Hi guyz

I'm Bob. I am new to this forum. Month ago, my friend met with an accident and deceased suddenly. He had a life insurance policy. Actually it was to serve his family members needs in his absence. But they troubled a lot in claiming the insurance policy because of the complexity of the terms & conditions in the policy. After this tragic moment I got panic about my family and started searching for the life insurance policy on the web which offers coverage cheaper yet reliable. While searching for it I gone through the site www.insurancepaylite.com who offers life insurance policy at low & affordable rates. Anyone tried this?

Sincerely,

Bob

is this a quick attempt at some slick advertising or real deal?

Yeah, looks like board spam to me.

However, since the topic came up,

If you're young and single, don't waste any money on life insurance. At the most, get an accidental death policy in case you have an accident out in the twisties and it'll pay for your funeral or cremation.

If you're married and own a house, you don't want your spouse trapped in a house he or she can't afford and ends up having to sell it. A 20 or 30 year term policy is the order of the day here. Cheap. Very cheap. The idea is, pay the low premium while you ALSO invest and save and by the time your policy expires, you'll have enough in savings to pay off the house if you die. You essentially become self-insured which is a good thing, of course.

Whole life or Cash Value or Universal Life (or whatever other names they've cooked up for it) is where the policy has an investment portion attached to it. This is NOT, in my opinion, a very good product UNLESS you're over 50 years old and you've already invested as much as you can in whatever other investment vehicles are available out there. This kind of policy has it's place but it's VERY expensive in most cases and not suitable for the younger crowd, say, below age 40.

Most insurance agents REALLY REALLY REALLY want to sell the policies with the investments and cash value features. They make a lot more commission on those policies. If you decide, however, that it's the thing for you, READ THE FINE PRINT. Ask questions about anything you don't understand. I assure you, you'll be glad you did.

An educated buyer gets the right thing more often than not.

--Wag--

Yeah, looks like board spam to me.

However, since the topic came up,

If you're young and single, don't waste any money on life insurance. At the most, get an accidental death policy in case you have an accident out in the twisties and it'll pay for your funeral or cremation.

If you're married and own a house, you don't want your spouse trapped in a house he or she can't afford and ends up having to sell it. A 20 or 30 year term policy is the order of the day here. Cheap. Very cheap. The idea is, pay the low premium while you ALSO invest and save and by the time your policy expires, you'll have enough in savings to pay off the house if you die. You essentially become self-insured which is a good thing, of course.

Whole life or Cash Value or Universal Life (or whatever other names they've cooked up for it) is where the policy has an investment portion attached to it. This is NOT, in my opinion, a very good product UNLESS you're over 50 years old and you've already invested as much as you can in whatever other investment vehicles are available out there. This kind of policy has it's place but it's VERY expensive in most cases and not suitable for the younger crowd, say, below age 40.

Most insurance agents REALLY REALLY REALLY want to sell the policies with the investments and cash value features. They make a lot more commission on those policies. If you decide, however, that it's the thing for you, READ THE FINE PRINT. Ask questions about anything you don't understand. I assure you, you'll be glad you did.

An educated buyer gets the right thing more often than not.

--Wag--

Ok this is exactly why people who don't know what in the hell they are talking about shouldn't be allowed to post. Look I can't tell people how to work on their bike so I keep my mouth shut...You should consider doing the same. If you are young and single consider a small permanent policy to make sure you are locking in insurability. If you can't afford a permanent policy then get a term policy that is convertible in case you are not eligible for insurance when you need it. However, it sounds like you have a family. Permanent policies actually allow you to self insure because the cash value reduces the amount of insurance that you are paying for. So, even as the cost per thousand goes up as you get older the total cost of insurance can go down because you are paying for less thousands. In a term policy you constantly pay for the same amount of insurance. The cost per thousand will be the same in both policies but remember you buy less thousands with the permanent one. The reason people think it is expensive is because they don't understand it. Part of your premium will go to insurance and the rest gets saved into cash value. The newest name we have cooked up is called a Variable Universal Life policy. It has mutual fund like sub accounts. You can invest this just like you do a 401(k) or any other investment that has sub accounts. You are buying term and investing the differnce all in one policy. The difference is that the VUL cash value grows tax deffered and comes out tax free if you want to withdraw it later in life. In the policies I have you can withdraw money after 10 years without penalty. Make sure the policy you choose has good investment choices and reasonable expenses. Particularly when you go to withdraw. Some policies have penalties for life to withdraw money. Some like mine are minimal for a small period of time and then they are free.....just keep in mind that term policies pay out less than 2% of the time. There is a place for them. I use term policies for clients with a temporary need. Like a mortgage for instance. Or more than likely for cash flow. If you can't afford to put enough money into the permanent policy it will collapse so choose a term policy. Hope this helps. However, I encourage you to get an advisor and ask their opinion for what is best for your particular situation and then do your resarch...don't take anyones opinion on here because they don't know about your situation.

