The U.S. stock market's benchmark, the Dow Jones Industrial Average (DJIA), is hovering around 17,000. That's a 143 percent increase since 2008 when the recession caused it to topple to 7,000.
There's no doubt our nation's stock market is on a tear, which is why I'm hearing investment guru Suze Orman's siren song ringing in my ear. Suze is telling everyone -- and she talks to a lot of people via the Internet, television and Twitter -- to get rid of that stodgy whole life insurance policy, buy a cheap term life insurance policy instead, and invest the difference in the market.
In one such presentation on YouTube, Orman answers a question from a lady whose financial adviser sold her a $650-a-month variable life policy with a death benefit of $750,000. Suze is so sarcastic it looks like she's throwing a tantrum.
"First, get a new financial adviser!" she berates the caller.
Whole life, universal life and variable life "are at the top 10 of Ms. Orman's hate list!" Suze says that whole life policies "do everything for the financial person who sold it to you and do absolutely nothing for you!"
Cancel the old insurance and buy a term life policy, she says. You can get a 20-year term policy for $50 a month and put the other $600 into a retirement account. Insurance, Orman says, is insurance. It was never meant to be an investment.
Whole life criticism nothing new
Suze makes some good points, but it's nothing that hasn't been said before, just without the studio audience, loud applause and marketing mania that surround her.
In the 1980s a financial wizard named Gerry Tsai took over an insurance company specializing in term life policies. He convinced people to sell their whole life and put the money in "momentum stocks" like camera-maker Polaroid. Tsai died a very rich man, but when Polaroid died its investors were a lot poorer.
The Consumer Federation of America's Director of Insurance, Bob Hunter, will tell you the same thing. Buy a cheap term life policy and keep it only until your children are grown. Meanwhile let your assets accumulate in other investments such as a 401k.
I also agree with Orman and Hunter -- but with a caveat. Instead of buying term life insurance, I took advantage of the free term policy offered by my employers and used the savings to pay down my mortgage. The rationale: If I died my wife could use the term life benefit to pay off our mortgage and refinance, giving her the financial cushion she'd need to survive without my earnings.
Whole life insurance stagnates
While many people are using similar strategies to mine, it's unclear whether they're following Suze Orman's or their own advice.
Sales of individual life insurance policies were flat in 2013, according to LIMRA, an industry group that tracks sales. So it appears that people are putting their money elsewhere.
But does it make sense to dump that whole life insurance policy just now? Undoubtedly you're not realizing a big return, unless it includes an investment account. But life insurers, by definition, must put most of their money into "safe" investments like Treasuries because they have to pay when the policyholder dies.
This means your whole life policy won't lose half of its value, like the market did six years ago, but instead will continue to grow tax-free as long as it remains in effect.
Life insurance companies would argue that one of the biggest reasons to purchase whole life is that most people are irresponsible. They buy when the market is high, like now, then panic and sell when the market is low.
They also have a tendency to run up credit card debt and pay exorbitant interest. And they put off saving for their children's education and their own retirement until it's too late.
But whole life insurance forces people to save every month for their future, which is the argument most agents use when trying to sell it to you in the first place.
When you have cash value inside the policy, you can borrow against it at a low rate and use the money to buy a house, car or even invest in the market.
As for Suze, I like to listen to what she says. But then, I like to listen to Dr. Oz, too. He recently had to testify before Congress, which rapped him on the knuckles for touting "miracle" weight loss programs. So, don't take everything television gurus say seriously.