Whole Life Insurance Policy Hard Sell - North Western

[warehouse]

My husband inherited some money about 5 years ago, there was some bad juju with how things played out with family so we decided to move the money somewhere different than the family bank. We both knew nothing about managing money at the time and on my dad's advice we moved it to a North Western IRA account with his financial advisor which had a front loaded fee around $5k. Face punch. Oh well, live and learn. So a year or so ago the financial advisor leaves and a new guy gets his clients, us. New guy recently reached out to us to set up a time to chat. We chat, he says many times I'm very "thoughtful" about financial planning and he basically can't believe I'm saving money instead of spending it. So that's the background, if it matters. Because I'm thinking at this point I need to ditch NW altogether.

He has now spent a huge portion of time in the last two appointments trying to sell me whole life insurance policy because it is part of a balanced portfolio. It's guaranteed money, etc. I don't buy it. The math essentially says I'd be getting a 2% return over 20 years. Why is he trying so hard to sell me this? Does he make a lot of money on it? Do I really need it?

I'm 31, husband 35. I have a large amount of super cheap life insurance through work and my husband has a smaller amount because he doesn't work and it's more expensive. But I don't think we need it, I can support myself if he were to die.

We have $200k in retirement accounts and our only debt is our mortgage. What say ye?

(ps i tried to use the search function to see other threads on this, but i always get an error. feel free to link other pertinent threads if you know of one)

[Paul der Krake]

New guy recently reached out to us to set up a time to chat. We chat, he says many times I'm very "thoughtful" about financial planning and he basically can't believe I'm saving money instead of spending it. So that's the background, if it matters. Because I'm thinking at this point I need to ditch NW altogether.

Of course he does ruffle your feathers. They are trained to inspire trust. Flattery is just one of the many tools at his disposition. When that fails, he will move on to something else.

He has now spent a huge portion of time in the last two appointments trying to sell me whole life insurance policy because it is part of a balanced portfolio. It's guaranteed money, etc. I don't buy it. The math essentially says I'd be getting a 2% return over 20 years. Why is he trying so hard to sell me this? Does he make a lot of money on it?

Oh yes he does. Whole life is a huge profit center. Your first year premiums' are his commission.

What say ye?

Buy term life.

(ps i tried to use the search function to see other threads on this, but i always get an error. feel free to link other pertinent threads if you know of one)

The search function on this forum has been broken for a long time. Type "whole life site:forum.mrmoneymustache.com", or any other keywords of your choice into The Google for more highly enlightening threads on the topic of life insurance.

[Frankies Girl]

You don't need any life insurance if either one of you can be self sufficient if you lost the other one. If you had small children, then term life would be a good idea for the length of time it would take to launch them out into the world, but with two adults, no kids, no significant debt and no stay at home spouse... life insurance is pointless.

The reason they are pushing it so hard is because it is of great benefit to them and their company. They skim a fee right off the top for themselves, so they love when they can talk suckers into buying whole life. You get very little benefit even if you had kids or needed life insurance coverage - whole life is one of the biggest rip offs out there.

Get the hell out of NW as soon as you can manage it. Do not bother taking this guy's calls/emails any further. They are not financial representatives, they are salesmen and their only purpose is to make more of your money their money. You are not their priority and the funds and advice they give you are primarily to benefit themselves and their company. If you happen to see any benefit at all, that is a distant third.

No need to even respond to them further other than to say "no, not interested" to any chats or suggestions; just get over to Vanguard and invest with their total stock market or a good target date fund and you'll be in great shape.

ETA: a few awesome links for learning the basics of investing:

http://jlcollinsnh.com/stock-series/
Special attention to this part - but they're all good reading: http://jlcollinsnh.com/2012/06/06/why-i-dont-like-investment-advisors/

https://www.bogleheads.org/wiki/Main_Page

[Jack]

What say ye?

Buy term life.

Really? ಠ_ಠ

The OP said this:

I'm 31, husband 35. I have a large amount of super cheap life insurance through work and my husband has a smaller amount because he doesn't work and it's more expensive. But I don't think we need it, I can support myself if he were to die.