No one who doesn't sell Whole/Variable/Universal Life insurance thinks it's a good product. You've just heard a nice regurgitation of the sales pitch.
1. You don't need insurance for your whole life. Life insurance is for your family to replace your income if you die. Once you're rich or retired you're done with life insurance. "Locking in insurability" is a cute catch-phrase designed to make it sound like you shouldn't be living life without life insurance. Does Bill Gates need life insurance? Do you need a half million dollar life insurance policy if you have a have million dollars in investments?
2. Whole/Variable/Universal Life is expensive insurance (annual renewable term which he admits gets more expensive every year) wrapped up with a crappy investment/savings component ("mutual fund like" investments). Even if they were actual mutual funds, the extra fees the insurance company piles on make them underperform radically. Need proof? Cash out a cash value policy - there'll be no capital gains tax. That's the tax levied on invested money that actually earned a rate of return. The fact that it's tax deferred is meaningless if it's a piss-poor investment which it is according to every consumer magazine, the vast majority of financial planners, and a decent calculator.
3. The cash value never becomes your money - unless you wise up and cancel the whole policy. You can borrow it, but only if you pay it back and only if you continue to make the payments on the policy.

These crap products are the cash-cows of the insurance world. The high-pressure sales jobs you see around them are for a reason - huge commissions. Just like extended warranties - a real good deal for someone, but it ain't you.

Currently, a 30 year old non-smoker can buy a $500,000 30-year level term (premium never goes up) policy for 34 bucks a month. A quick look at a "cash value" policy for the same coverage for the same guy is $166 a month. The extra $132 goes into a crappy high-fee investment vehicle that no one can really describe, where after 2 or 3 mysterious years of not amassing any cash value, the "account" will begin to grow (averaging 7% when mutual funds are making 12% according to Consumer Digest). You are allowed to borrow your own money as long as you pay it back and keep making your premium payment. At some point the policy will begin to "pay your premiums for you" in the form of "dividends". "Dividends" is in quotation marks because the SEC does not classify them that way, they classify them as what they are - a partial refund of a previous over payment.

Insurance is for transferring risk - in this case the risk of you dying and leaving your family hanging with a mortgage and all the monthly bills. If someone depends on your income it is absolutely mandatory that you get around 10 times your annual pay in level term insurance to replace your income in the event of your death. But insurance is not an investment. Investments need to be kept clean, separate, trackable, changeable, accountable, and transparent.

Actually you shouldnt be telling people what they need. Some people want to leave a legacy for their children or grand children. Your values are not necessarily the same as everyone elses, and if you decided that you don't need the life insurance later in life there are ways of controlling the policy to pull cash out and collapse the insurance value down so that the policy is self sustaining.

to your second point. I said the cost per thousand goes up every year. With a term policy they take 1 year renewable term rates and average them out for the number of years in the policy. Say 20 years. So, in the first half of the policy you are overpaying for insurance (this is how an average works). It isn't that the cost of insurance is more expensive in the policy it is how you pay for it. In a permanent policy you pay less for the insurance up front because the cost per thousand will be slightly lower. Reason being that it is a 1 year renewable rate compared to an average of 20 renewable rates. As you self insurance the cost per thousand goes up in a permanent policy...but you are already paying for that in a term...however in a permanent policy you are self insuring and paying for less insurance with every premium you pay.

to your third point...you still don't know what you are talking about...because it is considered borrowing which is why it is tax free income...however, in a good policy you borrow at 0% so the borrowed money never has to be repayed and you don't have a policy eating itself over time.

To your 4th point...the cash cows of the insurance world are TERM POLICIES...they pay out less than 2% of the time....permanent policies collect less money for the cost of insurance long term and pay out as long as the policy is funded correctly.

Your example is completely subjective and you don't even refer to the type of policy you are talking about....The returns you get in the policy depend on the type of policy and the amount of risk you are taking with the investments. So, the 7% is completely subjective as well....if you compare the cost of insurance to the cost you pay in taxes long term by buying term and investing the difference...you will pay less for insurance than you will in taxes...would you rather make your family rich or the gov't?

I would like to submit that I don't care what people do with their money and I am not trying to give advice....But I can't stand it when people misrepresent and criticize something that they don't understand....What you heard in this gentleman's post is a regurgitation of the "Susie Ormans" of the the world who give mass advice to people without having any idea what is appropriate for them....if you would like to be analytical I would be happy to go there and win.

It is also important to understand that this is what I do for a living and I have ran the numbers over and over because I am a cynic too. However, I know that all of the things I have said are true for the policies I work with....do your own research...Keep in mind that my richest clients put ungodly amounts of money into these policies because of the protection and tax advantages

<<Some people want to leave a legacy for their children or grand children.>>

Saving in a crappy investment because it's tax free (all loans are tax free, so are investments that don't earn a rate of return) is not going to get you there. Neither is paying 3 times too much for life insurance.


