Key Takeaways
- The Golden Rule: Insurance is for protection. Investing is for wealth. Do not mix them.
- Term Life: Cheap, pure protection for a set time (e.g., 20 years).
- Whole Life: Expensive, complex product that often underperforms simple investing.
- Agent Incentives: Agents make 80-100% of the first year's premium on Whole Life. That's why they push it.
Introduction
"It's an investment that pays you when you die!"
That's the pitch. And it sounds great. But Whole Life insurance is often one of the worst financial products for the average person.
Deep Dive: Buy Term, Invest the Difference
The Cost Difference
Let's look at a healthy 30-year-old male getting $500,000 coverage.
- Term Life (20 Year): ~$25/month.
- Whole Life: ~$400/month.
The Opportunity Cost
The "Whole Life" pitch is that you are building "Cash Value."
But what if you bought the Term policy and invested the difference ($375/month) in the S&P 500?
- After 30 Years:
- Whole Life Cash Value: Maybe $250,000 (after fees).
- Invested Difference: ~$600,000+.
You become "Self-Insured" by investing. In 20 years, when the term policy expires, you don't need insurance anymore because you have a pile of cash.
Who is Whole Life For?
- Super-rich people ($20M+ net worth) trying to dodge Estate Taxes.
- People with lifelong dependent children (special needs).
- For 99% of people reading this: Buy Term.
Summary
Don't buy a Ferrari from a guy who makes a commission on the sale. Keep your insurance simple and your investments separate.
