Whole vs Term Life Insurance

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This show does not offer investment products or investment advice. Welcome to Finishing Well, and kind of fun today's show has got a very simple title, Life Insurance. Well, you know, there's some terms in life insurance I really like, and it's very much like the term whole life, because we kind of have this, like God even paid the premium in Jesus Christ, this phenomenal whole life policy. It's like you're going to get to have a whole life. I mean, and I love what it says in Revelations 21, 5. It says, Behold, the one who sits on the throne says, I'm going to make all things new.

Right? He's going to make you whole. And I love, John Eldridge wrote a whole book on this, that verse, you know, all things new, where he talked about how exciting is heaven is going to be, because what Jesus is telling us here is he's going to make you whole.

The devil's been stealing and killing and destroying your whole life. And when you think about being made whole, for me, you know, I get my dad, my mom, right? Yeah. I'm even hoping for my dog, Major, right? When I was a kid, I had this beagle that we loved dearly. And, you know, that was your childhood friend. And how cool was we had a beagle in the ages of Snoopy.

You know, we had a real beagle. I think, but when I think of whole life from a standpoint of, you know, insurance products, and right this very minute as I am 65, and I think, gee, I need that to make my wife's life whole without me being there or my children's life whole to some extent. I just like the term to be made whole.

Well, yeah. And we, I favor whole life because most of my clients are 65 and over, and we have them insured many times on Medicare Supplement Insurance or Medicare Advantage Insurance for their whole life. And that's one of the things we have to deal with in our business is people pass away. And it's really nice when you're in the life insurance business if the insurance policies that you sold them are enforced when they die because they pay out to their intended beneficiaries. So whole life is in many circles gotten a bad name because people have looked at it, people in the investment business, people in the consumer watchdog business, and taking a look at it and they say, well, you're putting all this money with the insurance company.

And that's how they build these gigantic buildings. I mean, you're paying these huge premiums and they pay low interest rates and charge you high fees inside of there. You know, what my advice would be is to let's buy term insurance where you just pay this little premium and you're just giving them the minimum you have to give them. You're getting advice many times from really the wrong people who are just looking at a life insurance policy as an investment product, and it's part that. But it is a life insurance policy that's designed to pay a death benefit to a beneficiary soon after you pass away. So and you really could say there's two types of life insurance.

There's term life and there's whole life, and neither one of them is good or bad. So I was going to give you an example of term insurance, which I owned when I was very young. My son, we're expecting our first grandchild in February, and my son's been married a couple of years and his young wife, and they hadn't purchased really any private life insurance since their marriage.

And his baby's coming along, and I said, I'm going to do better than recommend this. I'm just going to buy it for them, pay the premium for a year. And then, you know, really I'd be, if we get down to the second year and they need some help with that premium, I'm going to send it in, okay? It was, he's 33, she's 31, a quarter of a million dollars worth of term insurance for 30 years. So it's guaranteed for 30 years that he's covered for a quarter of a million dollars worth of insurance, and in the 31st year it's over, okay? I mean, I figure he can take care of himself by then, okay?

He really can take care of himself now. But so 30 years, and when you really calculate that for a quarter of a million dollars worth of insurance, he's only going to pay $9,000 into that over 30 years. So the insurance company better not be paying out a lot of the claimants, or they're going to be out of business. If you're collecting 9,000 and paying out a quarter of a million, or if somebody dies in the middle of the term, it's going to be half of that. So term insurance policies pay out very few death benefits.

I mean, they just, most of them either lapse before the period ends, or the people outlive the period, and they don't have to pay out much. The few death claims that they have, they need all those premiums of the people that didn't collect just to pay off the few that do. So term insurance is a great deal. It allows you, when you're young and you don't have a lot of resources, even middle aged, and you have large needs for life insurance. And by that I mean the people that survive you, if you all of a sudden leave this world, your family needs a large amount of money, and you don't really have the dough to be buying a permanent insurance plan. Term insurance is wonderful. Now, the reason we're having this talk today is we have so many clients coming to us when they're turning 65 and going on Medicare.

They're coming to us for financial planning. We're looking over all their stuff, and they have term insurance policies expiring, and this is like you. I mean, you bought one several years ago, and the end is near.

Yeah, I think I bought them at 68. Yeah, when I'm 68. So, I mean, and when you bought the thing, you really didn't imagine that you would need that amount of insurance beyond 68, and maybe you don't need that amount. But it's still a concern to you, okay?

And it's like, what do I do with this, and do I replace it with another term? And a term at 68, even for 10 years, is pretty expensive, and then you just got to deal with the fact it ends at 78. So, we have a lot of people in this getting ready to retire age who have these term policies, and then they have some work insurance, or they had some work insurance, and they usually, they're a little foggy on whether that keeps going, how much it costs.

