionnaire and figure out what products would fit them. An experienced rep would go with you on the first 10 meetings to help answer any questions and you split the commission if anything sold was sold...Got out of there real quickly after hearing that.
When the hiring and training method is take a handful of spaghetti and throw it and see what sticks it's no surprise that 90% of "advisors" don't succeed in the first 3 years.
Agreed. Dude can get bent and I have half a mind to tell his wife what a grifter he is. She grew up privileged so I doubt she’s complicit in his malevolence. At least I hope she is, she’s an oncologist for gods sake. But if this whole thing torches her and my wife’s friendship as well, so be it.
And these jobs’ salaries scale up with income of your clients, so it’s no different for a rich person or a poor person.
You or I might be able to get a few hundred bucks’ per commission out of the policies we sell to our poor friends. But if all your friends were doctors and other wealthy people, the commissions on their policies could be huge.
I interviewed for an internship at Northwestern Mutual in college once. They started asking me about my family and friends in the area and halfway through the interview I realized what the scheme was, to call them to sll them life insurance wtf man. Oh, and the pay was to be $100 a week plus commission, in NYC, so unless you're selling you're fucked.
I interviewed at an investment company right out of school and it was like this. First couple interviews were great, and the final interview was just "Fill out this form with 200 of your contacts so that you can get started right away!"
Weird question, but bear with me...
I live in the UK, and while there are scams (timeshares were a thing in the 90s, and MLMs exist), we don't seem to have much in the way of stuff like this.
It seems to be a largely North American phenomenon.
Stuff like whole-life insurance appears to be a legalised, regulated semi-scam, with some legitimate use cases but they're usually a vehicle to return ripoff comissions to the seller.
And I can't figure out why we don't seem to have stuff like that here. The UK and the US are developed, regulated, capitalist countries. They're pretty similar in global terms.
And the UK has fairly loose banking regulations. And hell, the US has a big culture of lawsuits, it's not as if running a scam there is risk-free.
Any thoughts on why there's such a dearth of stuff like this outside N America (or conversely, why it's so common over there)?
I disagree. Avon is like a diet-MLM. It's high effort and low return.
Whole-life insurance is much more lucrative than selling moisturiser, so from the point of view of the salesperson, insurance is a "better" option than Avon.
This kind of sounds like a part-time job I did in college selling Cutco knives for Vector Marketing. They want you to make a list of all friends, family, and acquaintances and try to sell them overpriced mid-grade knives. It was awful and I didn't have the stomach to exploit all my relationships like that. I quit after a couple weeks.
My thoughts as well, but I would caution against blaming the victim (OP's wife) here. People can often be pressured or sweet talked by salesmen and saleswomen into bad financial decisions, and we don't know all the circumstances that affected OP's wife's decision.
Yeah, you know how it goes. They hype you up on what a great opportunity it is and they use interpersonal history & trust to pressure towards getting it done now. People without a decent financial education get caught up in the promise really easily. It’s unfortunate; they really should give people a much better foundation in school.
>eople can often be pressured or sweet talked by salesmen and saleswomen into bad financial decisions
And you absolutely should be blamed for this. It's not being rude to the salesperson to "my spouse / SO and I discuss all significant, long-term expenses". Being a doormat isn't a good trait for yourself, but it's great for salespeople and others who take advantage of people.
\[insert stereotype here about doctors and their money, though\]
It’s like any other bad decision made in coercive circumstances. You always have personal responsibility for your choices, but circumstances can make exercising the right choice very hard. Until you’ve been subjected to this kind of hard sell from someone really “good” at it, it’s hard to imagine just how close to a Jedi mind trick it can feel like. Professional scam sales people are *really* good at impairing the judgement of their audiences.
It’s one reason it’s not a good idea to go to a time share pitch as “a joke” or “for the free stuff.” They know a lot of people are telling themselves they’re just going for the free stuff, and the process is designed to get you to do exactly what you walked in planning *not* to do.
I have been approached by North Western “friends” and they are as charming as they are relentless. Luckily they weren’t close friends so I was able to shake them without it being awkward socially.
I responded to that question lower down I think. Long story short, we trusted the guy and I was not present when she signed the dotted line. I do not blame my wife at all. She’s s a beautiful, genius, altruistic person that sometimes fails to see the world isn’t always sunshine and rainbows. That’s why I’m so fucking pissed this “friend” took at advantage of her.
I consider myself pretty financially savvy, and even I got talked into one of these shitty policies. My saving grace is I eventually was smart enough to take my loss and cancel it. But even that cancellation process had to go through their high pressure sales guys. So it was hard to get out of as well. So your wife shouldn’t worry, it unfortunately seems to mostly happen by people in our trust circles who try to take advantage of us.
My wife’s friend almost got her to sign a similar whole life insurance policy, and I came to the same conclusion that you did - buying a term policy and putting the rest into an S&P fund or similar is far better, and the money isn’t locked up for 20 years.
You still need term because the payout on a whole life isn't enough. Whole life has a guaranteed payout so you àre essentially putting money in a bank account which they thrn give back to your estate when you die.
I left a company recently and my sister in law mentioned that I should talk to her husband about moving the 401k into insurance vehicles. I made up some BS about it not being much and not worth moving to. I do software development for a living and specifically my last few years were all around insurance systems. A few times I saw the premiums these advisors get and it will blow your mind on how big of a scam the whole thing really is.
See if there's a return of premium rider. Probably not but it's worth asking.
If you call NWM and argue that you didn't receive all the necessary disclosures and that "this product is not suitable for her" there's a really really good chance they'll refund you.
If they balk, ask for the suitability form from the application (you should also have it in your policy delivery documents that the agent is required to have given you) and find any inaccuracies you can, then you have concrete ammo to argue that the suitability form isn't accurate and that the product isn't suitable. The insurance companies take suitability seriously since it can come back to bite them in the ass bad.
It depends on the type of whole life.
Not a seller or promoter, but if you are seeking information, data can be helpful.
Here are the traditional WLP benefits affluent families use:
A person like this example will overfund a policy.
After 4-5 years of overfunding the whole life policy, your cash value will be right side up.
The benefit of these policies is to allow the user to earn tax free APR - in most cases, no lower than 4%.
While 4% may sound low, taking home 4% in the real market likely meant you made 6-8% pre capital gains tax.
2nd benefit,
You should be able to borrow / pull out your cash value at anytime for a net 1% borrowing rate:
They charge you 5% APR, but you are earning 4% APR on the whole policy value, not what’s remaining after you borrow it. More below..
3rd benefit,
Even with all the money pulled out, you will be able to continue earning on the original policy value, not just the cash remaining in the policy.
As an example, if your cash value is $1,000,000 and you borrow $700,000 from your policy, you still earn 4% or more on the total $1,000,000 - not the $300,000 remaining. In circumstances, you technically could borrow money out and never pay it back if your policy APR earnings offsets the payments.
4th benefit
This money is almost entirely untouchable to others who with to sue, divorce, or tax you, etc as it lives under a “life insurance policy”, not a standard liquid bank.
Hope this helps you on your journey
Now this certainly seems like a benefit. I’ve read many pros and cons so far and what I’m realizing is this decision isn’t as cut and dry as I originally thought. I’ll have to double check the APR.
You mentioned a 5% rate to borrow off of the cash value. I’m assuming this rate varies as well. I’ve read where rates can be higher and that some entities won’t even issue a loan against a WLP. Any truth to that? I like the idea of earning interest even if money is pulled out.
Thanks for the feedback.
The way I look at it is if I die early it worked. If we raise fuck up kids who need money I can borrow against this policy to give them some. If none of that happens I can pull the cash and live it up for a few years in retirement with my wife on top of our other retirement money.
With that said my policy is only 250k and I pay like 130/month my cash value is way more than I put into it. I think during covid it was pumping like 12% earnings.
Your wife's policy is scammy as fuck.
The previous comment is spot on. I can tell you I have 3 between my wife and I. 2 are right side and the 3rd will fully mature in 3 years. I have access to a total of $4m in the 2 that are right side up and my fully matured and funded one will be another $3m. Talk about a great “oh shit” button. I’ve borrowed $600k from one as a down payment on a home. Love borrowing my own money while still making return on the full amount, while paying myself back.
It is a benefit. In fact, a life insurance policy is the ONLY investment that can be 100% guaranteed. Ask any financial advisor for a guaranteed return. If they say anything other than a life policy, they’re lying
I was about to say this. You explained it extremely well. Problem is the person who sold this policy probability did not set up the policy this way, did not explain the benefits AND the person who bought the policy did not want to use the policy this way.
If you do it right these policy’s can replace your every day banks. If you don’t do it right it becomes a cash drain for nothing.
This deserves to be way further up on the thread. It is an investment tool that has a ramp up period but guarantees a certain return NOT tied to the market. Great diversification, great for collateral later in life, very tax friendly. Just like anything else, if you can’t afford it, don’t buy it! I’m not a seller, promoter, whatever. I’m a CPA who earns a decent wage.
Exactly.