<<if you decided that you don't need the life insurance later in life there are ways of controlling the policy to pull cash out and collapse the insurance value down so that the policy is self sustaining.>>
I don't even know what this means except maybe it means you cash out - putting you exactly where you would have been had you bought term insurance in the first place. Or maybe with a small policy that eats less of your cash value. I dunno, the gimmickry is hard to keep up with.

<<With a term policy they take 1 year renewable term rates and average them out for the number of years in the policy. Say 20 years. So, in the first half of the policy you are overpaying for insurance (this is how an average works). It isn't that the cost of insurance is more expensive in the policy it is how you pay for it. In a permanent policy you pay less for the insurance up front because the cost per thousand will be slightly lower. Reason being that it is a 1 year renewable rate compared to an average of 20 renewable rates. As you self insurance the cost per thousand goes up in a permanent policy...but you are already paying for that in a term...however in a permanent policy you are self insuring and paying for less insurance with every premium you pay.>>
Correct, I think, but not very clear. Annual renewable term insurance (ART) is very cheap for a Twenty-Something. Not very likely that you'll die. So the portion of your huge premium going to insurance is very small. Most of it should be going to cash value. But is it? If you've owned a cash value policy for 3 years or less, take a look at how long it has taken your cash value to start growing. I couldn't find an annual term quote for a 30 year old, so here's a 10-year, $500k, term policy for a 30 yr old: $13 a month. Okay, so annual term would be even less than that. Let's just call it 10 bucks a month. That means that in my above example, $122/month should be going into the "investments" aka "cash value". Most people who begin to question their cash value policies do so after having noticed that the cash value is near nil for quite a long period at the beginning. For example, the one I used to own grew to just over $3,000 after 6 years of paying $110/month. Do that math. Yikes.

<<because it is considered borrowing which is why it is tax free income...however, in a good policy you borrow at 0%>>
It's your money and you have to borrow it to use it. But hey, break out the party hats because if you've studied hard enough you may have found one of the "good" policies that allows you to borrow your own money without interest!!

<<..the cash cows of the insurance world are TERM POLICIES...they pay out less than 2% of the time>>
I'm not talking about total income, I'm talking about on a PER POLICY basis. Blessedly, most people have wised up to cash value life insurance products. The industry has done a good job of updating "the products" to address some of the most eggregious aspects thereby making them less horrific than they used to be. For example, the above $500k policy, after some cash value had amassed (lets say $15,000) USED to pay $500k at death. Where'd the $15k go? I think this has largely gone away. And the amount of time before cash value builds has decreased some, too. And they're claiming better investment vehicles, but they still vastly underperform the market. All these incremental changes to make the product sellable serve to illustrate the fact that the industry is keen to hang on to their CASH COWS!

<<I have ran the numbers over and over because I am a cynic too>>
A challenge: 30 year old. Wife, 2 kids. Makes $50,000/yr. Needs insurance. Needs to retire with dignity and leave something for his heirs.
Show me the math that gets him to age 65 using Whole Life with more money than buying term and investing the difference in a Roth IRA or even a taxable mutual fund account. Lay it out. With my plan he'll have "X" in tax-free cash value. In the "buy term" plan, he'll have only "Y". Show me the assumptions. Be advised, I have a calculator.

<<Show me the math that gets him to age 65 using Whole Life with more money than buying term and investing the difference in a Roth IRA or even a taxable mutual fund account.>>

I now understand why you hate cash value policies...I don't use Whole Life policies....ever. I will use a Universal Life policy occassionally if it is an older client who wants to have permanent insurance and does not have the time or need for growth...but I typically operate with a Variable Universal Life. Whole life policies suck and the policies have been outdated for years. They pay interest based on the profitability of the insurance company (which you would expect to be high) but they don't have to pay anything so they don't usually pay much. Also, if you don't fund the policy properly then the cash value will be useless other than maintaing the policy and even then it might not sustain. So, if you have an insurance salesman who just wants a sale they probably put you in as big of a policy that they could convince you to buy and then minimum funded it with promises of future riches.....not how it works and I don't like people who operate under these pretences. I will be happy to run a quote and give you an idea of how one of these policies should be funded and what you can pull from them...but I need to to know the need for insurance. the human life value is over a million but is that what you want to insure? Also, how much can you afford to put in the policy on a monthly basis? Let me know what you would like to assume for the rate of return this should be the same as what you are assuming for your Roth investments. I have 61 fund options from 18 fund families with a fixed account so staying competitive on the returns is not a problem.

By the way, I am not anti-term policies I am just telling you that if you have a permanent need then you need a permanent policy. And if you can afford the proper type of insurance you will be better off. But this is fun so get me the information and I will be happy to play along.