I mean, I always ask people questions. What do you know about it? They don't know much. They just know that they have it, and they have taken some comfort in that, but there's always this little uncertainty because I can just tell you it's set up to end when you quit working, okay? That doesn't mean it can't continue, but the price can be huge. Now, it depends on what kind of work insurance, too. There are some plans that are set up at work that are designed to keep the rest of your life.

So, I don't want to start dissing all that. I'm just, what I'm just saying is, when you, for the most part, if you haven't researched it, and you really don't know, and you haven't been putting a lot of money into there, it probably ends. So, and many of these folks, they come out with, well, I don't need life insurance, okay? And then I'm always kind of thinking, well, okay, so I thought that was what you hired me to determine. I didn't think, I don't really say this to them, but I just, I always have this little line of humor going on inside of me that, no, it's just, I mean, people are going to instantly, they're, boy, I got life insurance salesperson wanting to come over to the house, wanting to get into our stuff.

So, no, we don't know, we're all set, you know, and I'm already in there, and I'm already kind of into the facts. And so, people have been told this, is that you need life insurance when you're young, and you need term insurance, and then when you get old, you won't need it anymore, because your house is paid off, and you've got assets that you've accumulated. And if you die, all that money's there, and then the people can just live off of that, okay?

And that's a little too simple. Now, one thing that I'm going to tell you from my experience, I've been in the financial services and insurance business a lot of years, is that most wealthy people that I've advised have lots of life insurance, okay? I mean, it's just, in fact, I know very few wealthy people that are old, or older, growing old, that don't have lots of life insurance. So, you know, what I've always thought, if this is such a bad proposition, why do all the wealthy people have it, okay?

And I'll just kind of let you sink on that one. And what the answer to this question, the advice that I give, is we need to see the impact on your family if you're to die at certain ages, okay? So there's many people that tell me, I don't need life insurance anymore.

They're kind of right about that. I mean, they just, because they've got enough assets and resources that their spouse is going to be just fine. And their kids, you know, by the time you reach 75, 80, 85, 90, your kids ought to be able to take care of themselves. I mean, you don't really need to be buying life insurance for them, in most cases.

But again, many wealthy people do, because it just makes tax sense and transfer, there's all kinds of reasons why people have it. So the answer to this is you probably need less insurance than you needed while you were young and earning and didn't have a lot of assets. But most likely you need some insurance, and you may need somewhere between some and a lot, you know, whatever that is.

So you may need more than some, but it's usually less than your term insurance need, and it needs to be whole life. And the reason I say whole life is, you know, if you're given a choice when you buy a life insurance, do you want this policy to be enforced when you die? Or you want it to have ended five years before you die, okay?

And if I give people that choice, if I gave that to you right now, which one of those two are you going to pick? Yeah, I heard recently that, you know, we don't celebrate the date of our death, because we just don't know, it's out there everywhere. But if I knew it, that's exactly the term I would give. Well, yeah, yeah. I mean, only God knows that, and so the point I'm making is that when most people pass away, the family needs some money.

Whether it's the surviving spouse or the children looking after their fears, there's some minimum amount of money that's needed. One of the favorite things you talk about all the time, I think about blended families where you've got this sibling that would really feel left out. Let's talk about that after the break.

Yeah. I want to go into that a little bit, because that's more people that we talk to than you think it is, okay? And I have a special thing that I share with them, and I really share a story about the other people. But let's go over that after in the second part of the show.

We will do that, because at the beginning of the show, I didn't happen to mention that this is my good friend, Hans Schleil. He's a certified financial planner with, you know, Cardinal Advisors, which, you know, their website is cardinalguide.com, where you can find his book, right? The Complete Cardinal Guide to Planning for and Living in Retirement. One of those chapters is on life insurance, so we come back. There are some really cool things you can do with these products to really love on people that may feel like you weren't important to them.

I'm excited to hear what's coming after the break. Hans and I would love to take our show on the road to your church, Sunday school, Christian, or civic room. Here's a chance for you to advance the kingdom through financial resources by leveraging Hans' expertise in qualified charitable contributions, Veterans' aid and attendance, IRAs, Social Security, Medicare, and long-term care. Just go to cardinalguide.com and contact Hans to schedule a live recording of Finishing Well at your church, Sunday school, Christian, or civic group. Contact Hans at cardinalguide.com.

That's cardinalguide.com. Welcome back to Finishing Well with my good friend and financial planner, Hans Seil. Today's show is life insurance, and it's just an amazing tool. It really, really is, in so many different ways, to realize that your life, you know, you remember the movie It's a Wonderful Life? You know, one of Clarence the Angel's quotable sayings is, you know, you don't realize the hole that will happen if you were never here or if you aren't here.

