Broker Check

Don't Fall for This Life Insurance Trick!

October 11, 2021
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Life insurance is just about the worst thing to bring up in a conversation, but not for most financial advisors. Life insurance is many advisors' favorite part of the financial planning process, and why? Because typically it rewards them highly to sell it, and so they usually try to bring it up as much as possible with clients. This does not mean life insurance is bad or altogether a scam, life insurance is an important part of any financial plan. Life insurance is a great way to make sure your family is secure if something happens to you, and typically that is all people need it for, however, there are a few who can take advantage of the investment side of life insurance through "whole life insurance" as opposed to "term life insurance".


Term life insurance is just as it sounds, you sign up for the policy for a designated term, and your monthly premium is based on this term and the insurance amount you would receive if you died. Term insurance is significantly cheaper than whole life, sometimes hundreds of dollars a month cheaper, and you may even get more insurance for less!

Whole life insurance is just as it sounds as well, you sign onto a policy and it is available for your whole life. The selling point of whole life is the cash value account part of the insurance, part of the higher premium you pay each month will go into the account which acts as a retirement account for you, and just like a 401(k), this money grows tax-free. This extra tax-free retirement account does sound very appealing and many advisors offer it because it benefits them, but our focus is on benefiting the client. 


We find the smartest thing to do with life insurance for most clients is to go with term insurance due to how cheaper it is. But what about that cash value account the whole life comes with? You can still invest your money each month with term insurance, and you get to decide where it all goes. With all the money you are saving with the term, you can invest that each month into whatever you want, and not what the insurance company wants to invest your money in. 


Check out this quick video to hear how two clients saved themselves from a whole life insurance trap