I've MEC'd my policy through the rough years (beginning) and now every year it is funded, the Cash and Death values go up far more than the contribution.
Obviously it isn't the primary asset for retirement, its a portion of the portfolio to have tax advantage leverage. There is always a return and the risk is extremely low if you go with a good provider
How old is your wife? That’s a really pricey plan…
Source: Me a 15yr insurance agent.
In our sales practice we’re taught to never sell to a 1-legged appointment. Meaning only consulting with 1 party without the other spouse as a decision maker. It’s under-handed
How did you only catch this now in February? This should’ve been cancelled within the free-look period.
My only advise would be to call the insurance company to cancel, don’t call the agent.
43. I blame myself, he reached out in the fall out of the blue with some zoom meetings. After the first one, I stopped attending as I assumed he was going to eventually try to sell us something. No one reaches out randomly to offer financial advice. However I never thought he would go to the extent he did.
He’s the husband of her good friend from residency and I also considered him a friend so I trusted him not to take her for a ride. Also my wife wanted to hear what he had to say because she would Ike to start cutting back on shifts.
She mentioned he set her up with life insurance and I didn’t think too much of it. In my mind I figured life insurance wasn’t that expensive and if he gets a small commission from it so be it, he’s our friend. Also we were expecting a baby in December so a lot was on our plate at the time.
Little did I know, in addition to the term policy he also set her up a whole life policy. I’m just happy this didn’t go on for years before I looked into it.
Regarding your one legged appointment, I believe that’s a good practice. Apparently he didn’t give a shit. My wife trusted him so she just did what he said and I paved the way for it as I was not present.
I’ve read where the agent gets 12 months worth of the premium as a commission. Are you familiar with if they get that up front or is it monthly? I would love to fuck him over if he received the commission upfront and used the money only to have to forfeit a portion of it later.
Thank you for the input.
I’m in my 20s, I had a friend from high school, who I haven’t talked to in years reach out to me. He had told me his new job was a financial advisor and it would mean a lot if I at least meet with him to get his number of clients up.
Turned out to be meeting with his “mentor” and the friend sitting there “training”. After a couple sentences I knew what was happening and immediately told them I was in no way interested in any type of life insurance. Sat there for an hour while he tried to convince me it was a no brainer and I was a bad husband/father for potentially dying and not leaving them with this plan.
The line that really got me that he kept repeating was that he wasn’t trying to sell this to me to make money and that he only makes about $30 a month off it, which wouldn’t be enough to buy presents for his kids. He was trying to sell it to me because he wanted to help me out.
Friend from high school has reached out a few times since asking me to meet again and refer him to others. Needless to say I have not responded lol. I don’t understand how being in that line of work isn’t soul crushing
>I’ve read where the agent gets 12 months worth of the premium as a commission. Are you familiar with if they get that up front or is it monthly? I would love to fuck him over if he received the commission upfront and used the money only to have to forfeit a portion of it later.
It doesn't really matter. Just cancel it on whatever terms you can cancel it as soon as possible either way. Then go after the guy's reputation and social standing for pulling this shit.
A basic term life policy is plenty.
Wait wait wait - he set her up with TWO policies!? I’m no insurance expert, but I wouldn’t be surprised that in the terrible event of an untimely death that the company wouldn’t pay out both death benefits or at least fight tooth and nail to void one of them. I’ve never heard of two policies being sold/provided by the same company one term and one life. That seems like complete highway robbery and just a scam, scum tactic if I’ve ever heard of one. Wow, What a “friend”. Incredible.
The White Coat Investor has written extensively about whole life insurance policies. Sadly, doctors are frequently targeted and sold this type of financial product.
Here are a couple articles that can teach you more about these products:
- https://www.whitecoatinvestor.com/what-you-need-to-know-about-whole-life-insurance/
- https://www.whitecoatinvestor.com/debunking-the-myths-of-whole-life-insurance/
The way my financial advisor described how whole life insurance is supposed to be used: it's a tax minimization retirement product more than anything. If you're not at least maxing out your 401k, IRA, and HSA contributions first, you shouldn't even be considering whole life insurance at all. Or really it's a Roth for those who make too much to qualify for a Roth who want to pull money out well before retirement age.
The whole point of is it the ability to borrow (tax free and practically interest free) against the cash aspect, grow the cash aspect tax free, or transfer wealth to beneficiaries tax free. Since there's no limit on how much coverage you can buy, it lets you invest significantly more tax free than the $50kish of 401k+IRA. So if you're not someone trying to save/invest significantly more than $50k a year, it's also probably not a good product for you.
3%-ish growth over 50 years might not sound like a very good investment, but there's certainly a market that values being able to convert an investment into cash at any time without paying 15% cap gains or 40%+ income tax. A market of very rich people, so if that doesn't describe you, it's not a product for you.
I actually did a comparison on myself for a term + S&P versus WL + S&P, and the WL + S&P combo had much lower variance of final outcomes (i.e., both assumed the same monthly contribution). The expected return of the higher S&P weighting exceeded the WL option, but the volatility was significantly more, thus the sharpe ratio for the WL option was higher than for term + S&P.
Lesson is just that the "right" financial product depends on a lot of factors including risk tolerance.
The idea is it can be flexible: 3% fixed income during recessions, pull it out as a loan at near 0% APR and reinvest during high economic growth periods or like now where there's higher interest elsewhere. Only drawback is having enough money in there so the life insurance premium is insignificant as a % cost.
Not all investments can be used to secure a loan. You can't loan against an IRA, there's a lot of restrictions for 401k, and HELOCs tend to have market interest rates. Those are the sources of money whole life is competing against. It's tax free compared to an early withdrawal of a retirement account.
Have an acquaintance that just started and he said something like 50-60% iirc. But he's fucking awful at understanding finances so I'm not sure if that's straight percentage of the premium or what.
Commission is based on target premium. They get paid around 50-60% of target, target premium is based on the Death Benefit not the monthly premium the person is paying
I’m an insurance broker and I’m all about the products and teaching but seeing post like this is why I hate agents who get in this industry for the advance side. I wish everyone the best and every major company has a rating and offers education right from the horses mouth and policy reviews for FREE!!! The sooner you cancel the more of a charge back the agent will have to pay back!!!
I had a friend who was a financial guy who sold these types of policies. He was the one who originally talked me into it. When I cancelled I basically implied it was an unethical business and it basically killed our friendship. About a year later Canada imposed new regulations that made agents like him have to disclose more information about those policies. And of course he stopped selling them due to having to make those disclosures, which ultimately proved my point about him and his ethics.
If structured properly, they can work very well for certain individuals. But having a cash value of $340 on $5240 paid is definitely not structured properly unfortunately.
I’ve only ever see these make sense for the people above the estate limit and these policies are used to pay out the tax on the estate tax free. For middle class Americans I’m not sure how these make much sense besides very specific cases…
There should be a 10-day window period/grace period (at least there is in Canada) where you can cancel and get all your money back. If you're stuck with it LMK and I can give you a couple of ideas on how to get the most out of it. While most people shouldn't own one because it's a tool for High net worth individuals, there are methods you could use.
Me and my wife have whole life policies. Our "financial advisor" at the time talked us into it. We've had them for about 10 years now. Would we be better off canceling them at this point or has the financial damage been done and we should let them continue?
I would look at the cash value and the surrender charges. I just cancelled one after 11 years. It initially was a 750,000 policy and I was paying 500 a month. I later dropped the payments to around 200 a month and lowered the death benefit to 240,000. I then was able to stop making payments because I funded it well early. I finally cancelled it after 11 years. I put in 30,200 and the cash value was 34,500. After surrender charges I walked away with 30,400, so I made 200 bucks that will be taxed after 11 years. Luckily I did not lose any money, but would have been better off invested elsewhere. I totally got scammed.
Thanks for sharing this story. Not everyone is willing to admit they made a mistake for an extended period of time, and it helps a lot of other people when someone does come out and say it.
And good for you just straight recognizing that your money was invested poorly. Again, many people wouldn't bother to second guess any decisions they've made in life, and even better, would more likely double down in defense of the smartness and correctness of all their choices thus far.
Now, being real, 11 years is kinda long haha, what took so long?
Well I stopped paying into it around year 6 or 7, so I just left it alone. I saw the surrender charges and learned they didn’t expire until year 20. The cost of insurance was about 250, which was coming out of the cash value, a year and the surrender charge was going down around 500 a year. I finally did the math and realized I could make up the 250 a year by investing it elsewhere.
Same with me. I took an $8k loss when I ditched mine at year 7. But I immediately felt better not having that shitty product or salesperson in my life and just regrouped and moved forward with better investments.
Plug the cash flows into excel.
Simple enough to literally put every payment (negative) and the expected pay out (positive, and you can use life expectancy tables), in one column and the same payments and cash value less penalties into another. A third column can be current payments-less-term-life-payments invest in the market at 5-7% per annum.
Then slap IRR function in an empty top row and maybe NPV next to it and see how far apart they are.
If you want to get more accurate, use months or figure the rate of return on the average balance of the payments over the year plus the previous balance.