Give me the fund families and the tickers for the funds, and I'll do it myself.

One point is that whole life has morphed into variable universal life. True and I knew that. It became much more like "buy term and invest the difference". In fact, the more modern stuff may have gone quite a long way in the right direction. But it's still through an insurance company and they're going to get paid, so even if they're now using decent mutual funds the money to pay the insurance company has to come from somebody and that would be the policyholder.

This actually cleans things up a bit. You can either buy an annual renewable term policy, overpay for it by a factor of 10, and have the insurance company's representative pick from a small selection of mutual funds and invest that difference (minus fees of course) so that later you can have the option of borrowing back the money you overpaid; OR you can buy the same amount of coverage in 35 year level term insurance, for 1/10th the price, invest the difference $122/month in one or a series of mutual funds under the tax umbrella of a Roth IRA and end up with $463,000 TAX FREE OWNED MONEY.

i will run the numbers and get you the options on monday...i am to busy the next two days and i am leaving for a bike trip this weekend while it is still nice...i am sure you can understand

Ok this is exactly why people who don't know what in the hell they are talking about shouldn't be allowed to post. Look I can't tell people how to work on their bike so I keep my mouth shut...You should consider doing the same. If you are young and single consider a small permanent policy to make sure you are locking in insurability. If you can't afford a permanent policy then get a term policy that is convertible in case you are not eligible for insurance when you need it. However, it sounds like you have a family. Permanent policies actually allow you to self insure because the cash value reduces the amount of insurance that you are paying for. So, even as the cost per thousand goes up as you get older the total cost of insurance can go down because you are paying for less thousands. In a term policy you constantly pay for the same amount of insurance. The cost per thousand will be the same in both policies but remember you buy less thousands with the permanent one. The reason people think it is expensive is because they don't understand it. Part of your premium will go to insurance and the rest gets saved into cash value. The newest name we have cooked up is called a Variable Universal Life policy. It has mutual fund like sub accounts. You can invest this just like you do a 401(k) or any other investment that has sub accounts. You are buying term and investing the differnce all in one policy. The difference is that the VUL cash value grows tax deffered and comes out tax free if you want to withdraw it later in life. In the policies I have you can withdraw money after 10 years without penalty. Make sure the policy you choose has good investment choices and reasonable expenses. Particularly when you go to withdraw. Some policies have penalties for life to withdraw money. Some like mine are minimal for a small period of time and then they are free.....just keep in mind that term policies pay out less than 2% of the time. There is a place for them. I use term policies for clients with a temporary need. Like a mortgage for instance. Or more than likely for cash flow. If you can't afford to put enough money into the permanent policy it will collapse so choose a term policy. Hope this helps. However, I encourage you to get an advisor and ask their opinion for what is best for your particular situation and then do your resarch...don't take anyones opinion on here because they don't know about your situation.

Dude, no offense, but did you even read my post? You've practically argued for the points I made!

It's way more simple than that. As Dorkfish implied, the value of the investment at the end of the term policy is going to be MORE. Pure and simple.

I had an insurance guy try to sell me a UL policy a couple years ago and his big promise? In 20 years, the value of it was to be a whopping $100,000. All together now: Oooooooooooh. For the same amount of money he was going to charge me, I calculated that I would have the term coverage AND make about $400,000 in that time. Indeed, I'm halfway there in half the time and don't even need the term policies any more. I'll keep 'em just 'cause I can but they are not needed.

I won't say you'll never convince me but I will say you have to produce some cold hard numbers to make me a believer.

Cash value or UL policies are best used by people who have no self-discipline in regard to their savings. OR, they are for older people who have pretty much used up all the other available investment options around and can't get any more tax free stuff than they already have. You have to be pretty stinkin' rich to be in that position, though.

Here's another thing I don't like about it. If you put the money in, you can't take it out willy-nilly. If you buy investments in the open market, you can take it out the next frickin' day, no harm, no foul. But with the UL and VL contracts, you have to BORROW it? WTF!?!?!?!? It's YOUR goddamn money. Why should you have to do ANYTHING other than write a damn check for it?

Granted, the stock market is not the place for undisciplined people which brings to mind another group of people for whom these policies are well-suited. Indeed, now that I think about it, most people probably fall into this category. Who was it who said, "Most people spend more time planning their vacations every year than they do planning their finances every year." Jim Rohn, I believe.

Still, hands up here, I'll listen to whatever you have to say but recall from my earlier post, all of these products have their place. But in my opinion, the optimal solution is rarely any kind of cash-retention style policy.

--Wag--

Okay...you guys lost me here!!!! I have a policy for $500K that I make monthly payments on. I will have to get more details when I get home as to the type of policy it is. But, what I THINK I am hearing is that I don't need it???? My family is a single income family....I provide for my wife and 3 kids. I also have a 401K through work that I have been paying into for the past 11 years.

