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Index Annuities - Immediate Annuities

Life Insurance




Whole Life Insurance

Universal Life Insurance

Variable Life Insurance

Equity Indexed Universal Life Insurance

Variable Universal Life

AKA Cash Value Life Insurance


"[WL, UL and VL are on the] top 10 list of investments that I hate. They literally do absolutely nothing for you and they do everything for the financial salesperson." -- Suze Orman


"I can easily recommend term life insurance as the only thing [people need] because [WL, UL and VL] is garbage. It's a rip-off. You're much better off buying term insurance at about 5 cents on the dollar for the same amount of insurance and investing the rest of your money. You'll wind up with much more." -- Dave Ramsey


"You do not purchase insurance for investment purposes." - Ric Edelman


"The hidden fees of insurance policies are more pervasive than in virtually any other product in the market place." - Ric Edelman


"Insurance needs to be insurance. Investments need to be investments. You should never combine the two ever, ever, ever!" -- Suze Orman


"Life insurance salesmen hate me because I recommend term life [not WL, VL, UL]" - Bob Brinker 2/15/2015


"Avoid [indexed] universal life insurance at all costs!" - Clark Howard


"The chances of earning 8% - 9% -- it's not going to happen. We can't take a bond yielding 3.5% and turn it into something that produces 9%. That's financial alchemy. The ability of [the insurance company] to credit interest to the [IUL] product depends on how well its own investment portfolio of bonds is doing." - Larry J. Rybka, Chief executive of Valmark Securities Inc.


"When you combine investing and life insurance together, the investments never perform like they should because they get feed to death as they walk down the hallway of the life insurance company. And the insurance ends up being expensive." -- Dave Ramsey


“There is not a single independent study, not a single academic journal, not a single objective review that endorses the idea [of investing in a universal life insurance policy] whether for retirement purposes or other purposes. Nowhere anywhere have I ever in my 27 years in this business, have I ever seen anyone anywhere at any time say that universal life insurance is a good investment strategy. The only people who say that it is a good idea are people in the insurance industry -- the insurance companies who manufacture the products and the insurance agents who sell them [and who sometimes don’t call themselves ‘insurance agents’].” -- Ric Edelman


Insurance agents would "rather sell you investments [whole life, universal life] than insurance [term life]" because of the higher commissions (conflict of interest) - MarketWatch article


It's one thing to buy term life insurance if you need it, but putting investment money into a life insurance product like whole life, universal life or variable life is one of the worst financial mistakes anyone can make. As always, the truth is obscured by insurance agents, non-fiduciary "advisers" (who are also licensed insurance agents) and other hucksters who clutter the Internet with happy things to say about these terrible products. Some of these low-life agents host paid radio shows urging people to come out to "free seminars" which may include a free steak dinner to make you feel guilty about not dumping your money in these high commission insurance products.


LAVISH AGENT COMMISSIONS: Why do they work so hard to sell undesirable products like whole life insurance rather than term life? The commission on whole life policies is generally 100% of the first year’s premiums then 6% of the premiums for every year thereafter. So if you put down $10,000 then the agent pockets $10,000 up front. This compares with the commission on a term policy which is about 50% of the first year’s premiums, then 4% of the premiums thereafter. There is further agent incentive to upgrade the policy whenever possible. Earning 100% on a new policy is better than only earning 6% on an old policy. 


CONFLICT OF INTEREST: Adding insult to injury, the worst whole life insurance policies offer the highest agent commissions. It's no wonder that a whopping 80% of policy holders ditch their policy at some point prior to their death. These are crap financial products.


VERY POOR RETURNS: Whole life insurance provides a terrible return on investment. After several decades you will probably end up with a return of only about 3-4% (SOURCE). With indexed universal life insurance you can expect returns of between 2% and 5% but only if the policy is held for an entire lifetime (SOURCE). These lowly returns are further confirmed by an insurance brokerage company called the Bishop Company which states that these contracts are "unlikely to produce long-term returns in excess of bonds".