Some you pay for 10 years, premiums stop and you own it forever and the cash value keeps increasing, some for 20 years. Not sure which you got. Having it for so long the cash value has to be way more than what you’ve paid so far. Check on surrender charges and take out the cash value and let it die if you don’t want it anymore.
I got suckered into one of these years ago. Paid into it for 7 years and realized the cash value was still way less than I put in. I tried to cancel and I had to run the gauntlet of everyone telling me not to. Eventually I got rid of it and didn’t look back. In almost all scenarios these things are bad deals for people.
So I worked as a Financial Advisor for years and moved on to pricing / trading life insurance polices in the secondary and tertiary markets for a hedge fund (Life Settlement Markets). All I gotta say is you have OPTIONS!
Basically whole or permanent life insurance is primarily used as a tax loophole for the wealthy. If you have a lot of money and can easily afford the premiums, it’s a great way to build up cash value over time (tax free since it’s an insurance policy) and give it to your kids, without an inheritance tax.
BUT if you’re a “normal” person and think it’s waaaay to expensive, there’s multiple ways to get out of it:
1. You can easily stop paying the premiums, but that lets the insurance company win and is what they’re bargaining for - they can add fees and take all of your cash value.
2. If you’d had the policy for a very long time and have a lot of cash value, look into the Life Settlement Market - they basically buy your policy, give you cash and take over paying the premiums for the policy to eventually pay out to them.
3. If you just got this policy, realized you’re not going to be building any cash value for the next 10/15 years (due to step up charges) and think it’s too expensive - look into the contract documents. Usually there’s clause baked into the contract that allows you to exit the policy in the 1st or up to the 5th year.
Disclaimer: I’m no longer a Financial Advisor so this is not financial advice.
(I couldn’t stand seeing people being taken advantage of. I still passed and have the following licenses (they just expired over time) General Lines Agent, Series 63, SIE, Series 6, Series 7, Life/ Health, AD&D)
So if you need someone to help take a look, I got you fam. No money, no nothing, just want to help someone get out of this policy.
Hopefully this helps!
We had a friend of a friend try this on my wife a while back. He said he was a financial advisor, but only told us to max our 401k matching before trying to sell us insurance. That was a no from us. A few years later he was selling flooring.
It was just two days ago some co-workers husband tried selling me life insurance. I have zero interests in these crappy sales pitches.
Fortunately, I have a pre-existing condition (cancer) and it basically shut him down instantly. Felt like my illness finally came in handy lol
That’s ridiculous. I work in the finance department for a life insurance company. The friend did it solely for the commission, not for her best interests. I could find a $300,000 for less than $125.
That’s not a friend. That policy sucks ass. Also, there’s almost no reason to ever use a life insurance policy as an investment vehicle. You can get much better returns investing it yourself. The dividends that are generated on the cash value can be kinda shitty depending on the policy. There are very few scenarios where I would suggest using a policy as a way to invest.
Can’t compare term to whole life, and can’t compare insurance policies to an index like the sp500. They’re way too different in terms of what they’re used for.
In a whole life you are buying security plus cash value. It’s not for everyone, and only used to serve a specific purpose/situation, or for estate planning.
Cash value won’t grow the first few years, but then you get to a point where it’s more than what you put in and you can surrender the policy and take the cash value.
You can always cancel it anytime, but doing it now you will lose the premium you paid.
Gains are tax free in a whole life insurance, so is the death benefit.
Check if you can switch to a variable life insurance policy which is a policy where the cash value is invested in an index tracking the sp500.
The reputable companies that have been there for more than 120 years or so are massmuatual, northwestern mutual and New York life.
To add counterpoint, I have whole life. I researched it extensively. I have also seen the benefits in my older clients, though it’s not as lucrative as it used to be because of the low rate environment. I am an attorney/CPA but not a financial advisor.
You can effectively annuitize it later in life - extract money monthly or yearly and still get the death benefit net of what you took out.
I have a financial adviser, and she ran the numbers - I was 44, so about your wife’s age. Considering the death benefit, which you must do because death is certain, it beats stock market return because the payout is income tax free. However, you have to plan to keep it until death - not cash it out for the cash value, though you can annuitize it. You can also “turn it off” at some point. Just stop paying premiums, keep the death benefit and let it grow.
As a bonus it’s completely protected from creditors, even the cash value, no limit in NC.
It should not be a big chunk of your portfolio though. My husband and I each had 200k whole and 2MM term. We bumped it up by 250K each last year. The cash outlay for us is like 2-3% of our net income.
Thank you for lending your first hand experience. Do you mind telling me how much your premiums for the total 500k are?
Edit: I see you said 2-3% of your net. I’m assuming that’s the price you’re paying. I’ll do the math with our net and see what I come up with.
Man insurance is so scammy. how long has she been paying into it? I dont know if thats a thing in the use but usually here there is a cooling off period to cancel without penality (10 days).
I used to work as an insurance agent for Aflac umm unless your wife has a diagnosis for a terminal disease and is like really super old their is no way it’s reasonable to charge that much, that sounds like insurance fraud, place a complaint to the insurance commissioner of your state and make sure you have all your documents in order.
True financial advice would be keep the term policy and invest additional money into traditional Ira and Roth IRA if income isn’t too high (back door Roth is an option)
Once you get around 50-60s start shopping for a Long Term Care policy. They currently run about $300 per month but can save lots of money down the line in life.
Looks like a life insurance bubble coming soon. I had church friends come by my house and try to sell me whole life insurance with cash value tied to the SP500 variation. I told them I already have life insurance, and they still came to give me a presentation. I told them I do much better trading on my own. This couple were basically farmers before and now selling life insurance.
My best advice is to take your questions to a fiduciary financial advisor who is not receiving commission. It will cost you, but you will get an intelligent analysis of your financial situation, including this whole life product.
Another benefit, WA state has a new "Long Term Cares" act, basically a new tax, which will then provide some limited govt assistance if you need long term care in the future. Having a whole life policy which has a rider (clause) which allows use of the whole life policy for long term care will allow you to opt out of the tax. My whole life policy premium is cheaper than the tax would be at my income level so I actually save money by having a whole life policy. I overfund the policy and it will pay for itself, while I continue to avoid a new tax, and have a few benefits later in life on withdrawals and generational funds to kids. Overall it's working for me.
You can do a lot more with whole life than term insurance policies. The simple matter is term insurance bets on winning the payout if you die inside the term limits and your best "return" is the first day.
Whole life, you pay into the principle then can take loans out against it just like the big boys do (banks, investment firms, hedge funds, governments...) and have other people pay your loan that makes the policy grow (which the big boys do as well). Also, when you are paid up, it can pay you dividends that beat the market in down and up trends because they are not dependent on market fluctuations. Anybody who thinks whole life is a scam is in the dark. **"Become your own banker"**
Probably 50-60% of the first annual premium is paid to the sales rep. There's going to be very little cash value in the policy in the early years, especially if you intend on surrendering it. I come across these things all the time, and for people who make good money or have a lot of money there could be worse things to allocate to. If held for 20+ years it becomes a really good bond alternative. The problem is that people who sell them compare them to stock market investments and they'll just never stack up to that. It's an apples/oranges comparison anyway. If it's a good insurance carrier with a stable and strong dividend history, then after time you will see junk bond type yields with the safety of A rated paper. Just keep it at this point, after 20 years you'll look back and think eh, wasn't so bad. As long as you manage the expectation that this isn't the SP500.
This. It’s for millionaires.
I should max my 401k, IRÁ, and stash an HSA… those are the tools for me, if I have extra I should play the stock market/rentals/other passive income. Whole life insurance is low on the list, but it’s on the list.
Had a "friend" sell me on one. It seemed weird starting out, the numbers just didn't make sense to me but my "friend" swore he was my financial planner and was really doing me a solid. 6 months later I finally figured it out and canceled the policy. The "friend" even tried to talk me to keeping it for the rest of the year, offered to pay the premiums himself which told me exactly everything I needed to know.
I don't have that "friend" anymore. Fucking scummy sales people preying on friends and family for a buck. It's sick.
There is a lot of hate here for whole life policies. I bought both my sons whole life insurance. Doing so before each turned 1 year of age put them in the top health bracket which they will retain for the life of the policy. By the age of twelve the dividends from the policy will cover the monthly premiums. As they age they are able to increase the coverage amount up to 8 times in their lifetime without any medical exams or any risk to changing the health bracket they reside in. They will always have the dividends to help cover the increase in premiums. Whole life has some advantages for adults as well but most of us are so far in debt that the only thing we can afford that will support our families in the event of our passing is a term policy. In situations like 2022 when the stock market performed poorly retirees with whole life policies could have taken tax free withdraws from their policies to retain the principle of their brokerage accounts while their account wasn’t able to spit out the 4% yearly withdraw that most experts agree is standard. Whole life insurance does have its place. I’m not a fan of calling it a scam as most are. I think it needs to be evaluated for your particular situation.