The hole that's left, and just think about people that were meaningful to you and the hole that's kind of left when you're not there. Well, what a cool thing that we were provided with whole life insurance in order to help, you know, fill that hole that people are going to fill. Yeah, so we take people at 65, and, you know, what I'm going to state is a minimum, and I do this in my book, of $25,000 of whole life insurance that you can put in effect for your whole life.

Okay, and so why $25,000? Well, I'm going to deal with that as a minimum because when people pass away, when a person passes away, the family is, you know, in shock and in chaos, and I haven't met the person yet that had all their affairs in order. This is just on a gradation scale, and the nice thing about life insurance is it just creates immediate cash. You can have a hard time when you die just with your family getting to your checking account and just getting to the availability of money to pay bills and things. So starting with a funeral expense, I'm not a big fan of giving the funeral home money because as good as they are, as big as they are, I'd rather have an insurance company holding my money than I would, you know, people buy these pre-need, pre-pay things, and they put them in a trust fund or whatever. I'd rather have that in a big, highly rated insurance company, but in any case, $10,000, $12,000 for a funeral, and, you know, there certainly can be much more, but that kind of money just that's liquid to pay for a funeral is nice to have. You need a couple of thousand dollars to pay an attorney to settle up the estate, so if you do have money and things that these people are going to live on beyond your death or your spouse, they're going to need the help of an attorney, and it's nice to have that paid for out of life insurance. Most attorneys want their money up front, and to be able to pay an executor even a small amount of money, it's nice to have that come out of the life insurance, maybe a thousand dollars, and, you know, that's going to leave about $10,000, $12,000 depending on how you add it up to pay your bills after your death. Even if you're single and you pass away, there's still bills after your death just to pay the heat bill and the light bill and somebody to mow the yard and pay the taxes on the property and all that kind of stuff.

There's going to be no social security check coming in. So just as a minimum, when people ask me how much life insurance do I need, well, I think $25,000 is a good place to start, and we happen to have $25,000 life insurance policies that you can buy regardless of your health, and, you know, I won't get into too much detail on that. You can call me and talk to me, but they pay less than the full amount if you die in the first two years. So if somebody is very ill, if they're terminally ill, we generally don't try to write life insurance and go through this, but yet people that have serious illnesses that, you know, are going to get them rejected for life insurance, they can still buy these policies, and there's still a payment in those first two years. But after you make it two years, they're just like any other life insurance or permanent life insurance.

I'd highly recommend that if you're in poor health that you would get one of those. And then many of those people that come in asking for that, we're able to get them because they're healthy enough to get on one of the standard policies which pay their full benefit from day one, and they're about the same price. And then we even have some guaranteed universal life policies that are very cost effective.

You've got to be in reasonably good health to get those, but they go as low as $25,000. So we have a large assortment of choices that somebody that wants to solve this problem can, you know, can get in there and get whole life insurance. They know it's going to be enforced when they're deceased, and they can even get that if they've got poor health. Yeah, and even if you think, well, let me see, I've got a casket, I've got to buy the big cement thing that goes around, you know, and that thing, or maybe you're thinking cremation, let me tell you some things that you may be not thought about that immediately come at you.

I mean, like immediately come at you. Like, there's going to be family coming from all over, and some of those people are going to need help in order to get there. And then there's going to be a big, huge family dinner, I mean, or something along these lines that all these things are coming.

And then, oh, by the way, when you sit down with the executor sits down with the, you know, with the state, they're going to want to check in within two months of the estate tax, whatever that may be. And they're looking at you like, okay, you know, you got your checkbook out and here you go. And there are just it seemed like there were thing after thing that really surprised me like, oh, I didn't see that coming. You know, I didn't see that coming.

I didn't see that coming. But fortunately, my dad did have a small life insurance policy that really, like, got swallowed up before I could hardly turn around. Well, it's just wonderful. And, you know, it needs to be whole life, it doesn't need to be something that you're worried about it ending. We also have a thing called single premium whole life. And that is where you've got money in the bank and you just write a check, depending upon your age, if you're 65 and I'm just guessing at these and you're a female, probably $12,000 of a single premium whole life check for a $25,000 policy.

If you're a man, probably 13,000. But you just put the money, it's like putting it under the mattress. And there's no more payments. 50% return, right? Yeah, if you died quickly. But, I mean, it just – and I'm just pulling those numbers up out of my head, but I'm not too far off. No, if you died 20 years later, you're still getting 50% return. Yeah, you're right. You're paying $12,000 and you're getting $25,000 back. Yeah, you're not getting it, but your family is. Yeah, yeah.

I mean, it's just – yeah. And it's tax-free. I mean, life insurance, for the most part, is tax-free.

There's some situations where some people can mess up how they write it. For the most part, it's tax-free. It's going to go to the beneficiaries. I've delivered over 100 checks to beneficiaries. I used to keep track of it and I don't do it anymore, but I – in my career, I've been in the life insurance business a long time. And I've never had any of them ask me any questions about the policy. I've never had one person ask me, now, was that term or was it whole life?