Understand that even during the 'great recession' from Jan 1, 1999 to Jan 1, 2014 which included the stock crash of 56% from 2007 - 2009 and the stock crash of 49% from 2000 - 2002, with a simple 67/33 index fund portfolio and a simple annual rebalancing strategy you enjoyed an average annualized return of 5.6%. That's a total return of 126%.


NO ROCKET SCIENCE TO SAFE INVESTING: So what do insurance companies do with your money when you give it to them? According to this website, in 2010, they invested mostly in bonds, which anybody can invest in on their own, taking very little risk.


Analysis of insurance industry investment portfolios Year-End 2010

69.7% - bonds
10.3% - common stock
4.3% - Short term cash investments (CD’s)
0.7% - Real Estate
0.6% - Preferred stock
0.4% - Derivatives (example: futures contracts, commodities, currencies)


6.4% - Mortgages, first liens
4.5% - BA and other
2.5% - Contract loans
0.4% - Securities lending (reinvested collateral)
0.2% - Other receivables


What it boils down to is that by doing it yourself you eliminate the layer of high insurance company expenses. And when you look at what the insurance companies invest in, you realize that cash value life insurance policy holders just simply cannot be earning stock market-like returns, let alone bond-like returns.




When you study historical market returns and then see how money compounds over time you realize that avoiding insurance company financial products (like UL, WL, VL, and annuities) is a no-brainer. Stick with term life if you need it.


FACTS: It takes 5-15 years for the typical whole life policy just to break even.

33% of policy holders have dumped their policy after 5 years

50% of policy holders have dumped their policy after 10 years

70% of policy holders have dumped their policy after 20 years

77% of policy holders have dumped their policy after 30 years

Source: Society of Actuaries

This tells you that whole life policies are grossly over sold by insurance agents! Yet over 70% of the life insurance policies sold today are cash value policies (meaning they combine insurance with investment money).



Based on an actual policy, what kind of returns can you expect?


Whole Life for a 30 year old

Guaranteed cash surrender value at 40 years old: 9.16% return. (Keep in mind that your heirs would also get a large payout with a low cost term life insurance policy)

Guaranteed cash surrender value at 70 years old: 4.98% return.

Guaranteed cash surrender value at 81.1 years old: 3.02% return.

Guaranteed cash surrender value at 100 years old: 2.83% return.

Note: Any loans you take out against the cash value will lower the death benefit of the policy.



Also according to White Coat Investor (which has some of the most comprehensive and unbiased studies about investments) with whole life insurance you're likely going to wind up with one of two things: 1) A life insurance policy that costs you twice as much as you should have paid (with term life) or 2) you lock your money up for decades only to get a guaranteed return of under 2% (with a possible return of up to 5%).


Guaranteed Universal Life for a 30 year old

Cash out value at 81.1 years old: 1.93% (gains are fully taxed if you cash out)


MetLife can pay you higher dividends than the minimum guaranteed amount if they choose.

If so...

Cash surrender value return at 81.1 years old: 4.95% return

Death benefit return at 81.1 years old: 5.79% return


Beware of Agents citing returns before fees, taxes, interest


Insurance agents are great at lying by omission. They quote gross returns that are high. 8%... 9%... 10%... 11% returns! Unfortunately they're not subtracting fees including premium charges, insurance cost charges, expense charges, and policy charges. Never lose sight of the fact that these policies will return less than bonds, and that's only when held for an entire lifetime. They're also not factoring in the taxes that you may have paid if you sold off another investment to raise money to put into that whole life or universal life insurance product. They're also not factoring the interest and loan fees that you will pay if you take out a loan from your policy.


Here's what some consumer advocates have to say about UL, VL and WL...





Final word of warning: There's an army of insurance salesmen who are very skilled at underhanded sales tactics. They'll convince you that they are "critics" of insurance products just to gain your trust. In the end their motives never change. They are still going to try to sell you insurance products.


Also some agents have taken their sales efforts to the public forums in order say happy things about whole life and universal life. This thread details how insurance agents will try anything to prop up their high-commission products.


ARTICLE: "Indexed Universal Life Insurance: A rip off with a fancy name".

Review of Doug Andrew Missed Fortune


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