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You guessed it. I got another trade magazine with an article suggesting that whole life is the only type of life insurance a person should buy. If you don’t buy whole life as the article suggests, you just don’t get it.

I have access to whatever life insurance products are available each time I counsel a client on how to protect their family, their assets and ultimately their estate. If, after reviewing the needs, I felt like whole life was the best product for my client, short or long term, I would be the first to present it for consideration.

The argument for whole life that I continue to see popping up in articles and pouring out of the mouths of whole life agents assumes that there are only two type of life insurance options, term insurance and whole life.  They try to make term the evil product because, well, it is only around for a certain period of time, the term. Whole life, on the other hand, is around forever, or until you start spending the cash value trying to pay for the huge premiums.

Whole life is touted as a permanent product, and in a perfect world it would be. The truth is that whole life, with its’ cash value accumulation, is its’ own worst enemy. The cash value, if you can afford to get the policy to the point where it is significant at all, too often becomes not the pot of gold at the end of the rainbow, but the source of paying the overpriced premiums when you finally cry “Uncle”.

I don’t pretend that all life insurance challenges are met by term insurance, although I suspect that by far the majority are. There are permanent insurance needs, and this is where the whole life agents dance right by the more affordable and safer product, universal life with a no lapse guarantee. It will be there as long as it’s needed, until death due you part, at about one third of the cost of whole life. The safety feature is that it doesn’t contain a cash value accumulation feature that can be used to wreck your policy.

I have seen so many cases of people choosing to be underinsured because a whole life agent has filled their heads with the sugarplums of cash value. They need a million in coverage for their family and settle for $250,000 because that’s all of the whole life they can afford. The perception they have bought is that the cash value has somehow made up for the fact that their family is going to be struggling with a death benefit far too small to meet the needs.

I’ve said this before and I expect I will be saying it when I die. The real reason that agents sell whole life is all about cash value. It’s called commission. Ask that whole life agent how much commission they make the first year and every year that you renew your policy. Ask them what they would make if they sold term or universal life with NLG.

Bottom line. If you have whole life insurance as the base of your life insurance portfolio, or if you have someone selling you on the virtues of whole life, get the facts before you pull the trigger.  Do a spreadsheet. Consider carefully whether your needs are permanent or temporary. Get a second opinion from an agent that isn’t in love with your money.