Any Life Insurance experts here?

My friend is pricing life insurance for her mom and I happened to be there when the insurance agent was. Prospective insuree is 56 years old, in excellent health with no bad habits, etc. Agent offered term 20 year policy for 75K for roughly one thousand per year. This was thru Primerica, the insurance company he represented. My friend asked about permanent (I assume whole life) insurance. Agent said he would not offer any whole life as he did not consider it a good deal. My friend said that alledgedly five years ago, her friend's mom who was in early 50s at time got permanent life insurance for a $50k policy for only eight hundred and something a year thru NY Life. Agent again said he would not do permanent as he considered it a bad deal and he'd have to see the policy but suspected something was wrong. Also stated NY Life was basically only out to get your money and he should know because he worked for them before. Said Primerica whom he represented was a much better insurance company. I wondered too if there is a catch. Say insuree lives 30 years which would bring her in her early 80s. She would have only paid in roughly $25k which is only half the policy. My friend said that they invest the $800 per year and so will make much more then the payout if it lasts that long. Maybe she is right, I don't know.

Anyhow, any advice. Agree with agent? Do you think their probably is a catch with the $800 and change a year for a $50k whole life policy? Any experience/opinions on Primerica or NY Life? Agent was there for a couple of hours this afternoon and this was not his first visit. Said he was only trying to do right and he did seem like a nice legitimate guy but he's invested an awful lot of his time in this, will he get a really big commision if he sells her a term policy?

P.S. update: Just as I was about to send this, friend called me back. Said NY life offered 29 year term which would bring mother's age up to 85 for $81 a month on a $100k policy. This would equate to $972 a year, roughly what the other agent was offering on only a 20 year term 75k policy. NY life agent said to bring contract to a lawyer to look over. So it sounds legit and a better deal but I still would like people's opinions.

You know...I went to a leadership course in 1989 in high school. The main focus of the course was leadership and teamwork, but the instructor told us (literally) the following:

"If you don't take anything else away from what you learn today, you should remember to always buy WHOLE LIFE insurance. Term insurance is a rip-off. Buy whole life."

...and so I took that away with me and share it with you here now. I'm sure others will chime in. I have life insurance provided through the military, but if I had to buy my own, I'd buy whole life.

JM-99

They serve different needs.

I owned a life/health insurance agency for 10 years before going back to school and into medicine.

Term life is there to offer high coverage at manageable costs during the years when more protection is needed than can reasonably be paid for. (Think young mom and dad with kids or businessman with huge debt outlay to finance a business.)

Whole life is best for those who need long term coverage for end of life expenses, tax issues, etc.

Most young couples can't afford the hundreds of thousands or even millions of whole life necessary to cover their children through maturity if something were to happen to the breadwinner/s of the family. A combination of whole life and term life makes sense there.

In this particular case, a woman in her 50's, a whole life policy or a GUARANTEED level premium term policy might be appropriate, but without knowing more, its hard to say.

I was once fired by an insurance company because I believed it was in the families best interest to buy more term and less whole life and the company found out my recommendation from another agent. The family had massive business debt from a start up business and if the father had died the mother would have lost the business and not had enough life insurance to sustain her if the whole life policy, which took up all their extra income, were to stay in place. I recommended they scale back the whole life policy, buy term to cover the debt, and then scale up the whole life as income improved, which they did successfully, I might add.

Now, if the company was making more money on term than whole life, would I have been fired?

The numbers are the numbers, big insurance companies pay HUGE amounts of money to stay on top of the numbers, and they KNOW how many people in any age group are going to die in a given year. THEY MAKE MONEY REGARDLESS of which type of insurance you buy!!

Bill

I'd just invest the money in a few decent mutual funds and forget the life insurance entirely. If the prospective insuree is 56 and in excellent health chances are good with today's and future medical science they'll live well into their 90s at least. $1000 a year invested in decent mutual funds averaging only 8% (historically the stock market does better than 10%) will give you about $50,000 in 20 years and $125,000 in 30 years. This is more than the insurance payout, and calculated using a lower rate of return than you will probably get. Also, as I said earlier, chances are this person will live way more than 30 years given that they're in good health with no bad habits. If you invest $1000 and manage to average the 10% that the stock market does you'll end up with way, way more than the insurance pay out even in 20 years.

Any reason why the insuree needs to be insured? The amount of insurance being considered here isn't enough to cover any children through maturity, and is more than really needed to cover burial expenses. What do they anticipate the money would be needed for? Do they already have other investments which could be used for the same purpose? I'm asking these questions because in general insurance of any kind (medical, auto, life) never seemed to make sense to me if a person already has the discipline to put aside a good percentage of their income in IRAs, 401Ks, even a regular savings account. The insurance company basically operates as a middle man making a profit by taking your money, investing it themselves, and pocketing the difference between what they pay out and what they make in investments.

I was a primerica rep for a year or so a while back. Yeah, term life is what they sell exclusively. It is more for people who can't afford whole life. With whole life you have to watch that after you get a little older and if the premiums go up (which they almost always do), that the extra money you've paid in to "retire on" or pay taxes after your death or whatever, doesn't get eaten up by paying the increasing cost of your premium because they have you set at a "guaranteed rate." They only charge you 100 a month, even tho' after 15 years or so, your monthly premium has gone up to 150, so they take the 50 out of the extra savings.

That said, term is good for that fixed term. I agree with jtr, I'd go with a smaller amount of term and invest at MUCH as possible. Even the most conservative fund will do better than whole life returns (since they are doing the same thing, but keeping most of the interest for themselves).

Investing for 20 years is all fine and good, but you only get that 'payoff' if you live at least that long. You should still invest.

Insurance is 'insurance' in case you don't live that 20 or 30 years.

That said, they need to think of why they are buying the insurance. That info will help determine the needs and coverage level needed or desired.

Completely agree with JTR. I can't think of any good reason for this woman to buy life insurance other than she doesn't understand how it works.

You only need to insure what you cannot afford to lose, in this case the income your loved ones count on, lost from your untimely demise. If nobody is relying on you, then you don't need insurance.

Tying your investments to a whole life insurance policy is conceptually an odd combination since those have independent and even unrelated goals. The future inflexibility of such an arrangement would make such an "investment" undesirable even if it managed to have a good return, but historically whole life pays less than even a savings account.

Yeah, not worth it (re: subj title).