One thing almost every new dental or medical grad asks themselves is likely “Should I get Whole Life Insurance?”. The reason they ask themselves this is they likely have a whole life insurance salesmen tell them that they need it. But do you need it?
No. The end. See, it doesn’t make this list below.
Should you get Whole Life Insurance?
Ok, it’s not that black and white. I can’t know everyone’s situation. Perhaps there are certain circumstances where some of you should get some form of Permanent Life Insurance (Whole, Universal, etc.). Again I am not a professional or a financial advisor. I can tell you however, that for most of us, any form of permanent life insurance is not a good financial idea.
Do you need term Life Insurance? Absolutely. That is if you have not yet reached financial independence and you have people relying on you. But other than that, you don’t need Life Insurance.
Sales tactics of Whole Life Insurance Salespeople
There are two main points an Insurance salesperson will use to try and sell you whole life or some other form of permanent life insurance. One is they will try to convince you it is a great investment vehicle. It’s not. Read more at the White Coat Investor and he will explain why it is not a good way to invest for retirement. First you should be using IRA’s or a 401k or some other type of tax advantaged retirement plan. After you max those out, real estate or a plain old taxable brokerage account is better than whole life.
Some whole life salespeople realize it’s a bad investment vehicle and will try and sell you the Life Insurance benefit. They will explain that your term policy expires at a certain age (say 65), and then what do you do? To buy term life insurance at age 65 is super expensive. Which is true. But why would I need life insurance at age 65 and beyond? I sure hope I am financially independent by then, and if not, I hope no one relies on me financially. If I need life Insurance when I’m in my 80’s then I am in trouble. I plan to self-insure by the time I’m 65 and hopefully well before then. Why do I need $1,000,000 of life insurance when I’m 75 years old? Hopefully I will have much more than that in my investments. My investments will be my life insurance policy for my spouse and heirs.
Term Life Insurance
Term life insurance however is very important, especially if you’re not yet financially independent. Take my situation for example: I have a wife a four kids who rely upon my income. I have two laddered term life insurance policies that are relatively cheap. My policies include a $1.5 Million/15 year policy, and $1.5 million/25 year policy. Why don’t I have all $3 million for 25 years? Because I should have at least $1.5 million in investments in 15 years from now. So I can self-insure that first policy. Then in 25 years when the second policy expires, I hope to have $3 million in investments. If I reach financial independence before these policies expire, then I can cancel them and stop paying for them. It’s pretty tough to cancel a whole life policy, especially without losing money.
Don’t confuse Insurance and Investing
I got mixed up with a certain company that I will not name. The salesperson posed as a financial advisor. All he did was try to sell me insurance policies that I didn’t need. He pretended they were what was best for me, but really they were just something that would provide him with a huge commission. He almost succeeded. That is until I discovered the White Coat Investor. I am so glad I got out of it before I made some huge financial mistakes.
Please have enough term life insurance for your dependents. However, I don’t think you need whole life insurance. Invest your money elsewhere and reap the benefits. As always, there are a lot of other great resources on this topic both in my “Learn More” tab and elsewhere. Do your due diligence, but I believe if you follow this advice you will be better off financially.
-Debt Free DDS
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*Nothing on my website is professional or legal advice. I am only sharing information that I have learned and it may or may not be accurate. I am not liable for any problems you may have by following this advice. Please do further research and get professional and/or legal advice about any of these topics. This post likely contains affiliate links. This site could be paid for clicks or purchases made through these links.