Hi,
Do you know the life time benefits of Cash Value Life Insurance?
This type of policy will guarantees benefits for your entire life as long as you succeed in paying the premiums. This policy serves a dual purpose. Firstly it offers permanent and full time life protection. It also helps you to meet your financial needs. Cash value life insurance policy is thereby a discount life insurance policy.It is helpful especially when you have a long term financial commitment. If you have surplus money after repaying the debts/ money due to mortgage you still can go for a short term life insurance. This money received from the short term life insurance policy will be helpful to meet other commitments like maintaining your family after your death, pay your tax dues and or other short term commitments if any. Term life insurance or permanent life insurance is taken for a long period. If you live till that period you will be paid the policy amount on maturity. It is thereby a better discount life insurance policy.
All the Best!

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Life Insurance Benefits

Good Post,

What do you think about EIUL (Equity Indexed Universal Life)?

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EIUL is basically update Universal Life. Index Universal Life is my favorite when in comes to cash value policies. Most EIUL's have high returns with not downside risk. The benefits include high low risk returns, ability to borrow money tax free from your policy and huge tax advantages of life insurance

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Sorry, I have to disagree with thebeacon...

I've analyzed over 50 different EIUL policies from different carriers and I have not seen value in not one of them. Most EIUL's do NOT have high returns, because of complicated averaging formulas tied to certain indexes. Also, there are participation rates and caps on many of them. A cap limits your return to no more than a maximum amount (typicall 5-8% on average). A participation rate determines the % of the return of the index that you get credited with. So if your participation rate is 60%, and the index earns 10%, you get credited only 6%. These participation rates can change from year to year.

Then there is the index tracking, which is an even more complicated issue. Let's say your policy is tied to the S&P 500 index. Well, there are 10+ different tracking methods that could be used. Most of them average returns over a point-to-point monthly or quarterly basis. This reduces risk but limits returns. Others may track the index an an annual basis, but it is determined by not the calendar but the date your policy was issued. It has been shown that the S&P and other indexes perform much differently on a point-to-point basis dependent on the issue date.

For example, I had 2 clients that purchased these insurance products from Bankers Life. Both policies were $1 million and issued within 3 weeks of each other. However, there was over a 21% spread difference in cash value between the two policies, simply because of when they were issued. What was funny was that illustrations had shown that his policy should significantly outperform hers over time, yet it was hers that had more value.

Lastly, consistent down years in the market will lead to 0% or very low crediting rates (1-2%). These low crediting rates can lead to premium problems if cash values don't grow as expected. Most of the standard UL policies I've seen perform as well, with typically better guarantees, than EIUL.

UL serves the purpose of being a low-premium permanent policy. It is not meant to build considerable cash values. For that, you are better off with a VUL or Participating Whole Life policy.

thebeacon is right that permanent life insurance policies with good cash values can provide the ability to borrow money on tax favored basis, in combination with tax-free withdrawals up to return of premium.

One thing I want to add here is that you only need life insurance (regardless of which type) if you have dependents on your income if something happens to you but if you don't I wouldn't waste a penny on life insurance.

There are so many better ways to use that money you will pay for the premium and once you reach a certain level of wealth and then have dependents you don't need any life insurance either.

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It is not smart to play it safe but it is safe to play it smart.

Hermes, I certainly agree that if you have dependents, life insurance is a must.

However, I disagree that once you reach a certain level of wealth that you don't *need* life insurance. Bill Gates has life insurance, the maximum he can get. Warren Buffett? Yep!

Do these individuals need it, per se? No. But they understand the economics of life insurance, and because of THAT, they own as much as a highly-rated insurance company will issue.

There are a myriad of estate planning benefits to owning permanent life insurance. If you don't care about anyone or any thing, and you are alone in this world, then I can see your point.

But if there is one person on this planet you care about (other than yourself), or a cause that you care about, or even your community/city, then life insurance makes a lot of sense.

Let me ask you, if you've accumulated $5 million and it's just you and your spouse, do you need life insurance? No. But if you HAD permanent life insurance, I could show you that your retirement income could be increased by double over 20 years. So if you had an income of $250k/year off your $5 million in investments, how would it feel to instead be making almost $500k/year with no additional risk?

