Consider this my little Thanksgiving treat to the life insurance world. I am about to say something very positive about whole life insurance. So often I’ve beat whole life to death in comparing it to term life insurance, but Happy Thanksgiving! The whole life death benefit is every bit as valuable as a term insurance death benefit. Benefit dollar for benefit dollar. No question!!
And if I had a client who insisted that they were going to go without life insurance if they couldn’t have whole life, I would not recommend they go without. Even if their family nets less because they overpaid for life insurance, there is no question that something is better than nothing. Ok, even if they net a lot less.
I don’t think it’s my greedy side coming out when I am concerned that the wrong product will adversely affect your family if you die. This became something of a cause of mine after I worked with a young couple a few years ago. A friend of theirs had become a Northwestern Mutual Life agent and, as all new life insurance agents do, they went after all of those people who would have the hardest time saying no, friends and family.
This was a couple in their mid 30’s, both with good careers making plenty of money, and two children under 5 years old. They could afford it so they drew the budget line with their friend at about $600 a month and for that $600, each of them had $150,000 worth of whole life insurance. They had owned these policies for a couple of years when they contacted me. They sensed that something was wrong with the whole picture so we talked about their life situation and assets and goals, their income and their children, and what would happened if one of them died or one or both of them lost their jobs.
Each of them made $75,000+ a year. They had been blessed enough to, even at their age, have put away substantial retirement money. They just really felt like they didn’t have enough insurance, especially while they were raising their children. $150,000 might have fit their budget, but they really wanted more like $1,000,000 but didn’t see any way to afford it if it was the price per thousand they were currently paying.
Long story short, they could have $1,000,000 of 30 year term insurance on each of them for about $135 a month total. Far more benefit if there was a death and far less chance they would lose the coverage if there was a job loss. That’s what they are paying today and they seem very comfortable that we have addressed short and long term needs and they’re ecstatic that they have what they consider adequate coverage for their family. And it didn’t cause any rift with their friend, because like most life insurance agents he was selling something else after not making it quite a year in the business.
Bottom line. Something is always better than nothing, but settling for a poor second best choice when you don’t have to is not the job you should be doing for your family.