Chris Huntley, founder of Huntley Wealth is spearheading an exciting movement called the Whole Life Insurance Rebellion, which will be kicking off May 31st 2016. “This rebellion is more a condemnation of life insurance industry practices and how whole life insurance is currently being sold, than it is an indictment of the product itself. We would like to educate consumers about their options without the pull of personal gain.” If you want to keep abreast of the latest news, Nerd Wallet, PlantingMoneySeeds.com & InsuranceLiteracy.org and the Huffington Post will be covering this historic event in coming weeks.
An incredible 63.7% of all life insurance policies sold today are Whole Life, estimates the American Council of Life insurers! Admittedly Whole Life Insurance has its place, but this disproportionately high number is the result of juicy commissions offered to agents who sell these policies.
Many financial advisors, including Dave Ramsay and Suze Orman do not advocate purchasing Whole Life Insurance. Term insurance offers great coverage at a fraction of the cost and the money you save may be invested in a vehicle that gives you better overall returns.
Drawbacks of Whole Life Insurance
There are many drawbacks In regard to Whole Life Insurance, but the most obvious issues are the administrative fees and costs surrounding this expensive life insurance.
Heavy Initial Fees and Commissions
Incredibly, most agents make 80% – 110% of the first year’s premium in commission. This explains the brutal surrender penalties that govern your policy for the first 10 years. Typically it takes 7 – 10 years to break even. So let’s say for example, you purchase a $5,000 whole life policy with a 90% first year commission. Your agent will earn $4,500 in commission. There is quite a bit of financial incentive to push a whole life policy rather than term.
There are also additional expenses that will be deducted from your premiums that include the cost of insurance, administrative fees, policy fees and surrender charges (for the first 15 years). For your information these expenses are heavily loaded to the front of your policy, so whole life insurance performs far better after the first 10 years of investment. That being noted, these expenses undeniably drag down the overall performance of whole life insurance.
Whole Life Insurance is EXPENSIVE
Quite simply put, on average Whole Life Insurance premiums cost 10-20x what term insurance premiums cost. Even if you require lifetime coverage, you can purchase guaranteed universal life, for about half the cost of whole life.
Educate and Empower
Chris Huntley is using the Whole Life Insurance Rebellion as an opportunity to teach consumers about the ins and outs of Whole Life Insurance. The message he would like to convey is that Whole Life Insurance should not be used as an investment. The money you save by purchasing term life insurance could be directed into a far more lucrative investment opportunity that will maximize your dollars. Understanding the fine print will enable consumers to make a decision that will support their needs instead lining their agent’s pockets.
Tony Steuer from InsuranceLiteracy.org has created the Insurance Consumer Bill of Rights on Indiegogo.com, which calls for changes in the insurance industry that will require all agents to act in the consumers’ best interest. Which translates into providing coverage that is both affordable and targeted to consumers’ specific needs. Insurance agents should be held accountable for the advice they offer. You have probably heard of the Hippocratic and Fiduciary Oaths, codes of ethics medical and financial advisors must swear to live by. The life insurance industry has no such code and should adopt one.