What are the REAL benefits/downsides of whole life insurance? My TikTok is flooded with these finance gurus trying to sell it and are saying all kinds of stuff that sound sketchy like infinite money loops and whatnot
In: Economics
If they had an infinite money loop, why would they tell YOU about it? Why would they need to sell something if they knew how to get infinite money? Why are they not chilling on their own private Yacht instead of making posts on social media?
I bet if you catch the names of the companies they work for and you do a bit of digging, each and every one will be an MLM. They are not “finance gurus”, they are people that got duped into joining. I’ve seen exactly the same thing on my social and have googled 2 of the companies so far, both were MLMs and one was an offshoot of Primerica.
there is only 1 benefit, and it is minor.
Whole life is effectivly a tax-deffered saving account you cant use, with a fixed monthly deposit rate, and high fees.
The only benefit is you HAVE to pay the monthly fee, which turns it into a “bill” in your mental acounting instead of “extra money I should invest”
It’s life insurance with an investment attached, but the investment comes with a big commission for the agents, which is why they love selling it. You’re better off getting term life insurance and then investing the amount you save in an index fund that doesn’t have the commission.
So yes, benefits are that it can pay off, like any investment – but it’s not your best option.
Real benefit: you have life insurance for your whole life as long as you pay premiums (whole life). A cash value account.
Downside: higher premiums (compared to term) in the beginning. a part of the premium goes towards saving (something like savings account or mutual fund) and rest goes towards actual insurance (mortality rate). The idea they are promoting is you can borrow this cash value at a later point. There are administrative fees baked in. Not meant for short term.
fun fact: agent commissions are higher for whole life insurance hence these gurus push for it, sometimes 80pct of the annual premium.
Alternative: buy a term life and invest rest yourself in mutual fund or index fund.
eg: whole life can be $4500 per year, term can be $1200 per year (all depending on age, length of insurance etc).
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