Why does Suze Orman hate whole life insurance?

Question

Orman repeatedly says how much she hates whole life on her show.

I was doing a bit of research and found that Robert C. Wright who is the head of NBC Universal (Suze's Boss) spends 506,000 dollars per year on whole life insurance. Why is it that suzes boss does not follow her advice? is it possible that this billionaire was duped by an unscrupulous insurance agent into buying this stuff? HMMM, If Suzes boss does not even follow her advice than why should anyone else? why doesnt Robert Wright just buy term and invest the difference like many on this forum, and Suze say to do. Surely he has the resources to hire a competent financial advisor. Maybe buy term and invest the difference isnt the best option.

Answer 1

For starters she is an absolute moron. That really is the best thing I can say about her so I will stop there.

Please do not make the massive mistake of confusing financial media shills with real life financial planners. I assure you there is a distinct difference in regard to the quality of advice received.

I would agree with Aaron P and I would bet every penny I have that her boss does not employ her vapid, useless advice because he has a real financial planer he is working with whom you will not hear about on CNN but does his/her job extremely well.

Answer 2

Take at look of the facts. This is how whole life insurance works:

1) You pay level premiums for the rest of your life or until the policy expires. Majority of life insurance policies expires when you are 100 years old.

2) Your premiums are paid for 2 things: The life insurance itself and the cash value.

3) No cash value is accumulated in first 2 years. After 2 years, you will get interest between 1-3%.

4) If you wish to take money out from the cash value, you have to borrow it and pay loan interest of 6-8%.

4a) If you die and there's a loan on the cash value, the amount of loan plus any missed premiums will be deducted from the death benefit.

4b) If you surrender the life policy and there's a loan on the cash value, you will pay income tax on the amount borrowed.

5) If you die someday, the insurance company keeps the cash value.

As you can see, cash value is a rip off. It has slow growth and I could do much better by investing the difference or saving it in money markets. If whole life didn't build cash value, it would be called Level Term to Age 100 and it would be cheaper too.

I have always sold term insurance and help clients invest the difference (or help them start investing). Its the best financial plan because term insurance provides adequate amount of coverage for low amount of premiums. At the same time, the client is building wealth for retirement. When term insurance expires, the client would need to evaluate their financial needs. In theory, most people don't need life insurance forever. As they get older, their financial obligations decrease and their savings goes up, so the need for life insurance is low. If my client still needs life insurance when the term expires, my client can either renew it without having to provide proof of insurability or they can exchange it for another term policy.

Answer 3

The truth is because when you make the kind of money he is making its so you can pass the cash value of the life insurance policy on with out them being hit by an inheritance tax.  For the average person making less than 250K/yr term is better and investing the difference.  Only the super rich are really worried about this. Insurance people and financial people get a BIG comission for a universal life policy.

Answer 4

I used to work for an insurance company and I saw her say that once and I was very confused. Sometimes, whole life insurance isn't the way to go, especially if you are struggling to make ends meet now. Because chances are you will let the policy lapse because they are more expensive than term policies and you will be left with no investment or life insurance coverage. If you are struggling financially, buy term...I have a 125,000 term policy that I pay about $30 a month for and my fiance has a 50,000 term life policy that he pays $57 a month for. My policy is cheap and provides no long term investment and as I get older it will get more expensive, however is good for now...if I just want to protect my fiance in the future...his will gain cash value in the future...far in the future.  So my advice is...if you have the extra money-get whole life. It gains cash value that you can cash the policy in for or you can take out loans from it in the future. Do it young, the younger you are the better...the premium never increases.

Answer 5

Her job is not to give the best advice to everyone.  It is to give an opinion in such a way that makes want to pay attention.  This lets her boss sell gobs of advertising.  She is a financial spokes model.

Her advice is generally true for a general population, if dogmatic.  But don't worry, someone like Robert C. Wright would never hire her as his adviser.  She isn't sophisticated enough.  

She can't even follow her own advice.  You should have asked why most of her money is sitting around in bonds.

Answer 6

Because she is not the brightest crayon in the box... You can 't offer the same life insurance policy to all of your prospects/clients... You are not making cookies ... People have different needs and "invest"different ways

Answer 7

Why did you seem to ask a question, then answer it yourself to your own satisfaction without letting anyone else provide you with an answer?

If I were to try to explain why a boss of SEVERAL HUNDRED employees would not necessarily do what ONE of his employees espouses as the "right" thing to do I would propose that this might be his thinking:

    Hmmm, what Suzie says about buying term insurance

    instead of whole life insurance, then taking the money

    saved by paying a lower premium for the same amount

    of insurance & investing it in an account, or fund, that

    pays more than the paltry interest earned on a whole

    life policy should prove to be the best thing, if history

    is any indicator.  But, it also involves more risk, so I

    will take the less risky route to placate & pacify the

    majority of employees & shareholders who are risk

    averse.

Or, perhaps, he has to feel like he's in control & wants to make is own decisions (sound like anyone you might know?) so he's just doing it to spite her.

The long & shofrt of it is - - why do you care so much?  No one else seems to . . .

Answer 8

What the head of NBC does is irrelevant to the average person.

Many people feel that whole life, which is marketed in part as a financial investment, is a poor deal.  They think it is better to buy level term life (much cheaper premium) and invest the dollars saved in other ways.  I agree.