Whole Life Insurance - adding to portfolio?

[In-control]

I am thinking about adding whole like insurance to my portfolio. It is thru the Knights of Columbus and averages over 8% (5% Long term Bonds, 3% profit sharing) dividend yield. Essentially I pay for 20 years then the compondened $ is mine to use. If I use the $ prior to that I pay it back w/o penalty. It also comes with a death beneift.

The benifits as I understand them is that the $ are not considered taxable income, being a KOC member is the only way to get the coverage and the insurance group returns 87% of the profit to its members, which is part of the 8%. The $, and benifits can be rolled over to a trust when I pass and my family can have 100% of the $.

Is anyone else doing this?

 

[73ss454]

Years ago I purchased 3 whole life policies. All 3 ended up in class action suits because of the lies and cheating in the way they were sold. I say stay away and purchase term.

The last one I still hold paid 31K in April due to the class action suit. When I was sold this policy I was told I would only pay for 10 years. Well guess what, I have to pay to the age of 99. I'm in my 21st year and the dividend pays most of the premium but I still reach into my pocket each year.

Lies, all lies I tell ya.

 

[MasterBlaster]

Every whole Life policy that I have looked at is a crappy investment. Watch out for the subtle fees and gotcha events. Usually these policies have a term that is then rolled over. Don't assume that the rates on the next roll will be the same.

Also, to get the big promised 8% yield (or whatever) they usually require you to annuitize the payout at some very unfavorable rate.

These policies are not what they appear to be. Smoke and mirrors.

It's true you can leave the balance to your heirs. But the same is true of 401k's, IRA's, and within limits almost all your estate.

If you just have to get a whole life policy, Call up Vanguard and go with them. They won't cheat you and deceive you into buying a policy.

 

[rayvt]

I researched whole life insurance some 35 years ago. I came to the conclusion that it's a lot of smoke and mirrors hiding the fact that what you have is an expensive annual-renewable term policy combined with a mediocre savings account. Nothing I have seen or read in the past 35 years has led me to change my mind.

The "free" returns in a whole live policy come mainly by the fact that they are ignoring the time value of money. Also from the fact that the amount of insurance is not the face value death benefit, but the face value MINUS the cash value. The cash value is yours whether or not you die, so the actual insurance is only the amount in excess of the cash value.

I don't know anything about KOC, but I can't imagine that they are much different than others in this field.

BTW, with respect to the "3% profit sharing", where does the "profit" come from?

 

[Bestwifeever]

I imagine the KOC is getting a little consideration for offering this under their name (nothing wrong with that). Give them a donation and invest your money elsewhere.

 

[TromboneAl]

Whole life is a scam.

 

[OAG]

Who is the underlying company that KOC is "sponsoring". KOC does not write the policy. You need to checkout the underlying issuer. That policy does not "get better" because of the KOC; it is only as good as the actual policy issuer. For instance I believe AARP "sponsors" The Hartford. In any event term is the correct route; forget Whole Live (or whatever they want to call it).

 

[tightasadrum]

Boy, it kinda' makes me wonder how whole life insurance salesmen make a living anymore. Apparently the tide has gone out, and now we know who's been swimming naked.

 

[Rich_by_the_Bay]

Are the rating companies (Moody, Best, etc.) considered reliable in the current world?

 

[FinanceDude]

Is anyone else doing this?

No.......

 

[jimnjana]

I am thinking about adding whole like insurance to my portfolio. It is thru the Knights of Columbus and averages over 8% (5% Long term Bonds, 3% profit sharing) dividend yield. Essentially I pay for 20 years then the compondened $ is mine to use. If I use the $ prior to that I pay it back w/o penalty. It also comes with a death beneift.

The benifits as I understand them is that the $ are not considered taxable income, being a KOC member is the only way to get the coverage and the insurance group returns 87% of the profit to its members, which is part of the 8%. The $, and benifits can be rolled over to a trust when I pass and my family can have 100% of the $.

Is anyone else doing this?

Take a look at the projected values worksheet the KofC Agent should have provided you. Take a look at the first three years or so of the "cash value" you should notice that their is virtually none, this is the result of the agent getting his commission.

I purchased a KofC policy in 1989 that was supposed to be a "10 year" pay policy, it was not, their was a class action lawsuit against KofC which was settled several years ago. Today I still have the policy and have not yet decided whether to keep it or not. Interestingly, it is only in the last year or so that the dividends cover the cost of the premium...

Unlike others on the board, I think that purchasing whole life insurance makes sense for some. In the situation you are describing, I agree with the "buy term" advice you have received from others.

Jim

 

[brewer12345]

Who is the underlying company that KOC is "sponsoring". KOC does not write the policy. You need to checkout the underlying issuer. That policy does not "get better" because of the KOC; it is only as good as the actual policy issuer. For instance I believe AARP "sponsors" The Hartford. In any event term is the correct route; forget Whole Live (or whatever they want to call it).