Many errors here. I assume you are in the business. Kids health ratings are not the “top health bracket.” If healthy when an adult it makes sense for them to get a medical done to reevaluate, if not they keep an average rating into adulthood. Dividends are not guaranteed so no they will not “always” have them to offset costs. Also, you start talking about kids policies then switch to retirees using cash value in retirement. Very different types of policies and structure.
Cancel it. Google “whole life insurance scam Reddit” and scroll through a few hundred pages.
That’s literally what I did and what lead me to post. Hoping I could find some redeemable quality in it. No dice. Cancelled policy and sadly cancelled friendship.
OP, it is possible the friend really thought this would be mutually beneficial. Some people get brainwashed by this stuff and it’s possible your friend doesn’t realize what a bad investment this is for your wife. I’m a physician myself and I’m often the target of whole life insurance pitches. Just out of med school I got fooled once - never again. It was Northwestern Mutual. If the friend did know, then yeah, I’d cancel that friendship. Edit: after reading som first hand accounts of former insurance salesmen, it seems they absolutely know what they’re doing and are up against quotas to get things song and often extort their friends and family for this. Yes. Fuck this person. Friendship over in my opinion.
Thank you. I believe it was northwestern mutual. I hate how she has been preyed on because folks automatically assume physician equals rich. Happens when we bought cars, got house work, etc. Looks like it works for some, but it’s very few and far between.
Northwestern Mutual is an absolute joke of a company. They’re the Plexus/multi-level marketing company of insurance products. They hire young salesmen to go dupe their young friends into getting garbage insurance products, and while they’re at the meeting, they get that friend to give them 5 names of people to go exploit. Terrible business model.
Any company that advocates for or encourages employees to sell to friends and family is a fucking scam. It’s an obvious conflict of interest that can only benefit the company and hurt the people involved.
I lost a friend from college because I wouldn't sign up for his northwestern mutual BS. Sat through his entire pitch and I was like "dude I got 80k worth of college debt and no family, why the fuck do I care what happens when I die?"
Lol
I think they have WTF policies for your situation.
Had a friend from HS reach out and tell me he was "starting his own business" as a financial advisor. I thought "cool, I've been needing some financial advice." We jumped on a call with his handler and within 5 minutes were arguing about fiduciary responsibility and bias and how that all relates to NWM, and I couldn't continue any further in the conversation. Sad really. If this HS friend had really been doing his own thing, I would have been happy to support him.
Yeah, as soon as you ask these clowns, “are you a fiduciary?” they just start squirming.
Many large financial advisor companies do this. NWM one ups it by hiring interns, paying them a shit stipend, and having them cold call people for days on end.
Fresh college grads are hired and task number one is to fill out a form with 100 personal connections and their phone number for you (or the company) to use as leads
I interviewed with NWM right before graduation. They straight out asked me if I had 100 names in the interview.
Interviewed with NYL same song and dance. Showed up to their Dallas office in my suit and tie for a regional manager interview. I get called into the office and there are 6 of us in there for a presentation and group “interview”. I raised my hand…I’m here for the regional manager position? The presenter answered we post it that way to get more candidates. I just got up and left and asked them not to call me. They called me for months.
Exact same thing happened to me, said”see ya!”
I bartended at a country club in college and I was wondering why the NWM guy was basically salivating as he looked at my resume. Went to one orientation and noped out when I realized what I was getting into.
“Noped out”; cool phrase, will borrow
That is disgusting
Yup. They got me. I ended up surrendering an insane policy I was in. But you gotta F that sunk cost fallacy. Probably already made it back in diverting premiums to VT
Some guy from Northwestern reached out to me, claiming he was friends with my friend and they suggested me for "financial advice" First thing I did was call my friend and ask what the fuck he's giving out my phone number for. But he had good intentions and thought his buddy might have some good financial advice. So fine, as a courtesy to my friend I decided to hear the guy out from Northwestern Mutual. He went into a whole long financial picture speech and after politely discussing a number of things things he mentioned "whole life insurance" and told me a few reasons he thought it was better for me. I knew what Reddit had to say on it so I politely just said the numbers don't add up for me versus term insurance and he started insisting I give him exact figures so he can show me the numbers will work out in my favor. It was at this point that it became very clear that I was right from the beginning, my friend had been conned into a scam. But the thing is, just like an MLM, the guy from NWM believed (or really wanted to believe) what he was saying, he thought it was beneficial. I politely said I don't think we are a good fit and left it at that.
If you look at the number of hours most physicians have to work versus their pay, I made a lot more as an engineer; one never hears a mother telling her daughter “marry an engineer”…
My aunt married a pharmaceutical engineer (bio-chemical?) Who worked for J&J for 30 years and they are retired just fine. He's a nice guy but super nerd, like makes Big Bang Theory nerds look cool. At least his coke bottle glasses came back in style.
I worked with a women whose husband was a doctor. It got to the point that they had to hide that fact when getting bids on yard work, house cleaning, etc. She always was facing the plus 15% because you are a Dr.
It's not just your wife. The friend is really gullible and believes what they've been sold. I have a long time friend who tried to sell me on the same thing. She truly believed in it being a good investment. Shows how little some people know about investing
Going to put it here again Incase my comment gets buried: Whitecoatinvestor.com. Doctor who has had to deal with all the predatory financial advice he's been given over the years.
Yeah I also work in a hosptial and won’t lie, there is a nurse or two who got into the life insurance thing and didn’t realize it was was a scam. Like she legit thought she was vibging and doing good by getting people plans.
For anyone curious, that amount of money per month, depending on age and health, would buy probably around $6million + in term life insurance.
Why not invest her money in VOO/ SPY? That way she doesn’t have to die to touch her money. Plus the interest gained will be greater
Hijacking comment to bring a perspective. I work within the personal finance industry with fiduciary licenses and clients whose finances I manage. I have no skin in this and I don’t know your situation. I will say that depending on the needs of your situation it may have been warranted, but again I don’t know. I work in wealth management and we have an portfolio of amount of high earners where permanent life policies are beneficial to their financial estate/situation/portfolio. **It is a specialized product/solution that should be looked over with your fiduciary advisor** (notice I did not say “a fiduciary” I said **your** fiduciary). I recommend getting with your advisor and looking over different options against the reason of why the policy was set up. The “why” is the most important piece. If there’s a mismatch in the why and what the policy seeks to solve, then yeah, that’s wrong. Should you have a policy? I have no idea. Likely based on assumed income levels, but I’m not sure let alone what kind. Example: I have a client who is a high earning surgeon and when planning out his finances based on his needs and wants we did get a few different policies and his premium is in the $3k range. We talked about the pros, the cons, and he’s happy with it. Disclaimer: I do not write life/health/disability policies; I only advise clients about them. If mods need proof, I can provide. This means do not get paid on policies written nor do I take referral fees. If anything, I lose out when a client signs up for a policy since that’s less money that I potentially can manage. But that’s what a fiduciary is for: thinking of client needs ahead of my own.
I completely agree with you. Physician also and for years it was not worth it and my advisor did mention it and explained that I had better options. Eventually debts somewhat reduced and other tax advantaged accounts maximized. It became a good plan per him. Amd he did have 5 years of trust built up.
I can give you redeeming qualities if you think the friend may have done it honestly. There are specific products called "Final Expense" and they are designed to ensure that there's some amount of money for families to handle funeral expenses no matter what. They're whole life so that they will absolutely pay out. A lot of people think term is a scam because the vast majority of term policies never pay out. So some people don't care that it's more expensive they want to makes sure someone somewhere is getting the money they paid their money. I do have to say that seems to be geared towards people who are unlikely to have enough money laying around to pay for their funeral and burial, so it still probably wasn't a good idea for your wife, but people like them because they HATE the stock market and can not stand the idea aof losing any of their hard earned money. Also one of the richest guys I knew, (retired well before fifty, owned a multimillion dollar home, kids all went to private school) said he had a lot of luck with life insurance. He claimed to have taken out a bunch of different policies and then .... I have no clue. Hebworked some weird magic and he could do whatever he wanted most days of the week. I never got the details of how he did it, but I don't think any of it was term because, he'd say stuff to his kids like "if I'm ever vegetable, do whatever it takes to keep my heart pumping for as long as they possibly can. That's the deal I signed. The money keeps coming as long as I'm alive" Sounds like he had some annuities but like I said I never got the system details. The point is the friend may not have understood . The friend should have asked about risk tolerances and goals for the money Etc. Because if someone is comfortable with the ups and downs of the market, then yeah, whole-life isn't a good fit. By the way, If you cancel it within 6 months or a year, depending on the company, the friend will likely also have to pay back their commission.
Those burial policies aren't usually for 350k, are they? I know folks of my grandparents age often had polices like that and the "insurance man" would come and get the payments. And maybe the person should have to pay back the commission. No sense in OP throwing good money after bad to pay an outrageous commission.
