Indexed Universal Life Insurance - Page 2 - Saving Advice

Quote:

Example: Please Add On... Term Life Pros Cons Cheapest form of Life Ins Not permanent Cash Value Policies Pros Cons Permanent more costly Tax deferred Growth cap on upside growth Minimum Interest earned Loans/withdrawal for Access 401K Pros Cons Multiple Funds to choose from penalties for early access No cap on growth no minimum on losses Now add on, but again...

Term:
Pros
Cheaper, cheaper, and cheaper.
Allows more money to go towards investments.
Easier for regular folk to understand.
Can be purchased to fit ones needs.
Fits the scope of the need for life insurance, which is not permanent for most people (not an opinion- fact)

Cons
When the policy expires, there is no more coverage.

Permanent:
Pros
Good for those with special needs and a legitimate permanent need for life insurance.
Only option available for those who need coverage past 30 years.

Cons
Sold as if it were an investment.
Does not provide a tax benefit despite what salespeople would have you believe.
The cash value is the property of the insurance company (says so in the contract)
Much more expensive that term.
Feeds this idea that the need for life insurance is permanent.
Accessing the cash value requires an application, about 60 days notice, and interest to be paid back to the insurance company.
Operates much like a home equity line of credit.
When you die, your beneficiaries only get the death benefit (not the cash value)
If you surrender, the insurance company takes a bite of your money so that your cash value does not exceed the tax basis (total of premiums paid) thus creating the illusion that the insurance company is doing you a favor.
Sold as a "bank on yourself" scheme which has screwed a lot of people over.

Look Wayde. I have posted facts. You have posted opinions. Your opinions are based on the assumption that the cash value is an investment. However I can point out numerous reasons how the cash value is not an investment or savings.

The most basic one is that the cash value is not the property of the policyowner. It is the property of the insurance company.

Also when you pull money out it, it is a loan that is repaid to the insurance company. It is not paid to the policyowner because they don't even own the darn thing in the first place.

The cash value is said to build "tax deferred" because if you surrender your policy, you get your money back with no taxes most of the time. There is no taxes because the cash surrender value almost never exceeds the tax basis. So it creates this illusion that is nothing more than false.

May I also point out that surrender is the only way you get the cash value- which means the coverage is gone. So you get either the cash value or the death benefit. Not both.

You cannot consider this an investment because what you have paid in is almost certain to exceed what you get back. If by some stroke of a mericle there was a growth in the cash value that made it exceed tax basis, the taxes would still cut it down to such a minimal amount that it would be hardly worth noticing. Inflation will crush the rest as cash value growth usually doesnt even cover inflation. So where is there is possible return on investment? Oh thats right! If the unrealistic projections go into fruition.

Some people say "hey my cash value grew $10,000! Party!" But if they paid in $50,000 in premiums, they still have a $40,000 loss don't they? Of course a life insurance salesperson would view this as a positive.

Any tax benefit of the death benefit is a wash because term insurance has the same benefit.

All of these things prove that the cash value is not an investment or savings account. Am I getting through to you at all?

I have got my information from the following:
Securities and Exchange Commission
Internal Revenue Service
Financial Industry Regulatory Authority
Series 6 manuals
Series 7 manuals
State Insurnace manuals
Kiplingers Personal Finance
Fidelity

I also subjected myself to a 124 page research report by Richard Weber, MBA, CLU and Christopher Hause, FSA, MAAA. The report was titled Life Insurnace as an Asset Class. Rather than indoctrinate me, the report further allowed me to understand the product differently and further grap that it is not an investment. Isn't it surprising that a research report actually made me conclude the opposite of what it taught?

You see, I have done something that you have not done. I have read stuff, researched, articulated, and understood these policies for what they really are. You on the otherhand are going with the industry mindset. All you have done is try to indoctrinate people into this industry theory. You are a follower. You also have a bias because you are in the industry and sell these things.

The only reason why the industry constantly pushes this as an investment is because "you get something back for your money" whereas with term "you just pay and pay and pay premium and get nothing back." This totally ignores what insurance is supposed to do. Provide coverage. The coverage alone should be worth the cost of admission.

As I said before, the value of permanent life insurance has to do with the fact that it is permanent. Anything regarding it as an investment needs to be thrown out the window because its all theory.

---

Last edited by dczech09 : 02-23-2012 at 04:39 PM.