The KofC actually have their own "fraternal" life insurance company. There are several of these things, the largest of which (by far) is Thrivent, the Lutheran fraternal. Fraternal life insurance companies are a strange holdover from days of old. Basically a fraternal is kind of like a mutual company, except that in addition to making good on their policy obligations the insurer is supposed to do good works as well. Not that familiar with what the KofC does (I can guess), but Thrivent sponsors charity efforts, missionary stuff, and makes inexpensive mortgages for Lutheran churches. Last I knew, bit the KofC company and Thrivent were well run and conservative in their orientation, but its been a while since I had cause to pay attention.

If you have some sort of burning need to help KofC do good works by buying an insurance policy or if you are one of the few people who actually need whole life, go nuts. But ottherwise I would look elsewhere.

 

[ziggy29]

Insurance is insurance. Investing is investing. And ne'er the twain shall meet.

Both are important in an overall financial plan. But one should not typically be used to accomplish the other.

 

[OAG]

The KofC actually have their own "fraternal" life insurance company. There are several of these things, the largest of which (by far) is Thrivent, the Lutheran fraternal. Fraternal life insurance companies are a strange holdover from days of old. Basically a fraternal is kind of like a mutual company, except that in addition to making good on their policy obligations the insurer is supposed to do good works as well. Not that familiar with what the KofC does (I can guess), but Thrivent sponsors charity efforts, missionary stuff, and makes inexpensive mortgages for Lutheran churches. Last I knew, bit the KofC company and Thrivent were well run and conservative in their orientation, but its been a while since I had cause to pay attention.

If you have some sort of burning need to help KofC do good works by buying an insurance policy or if you are one of the few people who actually need whole life, go nuts. But ottherwise I would look elsewhere.

Between you and FD you guys keep me informed. I was not aware of that, thanks.

 

[FinanceDude]

Between you and FD you guys keep me informed. I was not aware of that, thanks.

I don't know about KOC, but I'm not too keen on Thrivent's "advisors", they are quite a destructive force in Wisconsin, the headquarters for Thrivent. Their funds suck and their insurance is mediocre, but folks stay with them because they "see their advisor" every Sunday at church........

 

[73ss454]

The advisor at Church, that's a good one FD. What's the advisor's name. (heh)

 

[FinanceDude]

The advisor at Church, that's a good one FD. What's the advisor's name. (heh)

Thrivent markets in the churches, so they hire advisors from Lutheran churches for the most part and the advisor markets directly to the parishoners with the pastor's blessing.

Go look up some Thrivent funds on Yahoo Finance, you'll see what I mean.

However, its hard to dump your advisor when he/she is an usher or works on the Church Council Committee.........

 

[73ss454]

So, are you working Sunday?

 

[FinanceDude]

So, are you working Sunday?

I'm Catholic, so no, I just get to atone for sins I'm not sure I've committed yet........

 

[Sarah in SC]

Ditto on the Thrivent. Rotten funds and cheesy salespeople.

 

[In-control]

Thanks for all the info. and advise. One piece of insurance that I am buying is long term care. @ ~$500/yr for an unlimited, $250/day policy is pretty good. I have had personal experience with the day's running out in Medicare and other insurance health care carriers. It's not expensive and @200/day really adds up quickly.

 

[FinanceDude]

Thanks for all the info. and advise. One piece of insurance that I am buying is long term care. @ ~$500/yr for an unlimited, $250/day policy is pretty good. I have had personal experience with the day's running out in Medicare and other insurance health care carriers. It's not expensive and @200/day really adds up quickly.

Which company? That is a very LOW price........

 

[In-control]

Which company? That is a very LOW price........

Knights of Columbus. You need to be a member before you can get anything.

 

[Rich_by_the_Bay]

Thanks for all the info. and advise. One piece of insurance that I am buying is long term care. @ ~$500/yr for an unlimited, $250/day policy is pretty good. I have had personal experience with the day's running out in Medicare and other insurance health care carriers. It's not expensive and @200/day really adds up quickly.

Better recheck the premiums and benefits. That sounds too good to be true...

Check the duration of care it covers, not just the per diem. Check the waiting period, if any. Just be careful. There are plenty of detailed threads around here discussing the ups and downs of such coverage.

 

[jimnjana]

Thanks for all the info. and advise. One piece of insurance that I am buying is long term care. @ ~$500/yr for an unlimited, $250/day policy is pretty good. I have had personal experience with the day's running out in Medicare and other insurance health care carriers. It's not expensive and @200/day really adds up quickly.

That is cheap, the last time I spoke to my KofC agent about my whole life policy I brought up LTC and the fact that my wife was denied coverage thru the federal employee program. He made it sound like he could get us coverage as long as she was breathing...within limits.

Jim