The presence of permanent life insurance does not nullify investments and what they can do, it enhances them. The wealthiest of people don't "need" life insurance, but they all own it!

I understand your arguments for life insurance, regardless of where you stand in life but I do belong to those individuals that can achieve better returns if I invest the money I would have to pay for the insurance premium.

So in my case, because I do care about someone/something other then myself, I don't 'waste' my time and money on life insurance as that would in the long-term decrease my over-all wealth.

Can it be a boost to your retirement?

Yes, it can but if you know you can do better why get it?

It may be part of an overall portfolio for many individuals but one that i personally don't like.

If you need to have it get it, if you don't need it I think you can do better but that is an individual choice.

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It is not smart to play it safe but it is safe to play it smart.

Life insurance isn't about returns, it's about protection. The best investment plan in the world is meaningless if you die and your family does not have the income they need. Your investment plan works ONLY if you are around to generate those returns. What happens to your plan if you die tomorrow?

If you cared about someone other than returns, you'd have appropriate amounts of life and disability insurance to protect them. If you are generating the returns you say from your investments, then you'd have no problem using some of that excess return to pay for life/disability insurance.

My point was that the presence of permanent life insurance would ENHANCE your investment returns. In fact, if you have appropriate protection, then you can actually afford to take more risk. And, when it comes to generating an income stream, you can also have more flexibility (riskier investments, paydowns, real estate, etc.).

There is no need, only want/desire. If you have no desire to protect the ones you love, you won't buy life/disability insurance. My life insurance coverage exceeds $6 million. If I died today, my family would do just fine. If I took the premium and invested it, earning 50% annual returns, it would take me 10 years to save up that amount of money. At 25%, 15 years. At 10%, 27 years. Do you think $6 million is a lot? Economically, if I died today my family would lose upwards of $152 million in lost income/benefits compounded over the next 35 years working.

People grossly misunderstand life insurance, how it works, and its economics. I recommend people read The Ecomomics of Life Insurance by Dr. Solomon Huebner, founder of the American College (which happens to certify all CFP's plus many other industry designations).

You can use your hedge funds to generate tremendous returns. But tremendous returns will do you no good if you were hit by a truck today. Protect your family first, then go use your hedge funds. I just think you have your priorities backwards.

Chris

I know that life insurance is not about returns. The point I tried to make is that I can have other protection and in my opinion better protection then life insurance.

It's not about affordability of the insurance itself but rather that I think it is a waste of money and it doesn't give me the comfort of security. I secure otherwise and life insurance may be an option but by no means the only one, maybe the most popular one.

Different people feel proteced in a different way and have a different defintion of risk. The assumption that if you don't have life insurance you simply don't care about anyone is very far from the truth.

You say that you have a 6M life insurance and other people prefer to have a 10M property portfolio to protect their family and another group chooses a different approach. Should something happen your assets will be there for your family.

I understand how life insurance works and regardless, I don't like it. It is the same with investments, there is not only one right approach but rather what works for the individual.

You like life insurance as far as protection is concerned and that is fine. I choose a different road.

I don't want to discourage anyone from getting life insurance, that is a judgement the individual needs to make.

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It is not smart to play it safe but it is safe to play it smart.

Interesting thread....

The Mynion vs Hermes perspectives are typical of one "Financial Advisor" coming from a Stock Broker/Investment point of view and the other "Financial Advisor" coming from the Insurance Agent/Protection point of view.

Hermes, I'm NOT picking on you.
Don't take my comments PERSONALLY.
I'm NOT attacking you.
I'm simply offering my two cents on the topic.

That being said.....

Hermes wrote:
Hermes, I just closed a case where the client has about a $1 million Federal Estate Tax problem. While having assets in the $ 4 million dollar range is nice it's not all cash. Most of the assets are real estate and a commercial fishing business with only about $200,000 cash on hand.

There isn't an investment strategy out there that would replace an Irrevocable Trust funded with Cash Value Life Insurance to pay the tax bill that will be due in cash 9 months from the date of her death.

My point here is that very few financial problems that have an insurance solution can be solved effectively by attempting to invest your way out of them.

There are many uses for life insurance. The investment side of cash value life insurance, while important, it's not the most important feature.

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Gary Spicuzza, *SAFE
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*Self Appointed Financial Expert