My employer had an insurance agent give a presentation regarding life insurance and the agent gave out his business card to those who were interested in more information afterward. He was of course selling whole life insurance. I would write a post about the differences about term life insurance versus whole life insurance but there are much more qualified people than me to discuss this topic. To read a good explanation of the difference between the two, check out this post on Wise Dollar. Basically, whole life insurance will cover you for your whole life, hence the name, whereas term life will only cover you for a set term, i.e 10 years, 20 years, etc. The premiums for whole life insurance will be much higher than a comparable term life insurance policy.
When I first graduated from college, a friend of mine took a job as a life insurance salesman excuse me, he preferred “financial advisor.” He kept trying to sell me whole life insurance and explained to me the benefits of it but I wasn’t interested. I was only 22 and had no dependents, why do I need life insurance? My job provided a group life insurance policy which would have covered my funeral in case an unfortunate early demise were to befall me. He tried to explain the investment aspect to me but, I still wasn’t interested. The fees are too high and I’d rather just buy term life insurance and invest the rest on my own. Much of my arguments were based on a book I read regarding whole life insurance versus term life, and I’m glad I read it.
Fast forward to present time. I had strong feelings regarding term life insurance versus whole life, but I went to the presentation with my fellow co-workers. After the life insurance presentation, some of my co-workers were discussing the topic. One of my co-workers said that whole life insurance was better than term life because term life insurance does not cover you for your whole life. There are some benefits to whole life insurance, but they generally pertain to those with a large net worth and for those who are interested in estate planning. This was not the argument my co-worker was making.
“Why do you need life insurance to cover you for your whole life?,” I inquired. Wouldn’t a 20 or 30 year term policy be sufficient to protect you, since by then your kids will be all grown up and not dependent on you. Plus, being that we work in government, after 20 or 30 years, we would qualify for our pension so our spouse would be secure as well. My co-worker responded that the money would be used to pay for the funeral and credit card bills. She chided me for not thinking of my family. “Do you expect them to pay those expenses?,” she asked.
I told her that I would like to think that in the next 20 to 30 years, I would have been able to save up enough to cover those funeral expenses and that I’ve never carried a balance on my credit card and did not intend to do so at my death. This devolved into a discussion about credit card bills and the economy. Other co-workers joined in and said that carrying a credit card was inevitable to make ends meet since there are so many expenses and bills to pay. Their comments later seemed to imply that I must be lucky not to have to carry a credit card balance. Feeling a little frustrated and like they were ganging up on me, I stupidly blurted out that people shouldn’t carry balances on their credit cards. I mean the interest rates on credit cards are usurious, the only way they get away from charging such usurious rates is by setting up headquarters in states which allow it, and then the credit card companies can export those rates to the rest of the country. I also, regrettably, said to my co-workers that if one couldn’t pay the balance in full, then they just shouldn’t charge it. Unless it was to pay for necessities like food and shelter, why would you subject yourself to such a high interest rate. There was a bit of a silence in the conversation, and I knew I probably should have just kept my mouth shut. I should stick to venting about financial matters anonymously on this blog! Thankfully, another co-worker changed the topic slightly and said that he preferred a whole life insurance because he wanted to leave his children a large amount of money. I don’t really think that’s a good reason to pay the extra premiums either, but I just nodded and smiled.
What is your opinion regarding term life insurance and whole life insurance? Do you discuss money matters with your co-workers? And, why do people carry balances on their credit cards when the interest rates are so ridiculously high?! =)
I’m with you Andrew, on both topics. Topic one is one of the big reasons I invested in Visa, and why I don’t talk with coworkers about money. It’s funny, because the coworkers think I am very odd. Not that they are wrong…..but they chide me about us having such a small home and simple cars. They also know I don’t need this job, but very rarely go out to eat lunch. Those 4 things don’t go together for many of them.
What I think is funny, is that 2 of them have now come to me for investment/spending advice. Haha. People are funny. Oh well, keeps life interesting.
Have a great weekend buddy
-Bryan
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Yea, one of my co-workers has come to me for investment/spending advice. The other ones think I’m a cheapskate. I prefer frugal!
I never discuss money with co-workers because it always brings up judgement from co-workers but for some reason I don’t mind talking about money on my blog.
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Yea, I try not to but it’s hard when you spend so much time with them. Plus, I get a long with them and we are friendly so you get comfortable talking to them. Having a blog is a great outlet for my money thoughts!
If you’re the type who doesn’t know quite how long you’ll need life insurance, then renewable term life insurance is a better product than whole life insurance (most of the time). This is what we have, since we figure we are likely to become Financially independent at a young-ish age.
I don’t mind having a conversation about credit card debt with truly low income earners, but for those earning the median or above, it’s just ridiculous, even in NYC.
Oh my co-workers are definitely above the median in earning. They do have student loans, but I think a lot of their issues stem from consumer spending.
I guess it’s another example of why this sort of stuff should be covered in high school. Obviously your work mates are university graduates but they still don’t get it.
Money is a tool most people have no idea how to use. But, I think that’s the way big business likes it.
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Exactly, money is only a tool. I often hear that credit card companies are evil…I can’t really dispute that, but the credit card is only tool to use your money. If you use it properly, you won’t have any problems and will actually reap some benefits.
Andrew, sometimes people need to hear a little truth, my friend. It’s not always fun to be the truth teller, and there are definitely times when we should keep our mouths shut, but at the same time, a little truth can change a life. I know we wouldn’t be working toward debt freedom if it weren’t for Dave Ramsey’s “tell it like it is” style in The Total Money Makeover. One of the things that really resonated with me in that book was his in-your-face honesty. Sometimes we all need a little dose of that. I’m proud of you, friend, for speaking up.
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I think the in-your-face honestly works better when the person admits that they have a problem and is actively trying to fix it. If you buy Dave Ramsey’s book, you’ve already admitted there’s a problem and you’re actively trying to fix it. Plus, Dave Ramsey giving it to you straight in a book is probably different than a coworker doing it =) I try to be as gentle as possible when I give advice so I don’t seem like I’m sitting on my high horse imparting wisdom.
I think a lot of people take financial information from “experts” (er, salesmen) at face value. People don’t question it or think much more into it because it takes effort and curiosity most people don’t have. I agree with you, but most people sadly aren’t planning on being in great financial health later on. As you saw from your coworkers, most of them are in debt and believe they’ll be in debt for the foreseeable future. That seems prevalent among the baby boomer generation (at least within my family and older coworkers) and nowadays, especially with student loans. I wish people would stop and think about what’s really necessary to survive in life. I know far too many people who are “broke” but still eating out and buying on impulse. Ack!
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Actually, when I mentioned the issue of commission as a reason why an insurance agent might not have interests that are aligned with the client, my co-worker said she has no problem with a professional getting paid. I see that point, but you want to make sure that there is no conflict of interest.
I and my co-workers talk about money matters as long as it is not private. Because sharing it with others, it helps me get good advice and I kinda help them with their problems as well. As a matter of fact, the reason why I have life insurance now is because my friend told me about its benefits.
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I gladly give advice when solicited. My coworkers did open up a 401k plan based on my encouragement and they’ve been happy with the results.
I actually recently did a podcast about this because I hate the confusion that life insurance agents create for people. Whole life isn’t bad on it’s own, but it’s bad when it’s sold for the wrong reasons – namely making money for the insurance agent. I typically suggest term life to my clients as a very basic first step. It’s the best and cheapest way to get the coverage you need while you’re growing your wealth. I can tell you that I never advise clients to get insurance to cover credit card debt. It’s scary to think about planning for that to me.
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I’ll have to check out that podcast.