Because, in reality, it doesn't matter. It was a life insurance policy that was in force when the person died. And there's a case where term or whole life, it doesn't matter, OK? And most of them were whole life policies because most of these people were very old. Some of them were term because they were younger people and it was more tragic, but still, it was just the life insurance. I've never had them ask me a question like, how much did they pay in premium or were there other beneficiaries?

There was just – never had a person ask me a question. They're just – many of them start crying. They didn't know their parent had done this or their uncle or … Along those lines, you were going to talk about families that had multiple children, you know, mixed – those kind of things.

Well, yeah. And so we're talking about 25,000 as a minimum. And you're just reminding me from the earlier hour, we have a lot of people that are coming to us for retirement planning at 65 that they're in the second marriage, OK? That they – and they – many of them had their children with – from their first marriage. So now they have this blended family and most of these people are not rich enough or wealthy enough to start leaving money to their kids when they die because all the money – we don't know whether the husband or the wife is going to die first. And so we've got to throw all their money at the surviving spouse. I mean, they can't be making their kids beneficiaries and passing on assets unless they're very wealthy. And so that doesn't usually seem to be much problem to them because a lot of times these are the same people that have just given their kids money or helped them with things because their kids are in their 30s and young families or that type of thing are needed.

So people aren't too worried about this. But something I point out to them as just delicately as I can is that – so if I'm talking to the mister here is that if he dies first and we're – which we should do, we're leaving all the money to her. He's been married to her for many years now and she's going to need everything you got to keep living and keep on living in the way you folks are living. And so your kids are going to come to your funeral and everything you've got is going to their stepmother or vice versa. She's the one that goes first.

Her kids are coming to her funeral and everything that she had is going to their stepfather. And I try to figure out the most tactful way to say that. And as time passes, these become more all our kids. But I'm just talking about some wounds that I've just been part of and being the financial planner. I'm always in the life insurance guy.

I'm always a popular guy with a family. And I've got the IRA that I'm managing and so people are coming to me for beneficiaries for all kinds of stuff. And a simple way to solve this is with life insurance.

I mean you can do one of two things. You can either leave something that's yours to your kids like if it's a vacation home or a special car or whatever, some money in the bank or just something that's special that you otherwise would be leaving to your spouse. You can leave this to the kids and then you just compensate for that with the purchase of life insurance.

Now we're going up from $25,000 to $50,000 to $100,000. A lot of people end up buying $100,000 worth of life insurance at $65,000 of whole life and then they have various beneficiaries. Maybe they're going to leave $5,000 to each kid. And a lot of people when they do this, they're going to name her kids which are their stepchildren too so that when I go first, if I go first, my kids and your kids that are our kids, they all get a check. And maybe it's just $5,000 or $10,000 but there's a whole lot of difference between $5,000 and nothing.

Just a big difference. And so you may not have children and you may have some nieces and nephews, people that are special. You may want to give some money to your church and if you really want to be certain that whoever you wanted to get the money, whether it's a niece or a nephew or I have one lady that still has her ex-husband down as the beneficiary on one of her life insurance policies. She's a client. It's one she wrote beforehand and she wants him to have that money.

She does. And so that could really get challenged by her kids if that was in a will and that just could create a lot of things that this is going to just be real simple. They're just going to send him a check, okay? And so the beauty of life insurance is you can name who you want. So what I'm doing is I'm just building up from there is the $25,000 of whole life is really a minimum in my book and then there are reasons to get $50,000 or $100,000 and we can make that happen for people even in their 70s.

So there you go. This is really a neat opportunity to make a lot of people whole because they are going to have a hole in their heart. Of course, you can find out more about this in Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement.

You can even just go to his website at cardinalguide.com and ask for it. It's a fun show. It may not be so fun to be dying, but it would be fun to see people made whole like Jesus is going to do for all of us when he makes all things new. Thank you, Hans. Thank you. Finishing Well is a general discussion and education of the issues facing retirees. CardinalGuide.com, Cardinal Advisors, and Hans Schleil CFP sell insurance.

This show does not offer investment products or investment advice. We hope you enjoyed Finishing Well, brought to you by cardinalguide.com. Visit cardinalguide.com for free downloads of this show or previous shows on topics such as Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes, as well as Hans' bestselling book, The Complete Cardinal Guide to Planning for and Living in Retirement, and the workbook. Once again, for dozens of free resources, past shows, or to get Hans' book, go to cardinalguide.com. If you have a question, comment, or suggestion for future shows, click on the Finishing Well radio show on the website and send us a word. Once again, that's cardinalguide.com, cardinalguide.com. This is the Truth Network.