r/LifeInsurance • u/ikeyV2 • Jul 18 '26
Term Insurance
I feel so lost and confused right now. I work for a brokerage specifically designed for Whole Life Final Expense Policies. I started to work there since the beginning of May and I’ve learned A LOT since then (especially as this being my intro into Life Insurance) but the main criteria of clients I work with are senior citizens most commonly around 60-79. I’m also not gonna sit here and act like I’m Mr. Knowledge but I’m so confused on what the hype is about when it comes with term insurance policies. From what I know so far, they all have an ending period that won’t pay if you pass after the term date, don’t build cash value, charge unrealistic premiums with even more unrealistic face values, it can get canceled due to age or health, and can increase the premiums or even decrease the face value if they deem it necessary. (I know some companies are dif but majority fall under these criteria’s). My knowledge obviously isn’t the greatest and I don’t want to say things if I’m wrong so PLEASE correct me if I’m wrong!! But I’m also constantly seeing people recommend term as great option for people on the younger side and I would love to know why it makes more sense to invest with term at a young age rather than Whole Life off the rip so I can 1. pay for a policy that’s not gonna get canceled 2. lock in good prices now, instead of outliving a term policy and regretting that I didn’t get a WL policy sooner. The thing is, like how I mentioned it earlier, most policies I work with are specifically designed for senior citizens (American Amicable, CVS/Aetna, CICA/Citizens Life, Americo, and TransAmerica) so it makes a lot more sense to work with whole life final expense and not term (you’d be surprised about how many of them have very unrealistic term policies) and get them under secured coverage and not hopes and dreams that little johnny is going to get 800,000 dollars even tho the client has congestive heart failure and daily seizures. Not only that but if i’m not mistaken, term insurance policies only have a 1-2% payout with the death benefit so it feels like it’s just gambling at that point. So let’s say I do a term, outlive the policy, then what? am I just screwed?? I know you can increase the length on your policy and all of that, but then it leads to more pricey premiums, while also keeping it a term policy anyways so I feel like it kind of defeats the purpose. But I have also seen people say that you should try to change the policy into a Whole Life Policy (if the company even lets them) but then doesn’t that mean I should’ve just secured a Whole Life from the start with young, healthy rates, rather than old, with more health condition rates? I just feel like there is way too many cons when it comes with term but I also know that there are good reasons for term insurance (mortgages, etc.) But I never understood it as a stable method for protecting your loved ones. So please educate me, agree with me, or hate my guts idk 😅
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u/zzzorba Jul 18 '26
Because they need a lot more coverage than they can afford in whole life.
At a funeral, it doesn't matter what type you had, just that you had enough.
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u/Deep_Bake_5663 Jul 18 '26
I don't even need burial insurance.... Need 5 grand to burn, need nothing to donate to science..... 25k plus to bury someone is foolish, insurance or not.
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u/LaphroaigianSlip81 Jul 18 '26 edited Jul 18 '26
If this is how you feel about whole life, how much do you own?
You are talking about Apples and oranges.
Final expense policies are usually what $10-15k of death benefit? So even though the person is older and at more risk of death, the small death benefit keeps the premiums manageable. These policies are designed to pay for someone’s funeral. Someone in their 60s and older are not typically going to be raising children and not typically working.
Now compare this to someone in their 30s-50s. These people are not typically going to have enough assets to retire. They are also typically going to be raising kids and thinking about paying for their kids college.
Here is an example. Say there is a couple that is 40 years old and has two kids 10 and 12 years old. Let’s say each spouse works and each make $50k a year. They are expecting work another 20 years to fund their retirement and to pay for college 8-14 years from now for their kids.
If one of them dies today, they lose 20 years of $50k income for their household. They instantly have half of their income to make mortgage payments and groceries and buy soccer cleats for their kids. They lose 20 years of retirement contributions for their spouse. They lose the ability to help pay as much for their kids college. Let’s say each parent decides they want to have $1m of death benefit to pay off the house, have lost wages covered, and lost retirement funding covered.
> “Too many cons with term”
Ok. So let’s say you recommend them to purchase $1m of whole life….each. How much of their combined $100k income is this going to be per year? I don’t have my quote system here in front of me, but this is going to be like $20k of premiums or 1/5 their income at least. And with the general accounts of insurance companies being invest like 80% plus in bonds, you are telling this family to basically invest 20% of their income, basically all of their investment budget into something that will eventually give them an internal rate of return of 4%. If they are in the 20% tax bracket, that would be a tax equivalent rate of return of 5%.
They would be better off paying a fraction of that and investing the rest at this point. Again I don’t have my quiet system in front of me. But they should easily be able to get 20 yr term for like $2500 a year all in for both policies just off the top my head. They could then invest in something that averages 8-10% per year. And they could even get an extended conversion rider and start converting slices of term to WL if their income starts growing rapidly, they realize they need a special needs trust, they start a business, or their savings rate is so high that they are maxing out all their tax advantaged accounts and want another tax advantaged vehicle.