Maybe you will need more info, but is there something I am not doing? I want to make sure that my family is provided for in case of an accident and I am killed or something.....

Okay...you guys lost me here!!!! I have a policy for $500K that I make monthly payments on. I will have to get more details when I get home as to the type of policy it is. But, what I THINK I am hearing is that I don't need it???? My family is a single income family....I provide for my wife and 3 kids. I also have a 401K through work that I have been paying into for the past 11 years.

Maybe you will need more info, but is there something I am not doing? I want to make sure that my family is provided for in case of an accident and I am killed or something.....

Above all, and I think the others will agree, don't make any sudden moves. Whatever you have already is almost guaran-damn-teed to be better than nothing. Now is not the time to panic or get mad! Get online and do some homework and we'll continue the discussion here if you wish. First things first, though, you need to know what you already have. Key words to look for are reflected above. "Term," "Universal Life," "Cash Value," "Surrender Value," "Whole Life," etc. etc. If the contract is more than a couple of pages, it is most likely NOT a term policy.

How much are your monthly payments? That's usually a good hint about what you have. How old are you now? How much is your mortgage balance? How many kids? What's the value of your 401(k)? That's a lot of personal information and probably not well-suited to a discussion in an open forum such as this if you value privacy. However, if you're willing, it would be good to use as an example. Then we can all fight over it! :D

Stay cool, boss. You may have exactly what you need already, whatever it is. In my opinion, the key is you're paying into a 401(k) and if your employer is matching your contributions, you're absolutely doing the right thing. The missing component in most people's financial planning is some sort of savings regimen at least or investment plan at best. Very important.

--Wag--

Hey Wag...Thanks man....I will proved the info:

Policy Payment: ~$120.00 per month
Age: 31
Wife and 3 kids
401K Value: ~$100K

When I started this kob 11 years ago, the first thing my boss told me was I was going to open a 401(k). At the time I had no idea what he was talking about, but I said okay. I had it set up so I was putting 10% of my pay (before taxes) into it. As we started having kids, I have bumped that down a bit, but it is still around 5-6%. The company matches $.50 on the dollar up to 8%. Funny thing is, I know WAY too many people that have no retirement account set up or anything.....I set my goal to retire at age 55....If my personal rate of return stays where it has for the past several years, I will be quite able to retire at 55 and actually get a HUGE pay raise compared to what I make right now.

Hey Wag...Thanks man....I will proved the info:

Policy Payment: ~$120.00 per month
Age: 31
Wife and 3 kids
401K Value: ~$100K

When I started this kob 11 years ago, the first thing my boss told me was I was going to open a 401(k). At the time I had no idea what he was talking about, but I said okay. I had it set up so I was putting 10% of my pay (before taxes) into it. As we started having kids, I have bumped that down a bit, but it is still around 5-6%. The company matches $.50 on the dollar up to 8%. Funny thing is, I know WAY too many people that have no retirement account set up or anything.....I set my goal to retire at age 55....If my personal rate of return stays where it has for the past several years, I will be quite able to retire at 55 and actually get a HUGE pay raise compared to what I make right now.

It SEEMS like you have a UL life insurance policy but it's hard to tell. 500K of insurance may actually be the premium for a term policy. If so, I think you're doing the right thing but ONLY because you ALSO have that 401(k) building up for you. 10%?! Wow! Most of the people I've ever worked with woulld cry buckets if you asked them to save 2% of their income. Indeed, most people have negative savings.

One guy I used to work with refused to put money into his 401(k) at all saying, "he couldn't afford to." And yet, he always had the latest and greatest video games, computers, etc. etc. A true waste of money. He's one of those guys who will be flipping burgers when he's 70 yrs old.

But I digress.

The theory is, buy a term insurance policy and invest the difference in the cost of UL of VUL life insurance policy. By the time the term insurance policy expires, you are then "self-insured" by your investments which, hopefully, are significantly greater in value than a UL policy would be.

The projected long-term math actually works for this kind of plan. I suppose that if we had a long-term recession or depression this would not work out so well, however, even in that case, if self-discipline prevails, it could still work to one's advantage as intended.

I wish like hell someone had kicked my ass about this kind of thing when I was 20. I'd be retired already at 40. No kidding.