No, absolutely not. Those are usually a range from a couple thousand to like 30k. My point is that there are some valid uses of whole life. The main reasons that I think people get them is that they really hate the idea of paying for something they'll get literally nothing for, which is what happens most times with a term policy. It doesn't matter to them that a whole life has returns thst are lower than the stock market because they think the stock market is a rigged system that primarily benefits the ultra wealthy and is just some voodoo bullshit or worse "wolf of wall st" Bernie Madoff scam for upper middle class country club wannabes (a somewhat understandable position especially if you grew up poor). So they don't care about maximizing returns. They want to "establish an estate" to pass on to their family after their gone and they don't want to deal with the vicissitudes of the market. Also, I was not suggesting that op allow the person to keep their commission. I just saw some other people saying to do something extra about it, and my point was that cancel is punishment enough.
No. They pay out 1-2 years worth of premiums at the end.
>he'd say stuff to his kids like "if I'm ever vegetable, do whatever it takes to keep my heart pumping for as long as they possibly can. That's the deal I signed Dude sold credit default swaps on his own life.
>There are specific products called "Final Expense" and they are designed to ensure that there's some amount of money for families to handle funeral expenses no matter what. So even these are sort of dumb. 1. Buy term life insurance in an amount that will cover your funeral and other expenses. Term will always be cheaper then whole life by a lot 2. Invest some of the difference In the unfortunate event you die early well your term policy will pay out . In the event you die at an old age, well you just have saved for 20-30 years and invested the money and now you should have no problem covering final expenses
You think that it could get cancelled? I'd like to do that too.
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Your “Friend” made a big commission on that whole life insurance she sold your wife.
Majority of the first months premium goes to the agent's commission
I think it’s more like the majority of the first year. They make a ton in a whole life policy
Yes I stand corrected.
It’s up to 110% of the first years premiums.
I would get 70% first year premium. Plus an override/bonus of 150-170% of that depending on which company. So $1000 annual premium would pay me. $700 first year commission and $1190 override for a total of $1890.
Maybe not that big. I have a "friend" who is new in his company's game and they get a significant percentage of the gross for the first year, but the way you really build income over time is that you get a small and decreasing percentage of the premium every year for every policy you sold that stays active. Keep at it a very long time and those small slices from hundreds of clients add up. But it's a straight hustle at the beginning and I assume a lot of the newbies don't make it long because the income is so low unless you're a great salesman.
Sure did. Hoping he got the full 12 months upfront so when we cancel he gets fucked. Not optimistic though.
Its actually quite likely he got the full 12 months upfront and would have to pay back the commission if you returned the policy. Most companies have a “free look” period where you can return the policy and get all of your premium back.
I mean that in itself might be a flag but not the issue. If the friend actually sold a useful product that was good who cares if they got a big commission The problem is whole life insurance is a crap product except for some very narrow reasons and even then you have to be careful on what policy you choose as most are still crap products Its almost always better to just buy term life and invest the difference
I swear that industry just _ruins_ people. Out of work, really need the money and get what they think is a boring office job only to discover they're suddenly a salesman who has to scramble to make quotas. So they end up *using up* all their friends and acquaintances when their soul-crushing cold calls net them bupkis. A year or two later when all of those "leads" dry up, all they've got to show for it are the commissions they basically scammed from friends (and friends of friends), no job, and a lot fewer people who will return their calls. And of course the real scammers heading up the business consider that a success.
Can confirm did this. Almost sold my mom a whole life policy cuz my boss and team thought it was a good idea. No salary all commission. Got out of that job fast.
Gross. They were encouraging you to do this?
This is like the kids forced to sell magazines or other junk in grade school "fund raisers" who ended up only selling to parents. Scams top to bottom.
My school had us selling wrapping paper to family, of all things.
damn just unlocked an old memory. even as a kid i didn’t get this
Yes. They abuse the trust people have towards friends and family.
I've got a friend at NWM now. They almost always sign up for these policies themselves, and are sold a lot of BS about how these products genuinely help people plan for the future. Some of them do, but not the ones the company makes the most money on (and therefore pushes you to sell). My friend turned down a job I offered him in the industry he came from because he wants to be doing something that helps people.
Of course they did. It's literally the business model
That sounds like a vacuum cleaner sale scam. Get new “salesmen.” Tell them they have to do 5 “demos” for friends and family before they are “official.” After the demo the company asks to speak to the family member to “see how you did.” But it’s just a high pressure sales attempt with their loved one standing right there in the room. Such a scam.
Hey I went to one of those “interviews” too! It was just 20 people in a room being shown how rich they can get selling Kirby vacuums or whatever.
Northwestern Mutual has an office in my area and a few friends interned with them. The internship? Come up with a list of 100 contacts, provide this to your management team, get basic licenses, and sell contracts. So gross
Oh shit, I just commented about this on another comment in here. I interviewed with them right out of school, everything seemed great until the contact form haha.
> I swear that industry just ruins people. Out of work, really need the money and get what they think is a boring office job only to discover they're suddenly a salesman who has to scramble to make quotas. So they end up using up all their friends and acquaintances when their soul-crushing cold calls net them bupkis. I just went through *exactly* this. Like verbatim. Former coworker was laid off and panicking for a little while, then ended up selling life insurance. I have no idea how he plans on getting leads once he burns through his friends. It's like being a realtor I guess, but so much less useful. I could see how certain people who really know how to network could make good money hustling like that, but the vast majority have to be left with no income security and eventually burn out.
I unfortunately was in this postion. Graduated and got in at NWM and was excited to help people and teach financial tools. Went through "training" and was constantly asking management about securities licenses for stocks but they kept pushing back saying I had start with insurance first. After training they had me list out all my contacts and dial....They said shoot for 40 calls per day and set up some meetings with people I knew to go through a questionnaire and figure out what products would fit them. An experienced rep would go with you on the first 10 meetings to help answer any questions and you split the commission if anything sold was sold...Got out of there real quickly after hearing that. When the hiring and training method is take a handful of spaghetti and throw it and see what sticks it's no surprise that 90% of "advisors" don't succeed in the first 3 years.
Fun fact: "realtor" is a bullshit word made up by the NAR to legitimize their parasitic jobs. They are real estate brokers.
And then when they change careers another more experienced insurance sales guy buys their book of business at a discount. Rinse and repeat.
Agreed. Dude can get bent and I have half a mind to tell his wife what a grifter he is. She grew up privileged so I doubt she’s complicit in his malevolence. At least I hope she is, she’s an oncologist for gods sake. But if this whole thing torches her and my wife’s friendship as well, so be it.
If his wife is an oncologist I really don't see the point of him selling life insurance for income, unless he's just bored at home.
People always want more money.
And these jobs’ salaries scale up with income of your clients, so it’s no different for a rich person or a poor person. You or I might be able to get a few hundred bucks’ per commission out of the policies we sell to our poor friends. But if all your friends were doctors and other wealthy people, the commissions on their policies could be huge.
I interviewed for an internship at Northwestern Mutual in college once. They started asking me about my family and friends in the area and halfway through the interview I realized what the scheme was, to call them to sll them life insurance wtf man. Oh, and the pay was to be $100 a week plus commission, in NYC, so unless you're selling you're fucked.
I haven't heard bupkis in a while, I love it
This is actually really bad for the people. And a lot of people fall for it.
I interviewed at an investment company right out of school and it was like this. First couple interviews were great, and the final interview was just "Fill out this form with 200 of your contacts so that you can get started right away!"
Weird question, but bear with me... I live in the UK, and while there are scams (timeshares were a thing in the 90s, and MLMs exist), we don't seem to have much in the way of stuff like this. It seems to be a largely North American phenomenon. Stuff like whole-life insurance appears to be a legalised, regulated semi-scam, with some legitimate use cases but they're usually a vehicle to return ripoff comissions to the seller. And I can't figure out why we don't seem to have stuff like that here. The UK and the US are developed, regulated, capitalist countries. They're pretty similar in global terms. And the UK has fairly loose banking regulations. And hell, the US has a big culture of lawsuits, it's not as if running a scam there is risk-free. Any thoughts on why there's such a dearth of stuff like this outside N America (or conversely, why it's so common over there)?
We don't have it because there are better options. But we do have it, think of Avon for example.
I disagree. Avon is like a diet-MLM. It's high effort and low return. Whole-life insurance is much more lucrative than selling moisturiser, so from the point of view of the salesperson, insurance is a "better" option than Avon.
At least when you buy overpriced moisturizer, you end up with the moisturizer and not a monthly bill for 100s of dollars for years on end.
The US has Avon, and the UK has whole life insurance.
Which is the best example you can think of for the UK?
This kind of sounds like a part-time job I did in college selling Cutco knives for Vector Marketing. They want you to make a list of all friends, family, and acquaintances and try to sell them overpriced mid-grade knives. It was awful and I didn't have the stomach to exploit all my relationships like that. I quit after a couple weeks.
The attrition rate is about 90% after 3 years. I'm on year 17 and still kicking.
Friend made a cool $5k if not more on that sale.
Hope it was worth it
They don't usually get a lot of sales throughout a year I don't think.
Depends on the amount of friends they have.
Why wouldnt you and your wife consult each other on something like this?
My thoughts as well, but I would caution against blaming the victim (OP's wife) here. People can often be pressured or sweet talked by salesmen and saleswomen into bad financial decisions, and we don't know all the circumstances that affected OP's wife's decision.