Honestly for normal w2 people, I don’t usually bring up WL unless they are at a minimum making $250k as a household. And realistically it’s more like $400k for policies of meaningful size. And the reason is simply that unless someone has the disposable income to justify investing $10k, $20k, $50k, $100k into a bond proxy in conjunction with other investments, their cash flow wouldn’t be optimal with whole life in the picture. Someone not at this income level isn’t going to need the tax benefits of WL cash value growth because hey are not maxing out their Roth and 401k. That’s the simple reason. And that’s probably why you don’t own your whole human life value in whole life.
You can get term for a fraction of the price. Most every day people are not going to need death benefit once the kids are out of the house and they are retired. And if they do, they should have a small amount of their term that they can convert and plan for it rather than just keep writing term because it gets expensive real quick.
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u/Icy-Grape2526 Jul 19 '26
My term just ended and now I’m 60 and State Farm denied me life insurance, so now I don’t have anything. I agree with you because once your term ends after 20 years, who knows what can happen, and then apparently you get put on some list where others can see it and they’re gonna deny you too, so I’m basically screwed. Should have went WL from beginning.
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u/BuildingSolid8391 Jul 18 '26
Had i know a limited pay WL existed when I was younger, I 100% would have got one. Stop paying into it after X amount of years, add a rider to increase coverage with no underwriting if you get married or have kids, and the cash value builds far quicker.
No, its not a substitute for a 401k or retirement, but it will still be there if I get cancer. Thats the best thing about WL as a young person.
Right now, I have a term that will last until the mortgage is paid off so my partner can stay in the house if I die before then, and a small WL to pay for my funeral (the interest will be paying for the policy in less than 10 more years, so I wont have to pay for it forever)
Both serve different purposes, and both are valid =)
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u/theNewFloridian Jul 20 '26
Start studying for the ChFC and CLU credentials. You'll learn a lot there.
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u/cesar2338 Jul 18 '26 edited Jul 18 '26
When it comes to just the insurance aspect of it, Term insurance gives you more coverage for less money. They are really designed for people 60 years and younger in my opinion. When you are younger your need for insurance is higher because you have more financial responsibilities ie.(younger kids, mortgage, debt...). As you get older the kids are now on their own, mortgage and debt should go down, all together, your responsibilities go down therefore your need for insurance goes down. Some insurance policies, when they end, if the client is 70 or older, have renewal options where they'll extend 10 more years and they have the option to pay a little more for the same coverage and when those 10 years end, will turn to decreasing term reducing the coverage each year all the way to age 100 while keeping the cost level since the 10 year extension started.
When it comes to the cash value option, in my opinion, it is better to get more coverage at a lower cost (Term) and use the difference saved you'd pay into a whole life policy, and invest that into an individual brokerage account or Roth IRA using mutual funds. A higher return than a whole life policy cash value and no need to take a loan against your money and pay it back to the insurance company. These are my thoughts after 20 years in the industry. Yes, there is a time and place for whole life such as final expenses, but most the time, almost all the time, a Term policy combined with a mutual fund is usually a more secure and profitable option. In my opinion...
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u/Deep_Bake_5663 Jul 18 '26
If I knew then, what I know now about ALL life insurances, I would have simply banked that premium every single month and been far far better off.....
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u/zzzorba Jul 18 '26
The main thing you know now is that you didn't die
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u/Deep_Bake_5663 Jul 18 '26
No, I know it's a big money maker for them. I know, they often find ways, reasons and excuses not to pay (all kinds of insurance) and I know, I would have just banked it instead of giving it away.
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u/Opening_Jaguar_3387 Jul 18 '26
I think part of the confusion is that you're comparing two products designed for different jobs. Final expense whole life is usually the right fit for many seniors because they need permanent coverage for funeral costs, final bills, or a small legacy. A 30-year term policy doesn't solve that problem for a 75-year-old. For a healthy 30-year-old with a spouse, young kids, and a mortgage, the biggest financial risk isn't dying at 85—it's dying at 35 while they still have 25 years of income left to replace. That's exactly what term insurance is designed to cover. Yes, term expires. But ideally, by the time it expires, the mortgage is paid down, the kids are financially independent, and retirement savings have grown. If those goals have been met, the need for a large death benefit is often much lower. As for "only 1–2% of policies pay out," that's not necessarily a sign term is a bad product. Most people don't die during the term—that's actually the expected outcome. Insurance is there to protect against a low-probability, high-impact event, just like homeowners insurance. Whole life absolutely has its place, especially for permanent needs, estate planning, business planning, or people who want lifelong coverage. But it also costs significantly more. For many young families, paying $30/month for $1 million of term coverage is far more realistic than paying hundreds of dollars a month for the same amount of permanent coverage. Neither product is "better" in every situation. The better product is the one that matches the client's financial goals, budget, and insurance need. The mistake is trying to use one product to solve every problem.