--Wag--

Please do not take my slamming of cash value (aka Universal Life, Variable Universal Life, Whole Life) insurance as an endorsement of cancelling needed insurance and going without.
1. Life insurance is to replace your income. If you will leave behind people who depend on your income, you need insurance that will replace that income. No exceptions. Insurance is cheap (unless you buy a ripoff cash value policy) - don't be caught without it.
2. How much do I need? About 10 times your current yearly income in Level Term Insurance. If you make $50,000/year, buy at least a $500,000 Level Term Insurance policy. Wifey can then collect that money upon your death, invest the money in decent mutual funds with an income component, and live off of 8-10% of it forever.
3. But what happens when the term runs out? Term insurance is "pure insurance". There is no savings component. You will save for retirement separate from your insurance company. If you buy a 25 year term policy, you now have 25 years to build enough wealth to become "self insuring". That means if you croak, there's easily enough money in investments to replace your income. You don't need life insurance when you're rich and retired.
4. If you currently have some brand of cash value policy, put level term insurance in place before you cancel anything. Use an Independant Agent who has the ability to shop unrestricted among a huge number of insurers to get you a great deal. Term insurance is cheap, cheap, cheap, so don't sweat making 2 payments for a month or two. Once your term insurance is in effect, cancel the cash value policy. This is a little like trying to close a credit card account. You're going to talk to several people, each one trying to sweeten the deal enough to hang onto your huge monthy payment. Do not let the Fog Machine intimidate you. They know what to say to hang on to you as a cash cow. Put your head down and say "NO!!". Get your cash value out of that cesspool, and don't listen to their lies about "capital gains taxes" or "huge tax hits" - there won't be any. None. There may be some surrender charges if you haven't owned the policy for a long time. Great program, huh? Overpay for insurance and if you change your mind, we get to penalize you. Anyhow, don't let that deter you. If there's a penalty, write it off to "Stupid Tax", learn from it and move on.
5. Once all that is complete, you must INVEST!! Get with a financial planner that's not affiliated with a big national investment, banking, insurance, or brokerage house name, make a plan, set it in motion on autopilot and go live your life.

Please do not take my slamming of cash value (aka Universal Life, Variable Universal Life, Whole Life) insurance as an endorsement of cancelling needed insurance and going without.
1. Life insurance is to replace your income. If you will leave behind people who depend on your income, you need insurance that will replace that income. No exceptions. Insurance is cheap (unless you buy a ripoff cash value policy) - don't be caught without it.
2. How much do I need? About 10 times your current yearly income in Level Term Insurance. If you make $50,000/year, buy at least a $500,000 Level Term Insurance policy. Wifey can then collect that money upon your death, invest the money in decent mutual funds with an income component, and live off of 8-10% of it forever.
3. But what happens when the term runs out? Term insurance is "pure insurance". There is no savings component. You will save for retirement separate from your insurance company. If you buy a 25 year term policy, you now have 25 years to build enough wealth to become "self insuring". That means if you croak, there's easily enough money in investments to replace your income. You don't need life insurance when you're rich and retired.
4. If you currently have some brand of cash value policy, put level term insurance in place before you cancel anything. Use an Independant Agent who has the ability to shop unrestricted among a huge number of insurers to get you a great deal. Term insurance is cheap, cheap, cheap, so don't sweat making 2 payments for a month or two. Once your term insurance is in effect, cancel the cash value policy. This is a little like trying to close a credit card account. You're going to talk to several people, each one trying to sweeten the deal enough to hang onto your huge monthy payment. Do not let the Fog Machine intimidate you. They know what to say to hang on to you as a cash cow. Put your head down and say "NO!!". Get your cash value out of that cesspool, and don't listen to their lies about "capital gains taxes" or "huge tax hits" - there won't be any. None. There may be some surrender charges if you haven't owned the policy for a long time. Great program, huh? Overpay for insurance and if you change your mind, we get to penalize you. Anyhow, don't let that deter you. If there's a penalty, write it off to "Stupid Tax", learn from it and move on.
5. Once all that is complete, you must INVEST!! Get with a financial planner that's not affiliated with a big national investment, banking, insurance, or brokerage house name, make a plan, set it in motion on autopilot and go live your life.

First things first. Give me the information I asked for and I will run a policy for you so you can compare. Second of all if your financial planner is telling you that you can take 8-10% out of your assets to live on for the rest of your life they are dead wrong...at 7% the average life of your assets is 14 years. 4-5% is the max you want to take out of your assets if you want them to last forever. This allows for a moderate portfolio to return what you need with less volatility and reinvest to keep up with inflation. otherwise you spend down assets and if they do last for 20 years because you run into a decent run of markets with 10% rate of return every year (which doesn't ever happen) then your standard of living will be crap because of inflation. Think about it...if you need 10% then you have to be aggressive and an aggressive portfolio fluctuates which means you might lose 10% one year. If you lose 10% and if you take out 10% then 20% of your portfolio is gone. now you need 38% return in your portfolio to take out the same amount of money and to get back to where you started. Not highly likely that you can play that numbers game for very long. Your only hope to make it anytime at all is to have a huge year in year one. I am done with this crap because I can't stand people who think they know everything in an area that they have no expertise. If you listen to the person in the cube next to you, you will do as well as they do. If you listen to susie orman then you will end up broke like all of the people to listen to her. Be careful who you take advice from and always plan conservatively.