Yeah, you know how it goes. They hype you up on what a great opportunity it is and they use interpersonal history & trust to pressure towards getting it done now. People without a decent financial education get caught up in the promise really easily. It’s unfortunate; they really should give people a much better foundation in school.
Agreed.
>eople can often be pressured or sweet talked by salesmen and saleswomen into bad financial decisions And you absolutely should be blamed for this. It's not being rude to the salesperson to "my spouse / SO and I discuss all significant, long-term expenses". Being a doormat isn't a good trait for yourself, but it's great for salespeople and others who take advantage of people. \[insert stereotype here about doctors and their money, though\]
It’s like any other bad decision made in coercive circumstances. You always have personal responsibility for your choices, but circumstances can make exercising the right choice very hard. Until you’ve been subjected to this kind of hard sell from someone really “good” at it, it’s hard to imagine just how close to a Jedi mind trick it can feel like. Professional scam sales people are *really* good at impairing the judgement of their audiences. It’s one reason it’s not a good idea to go to a time share pitch as “a joke” or “for the free stuff.” They know a lot of people are telling themselves they’re just going for the free stuff, and the process is designed to get you to do exactly what you walked in planning *not* to do.
I have been approached by North Western “friends” and they are as charming as they are relentless. Luckily they weren’t close friends so I was able to shake them without it being awkward socially.
I responded to that question lower down I think. Long story short, we trusted the guy and I was not present when she signed the dotted line. I do not blame my wife at all. She’s s a beautiful, genius, altruistic person that sometimes fails to see the world isn’t always sunshine and rainbows. That’s why I’m so fucking pissed this “friend” took at advantage of her.
I consider myself pretty financially savvy, and even I got talked into one of these shitty policies. My saving grace is I eventually was smart enough to take my loss and cancel it. But even that cancellation process had to go through their high pressure sales guys. So it was hard to get out of as well. So your wife shouldn’t worry, it unfortunately seems to mostly happen by people in our trust circles who try to take advantage of us.
My boss who’s a smart businessperson got duped years ago with those energy salesmen scams and still upset at himself even tho it wasn’t for that long.
This was exactly my first thought. How can you make such a large financial commitment without consulting your spouse?
My wife’s friend almost got her to sign a similar whole life insurance policy, and I came to the same conclusion that you did - buying a term policy and putting the rest into an S&P fund or similar is far better, and the money isn’t locked up for 20 years.
Well, this is worse, right? She's got term AND whole life.
You still need term because the payout on a whole life isn't enough. Whole life has a guaranteed payout so you àre essentially putting money in a bank account which they thrn give back to your estate when you die.
That doesn't make having both sound better to me.
I left a company recently and my sister in law mentioned that I should talk to her husband about moving the 401k into insurance vehicles. I made up some BS about it not being much and not worth moving to. I do software development for a living and specifically my last few years were all around insurance systems. A few times I saw the premiums these advisors get and it will blow your mind on how big of a scam the whole thing really is.
See if there's a return of premium rider. Probably not but it's worth asking. If you call NWM and argue that you didn't receive all the necessary disclosures and that "this product is not suitable for her" there's a really really good chance they'll refund you. If they balk, ask for the suitability form from the application (you should also have it in your policy delivery documents that the agent is required to have given you) and find any inaccuracies you can, then you have concrete ammo to argue that the suitability form isn't accurate and that the product isn't suitable. The insurance companies take suitability seriously since it can come back to bite them in the ass bad.
I think the only solution is to fake your wife's death
this is the way LOL
It depends on the type of whole life. Not a seller or promoter, but if you are seeking information, data can be helpful. Here are the traditional WLP benefits affluent families use: A person like this example will overfund a policy. After 4-5 years of overfunding the whole life policy, your cash value will be right side up. The benefit of these policies is to allow the user to earn tax free APR - in most cases, no lower than 4%. While 4% may sound low, taking home 4% in the real market likely meant you made 6-8% pre capital gains tax. 2nd benefit, You should be able to borrow / pull out your cash value at anytime for a net 1% borrowing rate: They charge you 5% APR, but you are earning 4% APR on the whole policy value, not what’s remaining after you borrow it. More below.. 3rd benefit, Even with all the money pulled out, you will be able to continue earning on the original policy value, not just the cash remaining in the policy. As an example, if your cash value is $1,000,000 and you borrow $700,000 from your policy, you still earn 4% or more on the total $1,000,000 - not the $300,000 remaining. In circumstances, you technically could borrow money out and never pay it back if your policy APR earnings offsets the payments. 4th benefit This money is almost entirely untouchable to others who with to sue, divorce, or tax you, etc as it lives under a “life insurance policy”, not a standard liquid bank. Hope this helps you on your journey
Now this certainly seems like a benefit. I’ve read many pros and cons so far and what I’m realizing is this decision isn’t as cut and dry as I originally thought. I’ll have to double check the APR. You mentioned a 5% rate to borrow off of the cash value. I’m assuming this rate varies as well. I’ve read where rates can be higher and that some entities won’t even issue a loan against a WLP. Any truth to that? I like the idea of earning interest even if money is pulled out. Thanks for the feedback.
The way I look at it is if I die early it worked. If we raise fuck up kids who need money I can borrow against this policy to give them some. If none of that happens I can pull the cash and live it up for a few years in retirement with my wife on top of our other retirement money. With that said my policy is only 250k and I pay like 130/month my cash value is way more than I put into it. I think during covid it was pumping like 12% earnings. Your wife's policy is scammy as fuck.
The previous comment is spot on. I can tell you I have 3 between my wife and I. 2 are right side and the 3rd will fully mature in 3 years. I have access to a total of $4m in the 2 that are right side up and my fully matured and funded one will be another $3m. Talk about a great “oh shit” button. I’ve borrowed $600k from one as a down payment on a home. Love borrowing my own money while still making return on the full amount, while paying myself back.
It is a benefit. In fact, a life insurance policy is the ONLY investment that can be 100% guaranteed. Ask any financial advisor for a guaranteed return. If they say anything other than a life policy, they’re lying
I was about to say this. You explained it extremely well. Problem is the person who sold this policy probability did not set up the policy this way, did not explain the benefits AND the person who bought the policy did not want to use the policy this way. If you do it right these policy’s can replace your every day banks. If you don’t do it right it becomes a cash drain for nothing.
This deserves to be way further up on the thread. It is an investment tool that has a ramp up period but guarantees a certain return NOT tied to the market. Great diversification, great for collateral later in life, very tax friendly. Just like anything else, if you can’t afford it, don’t buy it! I’m not a seller, promoter, whatever. I’m a CPA who earns a decent wage.
Exactly. I've MEC'd my policy through the rough years (beginning) and now every year it is funded, the Cash and Death values go up far more than the contribution. Obviously it isn't the primary asset for retirement, its a portion of the portfolio to have tax advantage leverage. There is always a return and the risk is extremely low if you go with a good provider
How old is your wife? That’s a really pricey plan… Source: Me a 15yr insurance agent. In our sales practice we’re taught to never sell to a 1-legged appointment. Meaning only consulting with 1 party without the other spouse as a decision maker. It’s under-handed How did you only catch this now in February? This should’ve been cancelled within the free-look period. My only advise would be to call the insurance company to cancel, don’t call the agent.
43. I blame myself, he reached out in the fall out of the blue with some zoom meetings. After the first one, I stopped attending as I assumed he was going to eventually try to sell us something. No one reaches out randomly to offer financial advice. However I never thought he would go to the extent he did. He’s the husband of her good friend from residency and I also considered him a friend so I trusted him not to take her for a ride. Also my wife wanted to hear what he had to say because she would Ike to start cutting back on shifts. She mentioned he set her up with life insurance and I didn’t think too much of it. In my mind I figured life insurance wasn’t that expensive and if he gets a small commission from it so be it, he’s our friend. Also we were expecting a baby in December so a lot was on our plate at the time. Little did I know, in addition to the term policy he also set her up a whole life policy. I’m just happy this didn’t go on for years before I looked into it. Regarding your one legged appointment, I believe that’s a good practice. Apparently he didn’t give a shit. My wife trusted him so she just did what he said and I paved the way for it as I was not present. I’ve read where the agent gets 12 months worth of the premium as a commission. Are you familiar with if they get that up front or is it monthly? I would love to fuck him over if he received the commission upfront and used the money only to have to forfeit a portion of it later. Thank you for the input.
