Thanks to social media there are a multitude of random short videos with people giving investing advice.
Some of those videos focus on whole life insurance policies as a underutilized investment tool. But legacy finance expert Dave Ramsey, host of "The Ramsey Show," is not a fan of the strategy.
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“It’s not a mild dislike. I hate it,” Ramsey said of whole life insurance policies, according to Yahoo.
"Whole life insurance is a poor investment and is too expensive for the returns you receive from the policy."
Term life insurance policies cover those who are enrolled for a specific amount of time, while whole life covers you for your entire life.
Whole life insurance monthly premiums are higher than term policies. Part of the cash paid into a whole policy goes into an account that is guaranteed cash value growth.
But Ramsey says that for every $100 paid into who life insurance premiums, the insured could buy the same amount of term life insurance for about $5.
On top of that, the cash accrual benefits don't start kicking in for some time on most policies.
"Your cash value build-up for the first three years is $0. One hundred percent of that [additional] $95 you’re paying goes to fees," according to Ramsey.
When you do start earning interest on the money, the rate is about 1.2% on average, Ramsey said.
And you can't withdraw the money in your cash account until you reach "maturity age," which varies by insurer, but has been documented as being 120 years old in some cases.
“If you didn’t do anything with that cash value while you were alive, guess what? The insurance company keeps it! Your family gets the death benefit, and the insurance company nabs your cash value account," Ramsey said.
