The short answer to this question is no; however, the way that whole life insurance is sold can sometimes seem like a scam to those who buy it. There is a time and a place for almost every financial product out there, otherwise they would not have been created. Some are just expensive, such as whole life insurance, and do not make sense for a large percentage of the population. Unfortunately for the consumer, whole life generally brings in the biggest commissions. For this reason if you receive a life insurance quote, you will generally be pitched whole life first. So who should consider whole life insurance and who shouldn’t?
This is what the professionals advise:
Marty McNamara, co-founder at Marrick Wealth answers this question as well saying, “Whole life insurance a scam? No. Is it sold to people who do not have a need for it? Absolutely… and unfortunately it’s done everyday.” There is generally a specific type of person to whom it should be sold. He says, “It is typically sold to someone age 40 or above making a good income.” If this description fits you, whole life insurance may still be worth considering.
Brian Frederick CFP, gives some good advice as well, “The agent might try to scare you into thinking that you need to get whole life now (when you are young) in case you get sick or are otherwise uninsurable in the future. Don’t fall for this. Instead make sure that the term policy you buy includes a convertibility privilege…Convertibility gives you the option to convert all or a portion of a term policy to a cash value, permanent policy in the future regardless of your medical condition at the time you do the conversion.” He also explains that he only advocates for his clients to look into permanent policies, such as whole life, if the are already maxing out their 401K and IRA accounts.
Mark Smith, President at Vision Wealth Planning, LLC also explains, “You should purchase the amount needed to cover your obligations and to provide your family with the replacement of your income.” If you are still young and do not have a lot of income, you likely do not need a lot of coverage, but you may in the future. To plan for this, a term policy may be perfect for someone at the start of their career. James Kinney, owner of Financial Pathway puts it this way, “Bottom Line: You can get more insurance for less money buying term.”
Where does that leave you?
What all of these professionals are saying is that whole life insurance has a place and a time in which it should be considered. No life insurance policy fits everybody, although it is advised that everyone have life insurance. It’s important to evaluate your situation and understand what you really need out of a life insurance policy.
Do you have a life insurance policy? How did you decide what type was right for you?