This money should be in a straightforward normal investment (stock index fund somewhere else(!) like Vanguard or Fidelity, or real estate), not in any insurance-like (or annuity-like) product whatsoever.

[Paul der Krake]

Jack is right, I should have prefaced with "if you need insurance in the future".

It doesn't sound like you need any right now.

[warehouse]

Paul- thanks for your reply!

New guy recently reached out to us to set up a time to chat. We chat, he says many times I'm very "thoughtful" about financial planning and he basically can't believe I'm saving money instead of spending it. So that's the background, if it matters. Because I'm thinking at this point I need to ditch NW altogether.

Of course he does ruffle your feathers. They are trained to inspire trust. Flattery is just one of the many tools at his disposition. When that fails, he will move on to something else.

He has now spent a huge portion of time in the last two appointments trying to sell me whole life insurance policy because it is part of a balanced portfolio. It's guaranteed money, etc. I don't buy it. The math essentially says I'd be getting a 2% return over 20 years. Why is he trying so hard to sell me this? Does he make a lot of money on it?

Oh yes he does. Whole life is a huge profit center. Your first year premiums' are his commission.

What say ye?

Buy term life.

(ps i tried to use the search function to see other threads on this, but i always get an error. feel free to link other pertinent threads if you know of one)

The search function on this forum has been broken for a long time. Type "whole life site:forum.mrmoneymustache.com", or any other keywords of your choice into The Google for more highly enlightening threads on the topic of life insurance.

Now that I think of it... he does lay it on thick with the flattery and compliments. And he says things like "you don't really know me so this might sound insincere but really, you're quite thoughtful about this stuff..." Ugh!

Makes sense on the commission piece.. he's pushing it like a few thousand bucks depends on it.. good to know.


This is great info! Have been lost without the search function!

 

[warehouse]

You don't need any life insurance if either one of you can be self sufficient if you lost the other one. If you had small children, then term life would be a good idea for the length of time it would take to launch them out into the world, but with two adults, no kids, no significant debt and no stay at home spouse... life insurance is pointless.

The reason they are pushing it so hard is because it is of great benefit to them and their company. They skim a fee right off the top for themselves, so they love when they can talk suckers into buying whole life. You get very little benefit even if you had kids or needed life insurance coverage - whole life is one of the biggest rip offs out there.

Get the hell out of NW as soon as you can manage it. Do not bother taking this guy's calls/emails any further. They are not financial representatives, they are salesmen and their only purpose is to make more of your money their money. You are not their priority and the funds and advice they give you are primarily to benefit themselves and their company. If you happen to see any benefit at all, that is a distant third.

No need to even respond to them further other than to say "no, not interested" to any chats or suggestions; just get over to Vanguard and invest with their total stock market or a good target date fund and you'll be in great shape.

ETA: a few awesome links for learning the basics of investing:

http://jlcollinsnh.com/stock-series/
Special attention to this part - but they're all good reading: http://jlcollinsnh.com/2012/06/06/why-i-dont-like-investment-advisors/

https://www.bogleheads.org/wiki/Main_Page

Thanks Frankie. No kids now or in the future so I think we're good with work provided insurance for now. Will definitely read up on those links.

Is there ever a time where whole life makes sense? My dad (same one who directed me to the front load fee) said he is going to buy whole life insurance when his term expires later this year. He and my mom are late 50s and have a unique job, they are caretakers on a large lake property. If my dad were to die my mom could not do this job on her own. I believe they have anywhere from $150k-$200k in a retirement account but I'm not sure of the exact number. He said that he needs insurance on himself to protect my mom and that it's so expensive to buy at his age that whole makes more sense.

How would I go about getting out of NW and into Vanguard ASAP? Would there be any cost associated with it? The balance in this account is $127k at this time if that matters for any reason with minimum buy ins at Vanguard.

[warehouse]

What say ye?

Buy term life.

Really? ಠ_ಠ

The OP said this:

I'm 31, husband 35. I have a large amount of super cheap life insurance through work and my husband has a smaller amount because he doesn't work and it's more expensive. But I don't think we need it, I can support myself if he were to die.