I’m in my 20s, I had a friend from high school, who I haven’t talked to in years reach out to me. He had told me his new job was a financial advisor and it would mean a lot if I at least meet with him to get his number of clients up. Turned out to be meeting with his “mentor” and the friend sitting there “training”. After a couple sentences I knew what was happening and immediately told them I was in no way interested in any type of life insurance. Sat there for an hour while he tried to convince me it was a no brainer and I was a bad husband/father for potentially dying and not leaving them with this plan. The line that really got me that he kept repeating was that he wasn’t trying to sell this to me to make money and that he only makes about $30 a month off it, which wouldn’t be enough to buy presents for his kids. He was trying to sell it to me because he wanted to help me out. Friend from high school has reached out a few times since asking me to meet again and refer him to others. Needless to say I have not responded lol. I don’t understand how being in that line of work isn’t soul crushing
>I’ve read where the agent gets 12 months worth of the premium as a commission. Are you familiar with if they get that up front or is it monthly? I would love to fuck him over if he received the commission upfront and used the money only to have to forfeit a portion of it later. It doesn't really matter. Just cancel it on whatever terms you can cancel it as soon as possible either way. Then go after the guy's reputation and social standing for pulling this shit. A basic term life policy is plenty.
Wait wait wait - he set her up with TWO policies!? I’m no insurance expert, but I wouldn’t be surprised that in the terrible event of an untimely death that the company wouldn’t pay out both death benefits or at least fight tooth and nail to void one of them. I’ve never heard of two policies being sold/provided by the same company one term and one life. That seems like complete highway robbery and just a scam, scum tactic if I’ve ever heard of one. Wow, What a “friend”. Incredible.
The White Coat Investor has written extensively about whole life insurance policies. Sadly, doctors are frequently targeted and sold this type of financial product. Here are a couple articles that can teach you more about these products: - https://www.whitecoatinvestor.com/what-you-need-to-know-about-whole-life-insurance/ - https://www.whitecoatinvestor.com/debunking-the-myths-of-whole-life-insurance/
The way my financial advisor described how whole life insurance is supposed to be used: it's a tax minimization retirement product more than anything. If you're not at least maxing out your 401k, IRA, and HSA contributions first, you shouldn't even be considering whole life insurance at all. Or really it's a Roth for those who make too much to qualify for a Roth who want to pull money out well before retirement age. The whole point of is it the ability to borrow (tax free and practically interest free) against the cash aspect, grow the cash aspect tax free, or transfer wealth to beneficiaries tax free. Since there's no limit on how much coverage you can buy, it lets you invest significantly more tax free than the $50kish of 401k+IRA. So if you're not someone trying to save/invest significantly more than $50k a year, it's also probably not a good product for you. 3%-ish growth over 50 years might not sound like a very good investment, but there's certainly a market that values being able to convert an investment into cash at any time without paying 15% cap gains or 40%+ income tax. A market of very rich people, so if that doesn't describe you, it's not a product for you.
Returns are a lot better than 3% if you croak suddenly during year 5.
Not if you compare it against a term policy
I actually did a comparison on myself for a term + S&P versus WL + S&P, and the WL + S&P combo had much lower variance of final outcomes (i.e., both assumed the same monthly contribution). The expected return of the higher S&P weighting exceeded the WL option, but the volatility was significantly more, thus the sharpe ratio for the WL option was higher than for term + S&P. Lesson is just that the "right" financial product depends on a lot of factors including risk tolerance.
3% was pretty good to take a spot in your fixed income allocation up until recent fed interest hikes
The idea is it can be flexible: 3% fixed income during recessions, pull it out as a loan at near 0% APR and reinvest during high economic growth periods or like now where there's higher interest elsewhere. Only drawback is having enough money in there so the life insurance premium is insignificant as a % cost.
Thank you for this reasoned and thought-out response
We call it the rich man’s Roth. It’s great for folks who want to retire prior to 59.5 and and are high earners.
> the ability to borrow (tax free What does this mean? What other types of loans are taxable?
Not all investments can be used to secure a loan. You can't loan against an IRA, there's a lot of restrictions for 401k, and HELOCs tend to have market interest rates. Those are the sources of money whole life is competing against. It's tax free compared to an early withdrawal of a retirement account.
This is a great reference to send to others!
This site is great! Thanks for sharing!
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Have an acquaintance that just started and he said something like 50-60% iirc. But he's fucking awful at understanding finances so I'm not sure if that's straight percentage of the premium or what.
Commission is based on target premium. They get paid around 50-60% of target, target premium is based on the Death Benefit not the monthly premium the person is paying
I’m an insurance broker and I’m all about the products and teaching but seeing post like this is why I hate agents who get in this industry for the advance side. I wish everyone the best and every major company has a rating and offers education right from the horses mouth and policy reviews for FREE!!! The sooner you cancel the more of a charge back the agent will have to pay back!!!
I had a friend who was a financial guy who sold these types of policies. He was the one who originally talked me into it. When I cancelled I basically implied it was an unethical business and it basically killed our friendship. About a year later Canada imposed new regulations that made agents like him have to disclose more information about those policies. And of course he stopped selling them due to having to make those disclosures, which ultimately proved my point about him and his ethics.
If structured properly, they can work very well for certain individuals. But having a cash value of $340 on $5240 paid is definitely not structured properly unfortunately.
I’ve only ever see these make sense for the people above the estate limit and these policies are used to pay out the tax on the estate tax free. For middle class Americans I’m not sure how these make much sense besides very specific cases…
I'm in Canada and have one. Use it for more of a financing tool than anything.
There should be a 10-day window period/grace period (at least there is in Canada) where you can cancel and get all your money back. If you're stuck with it LMK and I can give you a couple of ideas on how to get the most out of it. While most people shouldn't own one because it's a tool for High net worth individuals, there are methods you could use.
In the US it's called "free look period".
There are usually hefty surrender fees for the first 7years. That’s why agents move whole life.
Me and my wife have whole life policies. Our "financial advisor" at the time talked us into it. We've had them for about 10 years now. Would we be better off canceling them at this point or has the financial damage been done and we should let them continue?
I would look at the cash value and the surrender charges. I just cancelled one after 11 years. It initially was a 750,000 policy and I was paying 500 a month. I later dropped the payments to around 200 a month and lowered the death benefit to 240,000. I then was able to stop making payments because I funded it well early. I finally cancelled it after 11 years. I put in 30,200 and the cash value was 34,500. After surrender charges I walked away with 30,400, so I made 200 bucks that will be taxed after 11 years. Luckily I did not lose any money, but would have been better off invested elsewhere. I totally got scammed.
Accounting wise, you made $200 but Finance wise, you lost...the whole time = money thing in finance...
11 years in SP500 2011-2022... Talk about the wrong years to miss.
Exactly. Live and learn, I guess.
Thanks for sharing this story. Not everyone is willing to admit they made a mistake for an extended period of time, and it helps a lot of other people when someone does come out and say it. And good for you just straight recognizing that your money was invested poorly. Again, many people wouldn't bother to second guess any decisions they've made in life, and even better, would more likely double down in defense of the smartness and correctness of all their choices thus far. Now, being real, 11 years is kinda long haha, what took so long?
Well I stopped paying into it around year 6 or 7, so I just left it alone. I saw the surrender charges and learned they didn’t expire until year 20. The cost of insurance was about 250, which was coming out of the cash value, a year and the surrender charge was going down around 500 a year. I finally did the math and realized I could make up the 250 a year by investing it elsewhere.
In real terms, it’s likely a loss.
Same with me. I took an $8k loss when I ditched mine at year 7. But I immediately felt better not having that shitty product or salesperson in my life and just regrouped and moved forward with better investments.
Plug the cash flows into excel. Simple enough to literally put every payment (negative) and the expected pay out (positive, and you can use life expectancy tables), in one column and the same payments and cash value less penalties into another. A third column can be current payments-less-term-life-payments invest in the market at 5-7% per annum. Then slap IRR function in an empty top row and maybe NPV next to it and see how far apart they are. If you want to get more accurate, use months or figure the rate of return on the average balance of the payments over the year plus the previous balance.
Some you pay for 10 years, premiums stop and you own it forever and the cash value keeps increasing, some for 20 years. Not sure which you got. Having it for so long the cash value has to be way more than what you’ve paid so far. Check on surrender charges and take out the cash value and let it die if you don’t want it anymore.
I got suckered into one of these years ago. Paid into it for 7 years and realized the cash value was still way less than I put in. I tried to cancel and I had to run the gauntlet of everyone telling me not to. Eventually I got rid of it and didn’t look back. In almost all scenarios these things are bad deals for people.
So what company does her friend work for? I am guessing either Northwestern Mutual or Primerica, with an outside chance of Edward Jones.
Definitely sounds like NWM to me. That business is allowed to exist by college admin that doesn’t have enough backbone to kick them off campus.