First things first. Give me the information I asked for and I will run a policy for you so you can compare. Second of all if your financial planner is telling you that you can take 8-10% out of your assets to live on for the rest of your life they are dead wrong...at 7% the average life of your assets is 14 years. 4-5% is the max you want to take out of your assets if you want them to last forever. This allows for a moderate portfolio to return what you need with less volatility and reinvest to keep up with inflation. otherwise you spend down assets and if they do last for 20 years because you run into a decent run of markets with 10% rate of return every year (which doesn't ever happen) then your standard of living will be crap because of inflation. Think about it...if you need 10% then you have to be aggressive and an aggressive portfolio fluctuates which means you might lose 10% one year. If you lose 10% and if you take out 10% then 20% of your portfolio is gone. now you need 38% return in your portfolio to take out the same amount of money and to get back to where you started. Not highly likely that you can play that numbers game for very long. Your only hope to make it anytime at all is to have a huge year in year one. I am done with this crap because I can't stand people who think they know everything in an area that they have no expertise. If you listen to the person in the cube next to you, you will do as well as they do. If you listen to susie orman then you will end up broke like all of the people to listen to her. Be careful who you take advice from and always plan conservatively.

First of all, just because we disagree is no reason for you to believe we have no expertise. Don't be such a crybaby, jump in here and defend your position if you believe in yourself and your product. Jeezus. Hang with us, bro. We can all learn stuff here. Methinks you're not reading my posts carefully because I've said repeatedly that I'm open-minded enough to learn from you.

For a few of your posts, I'm was still thinking, "Well, the landscape of life insurance may have changed, perhaps there ARE better products out there." This is your chance to show me what I'm missing. Bowing out because you "can't stand" me/us isn't helping your scenario at all. If you really give a damn about people going broke, stay in this discussion with us.

According to your post above, the essential need is very simply this: Can I maximize my retirement accounts while protecting the financial needs of my loved ones along the way? If, "buy term and invest the difference" will make that happen, then I'll continue to stand behind it. If a UL or VUL policy will do it better, I could get behind that instead.

Absent any real numbers here, cook up a scenario yourself and let's have a look at it.

--Wag--

It's a bit ironic that you're slamming the idea of living off of 8-10% of a lump sum insurance payout while simultaneously endorsing a product that has a very long track record of nil returns at all and claiming to be looking out for people's wealth building.

I'd also appreciate it if you'd knock off the condescension. I don't need you to remind me that you're an investment advisor and I can read between the lines well enough to make an educated guess who paid the bill for your training. The guy who put me in a crap cash-value life insurance policy was a trained CFP, so that doesn't buy you unquestioning cred with me.

Tucked tail and ran. Pity. I was all ready to listen to him and try to figure out what it was he thought was so good about cash-value.

--Wag--

First of all, just because we disagree is no reason for you to believe we have no expertise. Don't be such a crybaby, jump in here and defend your position if you believe in yourself and your product. Jeezus. Hang with us, bro. We can all learn stuff here. Methinks you're not reading my posts carefully because I've said repeatedly that I'm open-minded enough to learn from you.

For a few of your posts, I'm was still thinking, "Well, the landscape of life insurance may have changed, perhaps there ARE better products out there." This is your chance to show me what I'm missing. Bowing out because you "can't stand" me/us isn't helping your scenario at all. If you really give a damn about people going broke, stay in this discussion with us.

According to your post above, the essential need is very simply this: Can I maximize my retirement accounts while protecting the financial needs of my loved ones along the way? If, "buy term and invest the difference" will make that happen, then I'll continue to stand behind it. If a UL or VUL policy will do it better, I could get behind that instead.

Absent any real numbers here, cook up a scenario yourself and let's have a look at it.

--Wag--

alright partner...i can do that but i can tell you that some of the scenario's that have been proposed are unreasonable for permanent insurance...you can not expect to put $100 into an insurance product and expect it to grow...right now i have a million dollar vul and i put $400 a month into it. i have room to double my contribution in the future and i will (my wife wants a bigger house first apparently 3bds and 3.5 baths isn't enough for two people lol) i am only 24 though. for someone who is older you need to contribute more. so, if you can't contribute enough you either need a smaller policy blended with term our you need to go term all of the way...i believe i said in an earlier post that you use term for a temporary need or when there is a cash flow issue. so, i will get you the numbers and someone asked for the funds in my vul and i will get those as well. it will take me a little while and i won't be in the office until monday so stick with me. sorry if i blew up i was having a bad day at the office. my appologies:hammer

It's a bit ironic that you're slamming the idea of living off of 8-10% of a lump sum insurance payout while simultaneously endorsing a product that has a very long track record of nil returns at all and claiming to be looking out for people's wealth building.