This money should be in a straightforward normal investment (stock index fund somewhere else(!) like Vanguard or Fidelity, or real estate), not in any insurance-like (or annuity-like) product whatsoever.

Thanks Jack! Interested in moving to Vanguard, will research details.

Also- can you all tell I don't really know how to appropriately quote and reply to pieces of posts? haha

[FIREby35]

I ran from NW after a hard sell about five years ago and before becoming fully MMM. Trust yourself and cut these guys out of your life!

[chasesfish]

Warehouse - Run, really fast.  I've looked at those scenarios twice and here's how the conversation goes: 

Me:  "Okay, its $2500/year"
Agent:  Yes, and look at that value build over time
Me: "Why am I paying $2500/year and after 5 years there is less than the sum total of my payments in the cash account"
Account example says $9,000
Agent: "That's your cost of insurance"
Me: "$2500 for five years earning 6% would be $14,838 at this point.  Term insurance during that period would have been $1250 (250/year), so I should have $13,588 invested at this point"
Agent:  Dead silence.  Thoughts inside his head "Yeah, the $4,588 is how much I just made in commission"

By my math, that's a 36% investment management fee since I can just buy insurance directly from a carrier online.

Whole Life really only makes sense in high-net worth situations, specifically with closely held businesses or estate tax consequences.  If there are two partners in a business and one dies, there's a value in the business that one has to buy the other out on.  That risk/cost doesn't go away after term insurance expires, so permanent insurance might make sense.

I actually like the concept and tax advantages of the product, I just can't find a way to buy it direct without the level of fees buried inside of it.   Two working folks in their mid 30s are better candidates for term and investing the difference. 

[Mr. Green]

That's a salesman through and through, and he obviously doesn't have your best interest in mind. If he knew you weren't planning to have kids and had little debt there's simply no reason for him to recommend a whole life policy.

[ender]

Whole Life really only makes sense in high-net worth situations, specifically with closely held businesses or estate tax consequences.  If there are two partners in a business and one dies, there's a value in the business that one has to buy the other out on.  That risk/cost doesn't go away after term insurance expires, so permanent insurance might make sense.

Really high net-worth situations, too.

Higher than most people actually have :)

[pbkmaine]

Run! Get the heck away from this guy.


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[Noahjoe]

His commission is around 40%. Source: I used to sell insurance. Whole life is the best commission, because it's the worst deal for the buyer.

[Jack]

Also- can you all tell I don't really know how to appropriately quote and reply to pieces of posts? haha

Just insert the quote and then go through and delete the irrelevant parts. As long as you keep the beginning and ending BBCode quote tags matched up, it's easy (they work like parentheses, in matched pairs).

How would I go about getting out of NW and into Vanguard ASAP? Would there be any cost associated with it? The balance in this account is $127k at this time if that matters for any reason with minimum buy ins at Vanguard.

Since it's in an IRA, there shouldn't be any tax issues (as long as you don't accidentally take a distribution instead of a transfer/rollover).

There shouldn't be any cost associated with the transfer on the Vanguard side, and you're well above the Admiral share-class minimum investment, which is $10,000. (You might have a problem if you wanted to get 13 different Vanguard funds, but that would be silly.)

I have no idea if NW might charge you some kind of fee to extricate your funds from their clutches. Some of the even-more-unethical-than average places charge pretty ridiculous surrender fees, but in almost all cases not paying them and thus continuing to associate with said unethical company is even worse. (In other words, if NW charges a fee and you can't get it waived, suck it up and pay it to escape.)

The easiest way to switch should be to call Vanguard and let them handle the transfer for you. Some places want to just mail you a check when you transfer away from them, which makes you responsible for forwarding that check to Vanguard and making sure everything's categorized correctly (again, making sure it doesn't count as a distribution). That's a hassle, so try to get the funds to transfer directly from NW to Vanguard if possible.

[VaCPA]

Do not buy whole life ever. I actually just cashed out an old policy from NW Mutual my parents purchased and am going to put the money in my Roth IRA. I got an in-force illustration to run some numbers just to make sure it didn't make sense to keep it after all this time and it didn't.