So I worked as a Financial Advisor for years and moved on to pricing / trading life insurance polices in the secondary and tertiary markets for a hedge fund (Life Settlement Markets). All I gotta say is you have OPTIONS! Basically whole or permanent life insurance is primarily used as a tax loophole for the wealthy. If you have a lot of money and can easily afford the premiums, it’s a great way to build up cash value over time (tax free since it’s an insurance policy) and give it to your kids, without an inheritance tax. BUT if you’re a “normal” person and think it’s waaaay to expensive, there’s multiple ways to get out of it: 1. You can easily stop paying the premiums, but that lets the insurance company win and is what they’re bargaining for - they can add fees and take all of your cash value. 2. If you’d had the policy for a very long time and have a lot of cash value, look into the Life Settlement Market - they basically buy your policy, give you cash and take over paying the premiums for the policy to eventually pay out to them. 3. If you just got this policy, realized you’re not going to be building any cash value for the next 10/15 years (due to step up charges) and think it’s too expensive - look into the contract documents. Usually there’s clause baked into the contract that allows you to exit the policy in the 1st or up to the 5th year. Disclaimer: I’m no longer a Financial Advisor so this is not financial advice. (I couldn’t stand seeing people being taken advantage of. I still passed and have the following licenses (they just expired over time) General Lines Agent, Series 63, SIE, Series 6, Series 7, Life/ Health, AD&D) So if you need someone to help take a look, I got you fam. No money, no nothing, just want to help someone get out of this policy. Hopefully this helps!
She got scammed
I don’t understand why a rich professional person would buy an insurance policy for only $350,000.
We had a friend of a friend try this on my wife a while back. He said he was a financial advisor, but only told us to max our 401k matching before trying to sell us insurance. That was a no from us. A few years later he was selling flooring.
It was just two days ago some co-workers husband tried selling me life insurance. I have zero interests in these crappy sales pitches. Fortunately, I have a pre-existing condition (cancer) and it basically shut him down instantly. Felt like my illness finally came in handy lol
That’s ridiculous. I work in the finance department for a life insurance company. The friend did it solely for the commission, not for her best interests. I could find a $300,000 for less than $125. That’s not a friend. That policy sucks ass. Also, there’s almost no reason to ever use a life insurance policy as an investment vehicle. You can get much better returns investing it yourself. The dividends that are generated on the cash value can be kinda shitty depending on the policy. There are very few scenarios where I would suggest using a policy as a way to invest.
Please kindly inform your wife that she is now a huge target for an army of scammers and that that person and anyone they know is not a friend
This is giving me Primerica vibes.
Get rid of the policy and the friend. Neither are worth it.
Can’t compare term to whole life, and can’t compare insurance policies to an index like the sp500. They’re way too different in terms of what they’re used for. In a whole life you are buying security plus cash value. It’s not for everyone, and only used to serve a specific purpose/situation, or for estate planning. Cash value won’t grow the first few years, but then you get to a point where it’s more than what you put in and you can surrender the policy and take the cash value. You can always cancel it anytime, but doing it now you will lose the premium you paid. Gains are tax free in a whole life insurance, so is the death benefit. Check if you can switch to a variable life insurance policy which is a policy where the cash value is invested in an index tracking the sp500. The reputable companies that have been there for more than 120 years or so are massmuatual, northwestern mutual and New York life.
To add counterpoint, I have whole life. I researched it extensively. I have also seen the benefits in my older clients, though it’s not as lucrative as it used to be because of the low rate environment. I am an attorney/CPA but not a financial advisor. You can effectively annuitize it later in life - extract money monthly or yearly and still get the death benefit net of what you took out. I have a financial adviser, and she ran the numbers - I was 44, so about your wife’s age. Considering the death benefit, which you must do because death is certain, it beats stock market return because the payout is income tax free. However, you have to plan to keep it until death - not cash it out for the cash value, though you can annuitize it. You can also “turn it off” at some point. Just stop paying premiums, keep the death benefit and let it grow. As a bonus it’s completely protected from creditors, even the cash value, no limit in NC. It should not be a big chunk of your portfolio though. My husband and I each had 200k whole and 2MM term. We bumped it up by 250K each last year. The cash outlay for us is like 2-3% of our net income.
Thank you for lending your first hand experience. Do you mind telling me how much your premiums for the total 500k are? Edit: I see you said 2-3% of your net. I’m assuming that’s the price you’re paying. I’ll do the math with our net and see what I come up with.
$655 / month for $350k coverage…WTF!? Even the term policy sounds high. I pay about $300 per year for $1M term purchased in my late 30s I think.
Man insurance is so scammy. how long has she been paying into it? I dont know if thats a thing in the use but usually here there is a cooling off period to cancel without penality (10 days).
She's been ripped off, "friend" is selling a legal scam.
I’d be fucking livid if my partner up and added a $655/mn payment to our debts without consulting me. (Obvs this works both ways)
The “friend” played your wife. Damn
Geeez, im paying 60 a month for 250k...
I used to work as an insurance agent for Aflac umm unless your wife has a diagnosis for a terminal disease and is like really super old their is no way it’s reasonable to charge that much, that sounds like insurance fraud, place a complaint to the insurance commissioner of your state and make sure you have all your documents in order.
True financial advice would be keep the term policy and invest additional money into traditional Ira and Roth IRA if income isn’t too high (back door Roth is an option) Once you get around 50-60s start shopping for a Long Term Care policy. They currently run about $300 per month but can save lots of money down the line in life.
While life is AWFUL. Cancel it yesterday and cut ties with the salesperson “friend”.
Looks like a life insurance bubble coming soon. I had church friends come by my house and try to sell me whole life insurance with cash value tied to the SP500 variation. I told them I already have life insurance, and they still came to give me a presentation. I told them I do much better trading on my own. This couple were basically farmers before and now selling life insurance.
That reminds me of a line from the John Prine song “Illegal Smile.” “And all my friends turned out to be insurance salesmen.”
Cancel it, 655 a month for 350,000 coverage is an scam by itself
Whole life sucks ass.
My best advice is to take your questions to a fiduciary financial advisor who is not receiving commission. It will cost you, but you will get an intelligent analysis of your financial situation, including this whole life product.
NW mutual I bet
Another benefit, WA state has a new "Long Term Cares" act, basically a new tax, which will then provide some limited govt assistance if you need long term care in the future. Having a whole life policy which has a rider (clause) which allows use of the whole life policy for long term care will allow you to opt out of the tax. My whole life policy premium is cheaper than the tax would be at my income level so I actually save money by having a whole life policy. I overfund the policy and it will pay for itself, while I continue to avoid a new tax, and have a few benefits later in life on withdrawals and generational funds to kids. Overall it's working for me.
You can do a lot more with whole life than term insurance policies. The simple matter is term insurance bets on winning the payout if you die inside the term limits and your best "return" is the first day. Whole life, you pay into the principle then can take loans out against it just like the big boys do (banks, investment firms, hedge funds, governments...) and have other people pay your loan that makes the policy grow (which the big boys do as well). Also, when you are paid up, it can pay you dividends that beat the market in down and up trends because they are not dependent on market fluctuations. Anybody who thinks whole life is a scam is in the dark. **"Become your own banker"**
Probably 50-60% of the first annual premium is paid to the sales rep. There's going to be very little cash value in the policy in the early years, especially if you intend on surrendering it. I come across these things all the time, and for people who make good money or have a lot of money there could be worse things to allocate to. If held for 20+ years it becomes a really good bond alternative. The problem is that people who sell them compare them to stock market investments and they'll just never stack up to that. It's an apples/oranges comparison anyway. If it's a good insurance carrier with a stable and strong dividend history, then after time you will see junk bond type yields with the safety of A rated paper. Just keep it at this point, after 20 years you'll look back and think eh, wasn't so bad. As long as you manage the expectation that this isn't the SP500.
This. It’s for millionaires. I should max my 401k, IRÁ, and stash an HSA… those are the tools for me, if I have extra I should play the stock market/rentals/other passive income. Whole life insurance is low on the list, but it’s on the list.
He isn’t your friend and you should cancel immediately. No exceptions.
Had a "friend" sell me on one. It seemed weird starting out, the numbers just didn't make sense to me but my "friend" swore he was my financial planner and was really doing me a solid. 6 months later I finally figured it out and canceled the policy. The "friend" even tried to talk me to keeping it for the rest of the year, offered to pay the premiums himself which told me exactly everything I needed to know. I don't have that "friend" anymore. Fucking scummy sales people preying on friends and family for a buck. It's sick.
There is a lot of hate here for whole life policies. I bought both my sons whole life insurance. Doing so before each turned 1 year of age put them in the top health bracket which they will retain for the life of the policy. By the age of twelve the dividends from the policy will cover the monthly premiums. As they age they are able to increase the coverage amount up to 8 times in their lifetime without any medical exams or any risk to changing the health bracket they reside in. They will always have the dividends to help cover the increase in premiums. Whole life has some advantages for adults as well but most of us are so far in debt that the only thing we can afford that will support our families in the event of our passing is a term policy. In situations like 2022 when the stock market performed poorly retirees with whole life policies could have taken tax free withdraws from their policies to retain the principle of their brokerage accounts while their account wasn’t able to spit out the 4% yearly withdraw that most experts agree is standard. Whole life insurance does have its place. I’m not a fan of calling it a scam as most are. I think it needs to be evaluated for your particular situation.
Many errors here. I assume you are in the business. Kids health ratings are not the “top health bracket.” If healthy when an adult it makes sense for them to get a medical done to reevaluate, if not they keep an average rating into adulthood. Dividends are not guaranteed so no they will not “always” have them to offset costs. Also, you start talking about kids policies then switch to retirees using cash value in retirement. Very different types of policies and structure.