I'd also appreciate it if you'd knock off the condescension. I don't need you to remind me that you're an investment advisor and I can read between the lines well enough to make an educated guess who paid the bill for your training. The guy who put me in a crap cash-value life insurance policy was a trained CFP, so that doesn't buy you unquestioning cred with me.

i said early on in this thread that you have to make sure you have a good policy...there are bad ones and i never denied that...you have to look for polices that allow you to borrow for free....and don't get stuck on the word borrow...it is the loophole that allows you to have tax free money...it is kind of like track days not being a race so that your insurance will pay out if you wreck...i am sorry if i have come across as condescending but i have automatically been the bad guy since i submitted a reply simply because of what i do. i would never ask you to assume i was a credible source...i am a skeptic to the core...all i want you to do is learn and then do your own research....but you have done nothing but battle me over who is right...the vul policies that exist are around in response to the buy term and invest the difference mentality...some are good and some are bad...stick around for more information on the policy i use that i consider to be a great policy but for an illustration of why i say term is more expensive long term draw this out (i will try to make it as simple as possible) draw two vertical rectangles side by side that are the same size. those boxes represent the amount of insurance you are buying...on the one on the left draw a line at a 45 degree angle at the top of the box...it will look kind of like a box cutter blade... in the other box draw a line from the bottow left corner to the top right corner within the box. the box on the left is buy term and invest the difference. the line on the top is your investments growing...they could be in a roth or a non-qualified brokerage account or whatever you want. the box on the right is a vul. the top triangle in the box is the amount of insurance you buy and the bottom triangle is the investments growing. representing the policy becoming self insured over time. if you compare the two portions that represent insurance you will see that in one you are always buying the same amount of insurance in buy term and invest the difference and you continuously buy less insurance in a vul as your cash value grows. obviously how quickly your cash value grows depends on investments but it is a simple example that is suppossed to help with understanding. sorry for the rediculously long response.

Okay, now you're starting to make sense. Obviously, there ARE new products out there which weren't around when I got my jaded view of "cash value" insurance products! ;-)

So the real question is, if I use my $400 pool of money to buy $100 a month for a 20 year term policy and invest $300 in the stock market, will I have $1,000,000 in an investment when I need it to retire in 40 years? Will I have more? Will I have less? How much more or less? That probably wasn't very clear but I think you'll get the idea.

Also, in all seriousness, I have to ask, What happens if you hit a tough spell and can't make the $400 payment for a few months? How does that affect the insurance policy?

BTW, apologies accepted. Takes a tough man to apologize like that. Everyone has a shitty day from time to time.

--Wag--

the short answer to running into a tough month or two is that you can use cash value in the policy to pay for it if you wish but in all honesty, i help my clients establish cash reserves and budgets for those who need them (some do it themselves and some make enough that it doesn't matter). so, if that is a serious concern you might want to wait until you get the monthly cash flow under control. i have job where the income fluctuates pretty wildly so i just keep more in cash than most people do. as a result i have enough in savings to float it if i need to.

i will run the numbers as i said to give you an idea, but i want you to understand that it may still be less assuming the same rate of return. there are fees assesed on the cash value (which is why i said early on that you need to make sure the fees are reasonable). the reason the fees exist is because these policies actually pay out and they are essentially insurance for the insurance company. so that if they have more claims than expected they can still pay out. it is the opportunity cost of continuing a death benefit.

I'm curious and waiting to see what you have.

(Hope we're not boring everyone else!)

:D

--Wag--

kc,
No matter what, your insurance "costs" $400/month. The "cost" of the insurance relative to level term is irrelevant to the point you're making. Finance professors have a skewed definition of the word "cost". For example, if someone goes and buys a rental home with debt, makes a monthly mortgage payment of $1200, but the property rents for $1200, they say there is no "cost". I define "cost" in a much more personal way: cost is the check you have to write every month - no matter what. I mention all that because that's the axle you're getting wrapped around in your rectangles example above: the insurance industry's pettifoggery about "the cost of the insurance". So...your policy costs $400/month. If, at your tender age of 24, you purchased a 30-year, level term policy in the amount of $1,000,000 it would cost $57/month, leaving you $343/month to invest in mutual funds. For 30 years. At age 54 you would no longer be insured. However, you would have roughly $775,000 if you averaged 10% over that 30-years. If you average 12%, which is reasonable over that period of time in growth stock mutual funds, you would have $1.2 million. Note this is purely the benefit derived from separating your insurance and your investing - it's quite apart from your Roths, 401k or other retirement savings. Even if your VUL is a really, really good one, I guarantee you're not going to end up with $775k and what money you do end up with is only a pre-approved loan (loans are never taxable, remember) and the actual money is not yours until you cancel (or "collapse" in the never-ending vernacular of insuro-dweebs) the policy.

Still waiting for the ticker symbols for some of the mutual funds you say are now available in "good" VUL policies.