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jiten702
Full Member
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| Permanent/Whole Life Insurance....... |
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Permanent life insurance is the insurance policy that provides coverage throughout the insured's lifetime and may include an element that builds cash value. This type of policy provides lifelong protection. It also provides a savings element that accumulates a cash value over a long period of time. In other words, this type of policy, combine life coverage with an investment fund. Here, you're buying a policy that pays a stated, fixed amount on your death, and part of your premium goes toward building cash value from investments made by the insurance company.
Mutual funds |
Financial Advisor
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Sat Feb 19, 2011 9:49 am |
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jeffreymint
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We know that insurance is insurance. Permanent life insurance is just another type that you can choose from the many options available. It is a protection for your lifetime instead of just a specified term.
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Wed Feb 23, 2011 3:19 pm |
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GotCommonCents
Contributing Member
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Use term insurance to cover yourself for 20-30 years.
Invest money (not in an insurance policy) so that you are self insured by the time 20-30 years passes. You will earn much more on your money this way than what you get with a Whole Life Policy.
For more advice about how to handle your personal finances and manage your life in a way that will be prosperous, check out my blog:
www.GotCommonCents.com
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Fri Apr 01, 2011 9:33 pm |
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josht
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I don't understand why everyone jumps so quickly on the Dave Ramsey buy term invest the difference bandwagon. That isn't such a great idea.
The fact is the markets aren't producing very good returns for the majority of americans. And only 1 percent of term policies pay out in a death claim. Why would you want to invest in something that you have a 99 percent chance of losing money on. Doesn't make sense.
If you structure a life insurance policy in the right way, you will put yourself in a position not only to have your cash value grow, but also put yourself in a position where you are guaranteed to die with insurance. And tax free transfer of wealth to your heirs is the best type of investment you can have.
So why not buy whole life and invest your cash value, if you really want to invest?
Josh Thompson
Infinite Banking
You Be the Bank
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Fri Apr 01, 2011 9:37 pm |
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oldguy
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quote:
And only 1 percent of term policies pay out in a death claim. Why would you want to invest in something that you have a 99 percent chance of losing money on. Doesn't make sense.
LOL - gee, and I hope my house burns down so that my insurance company has to pay, that way I'll get a 'return on my money'. Oh wait - that doesn't make sense either. 
How is the insurance business up in ID? I read thru your 'Be Your Banker" webs last year just to understand the pitch (it's good to stay aware of the current 'deals', old people are often targeted). You'd be surprised at the stream of variable annuity offers that I receive, us 'old rich' guys are the targets.
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Mon Apr 04, 2011 5:43 pm |
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littleroc02us
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quote:
Originally posted by josht
I don't understand why everyone jumps so quickly on the Dave Ramsey buy term invest the difference bandwagon. That isn't such a great idea.
The fact is the markets aren't producing very good returns for the majority of americans. And only 1 percent of term policies pay out in a death claim. Why would you want to invest in something that you have a 99 percent chance of losing money on. Doesn't make sense.
If you structure a life insurance policy in the right way, you will put yourself in a position not only to have your cash value grow, but also put yourself in a position where you are guaranteed to die with insurance. And tax free transfer of wealth to your heirs is the best type of investment you can have.
So why not buy whole life and invest your cash value, if you really want to invest?
Here's a question, "Does your family get the cash value when you die".. The answer is No. The market has been fantastic lately, and there has never been a stretch of 15 years where the market didn't average around 8%. My portfolio made 28.5% last year in index funds, Vanguards fees to manage it were less then .06% and since inception my portfolio has avergage close to 9%. I'd take those odds any day vs. Cash value where you have to pay huge commission fees and other. Also, why would you need life insurance longer then 20 years term? Are you not going to have your house paid off and the kids out of the house. I'm sure my wife will be able to survive off of the 2-3 million we should have at retirement.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Mon Apr 04, 2011 6:33 pm |
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josht
Contributing Member
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Cash value is tied into you death benefit, so no they don't get the cash value because they get the death benefit.
Good if you are getting a 9 percent return on a fund great, but if you are getting taxed every year then you are getting around 6 really. And if you are getting a 9 average you need to understand that average and actual are much different.
If you have a 10 percent loss on 10k, followed by a 10 percent gain on 10k, you don't break even. The first year you would drop to 9000, and then next year you would go up to 9900. Losses are always going to have a much greater impact than gains.
Either way, I can put 10k into a life insurance policy, have it grow in the policy, borrow the money out, and put that money into your index fund and come out better than you every time, and I get the death benefit included. Any way you spin it everything will always get better with cash value life insurance. Compound interest is king.
Josh Thompson
Infinite Banking
You Be the Bank
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Mon Apr 04, 2011 6:39 pm |
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littleroc02us
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quote:
Originally posted by josht
Cash value is tied into you death benefit, so no they don't get the cash value because they get the death benefit.
Why don't they get the cash value?
Good if you are getting a 9 percent return on a fund great, but if you are getting taxed every year then you are getting around 6 really. And if you are getting a 9 average you need to understand that average and actual are much different.
What would I be getting taxed on, except from my paycheck? All I'm doing is maxing out my Roth IRA's and it won't be taxed when I retire on withdrawls.
If you have a 10 percent loss on 10k, followed by a 10 percent gain on 10k, you don't break even. The first year you would drop to 9000, and then next year you would go up to 9900. Losses are always going to have a much greater impact than gains.
My index funds have averaged 9% since inception.
Either way, I can put 10k into a life insurance policy, have it grow in the policy, borrow the money out, and put that money into your index fund and come out better than you every time, and I get the death benefit included. Any way you spin it everything will always get better with cash value life insurance. Compound interest is king.
No chance, you lose the cash value if the person dies and I can invest it myself and make more and not have to pay all the huge commissions and fees.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Mon Apr 04, 2011 7:35 pm |
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josht
Contributing Member
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You misunderstand the meaning of cash value. Cash value is a portion of the death benefit guaranteed to you if you liquidate the policy before death. So if your cash value is 20,000 dollars, and your death benefit is 100,000 dollars, then really you have a 20k dollar cash account and an 80k dollar insurance policy.
I would rather have the 100k dollars than 20k, obviously.
Josh Thompson
Infinite Banking
You Be the Bank
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Mon Apr 04, 2011 7:42 pm |
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littleroc02us
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quote:
Originally posted by josht
You misunderstand the meaning of cash value. Cash value is a portion of the death benefit guaranteed to you if you liquidate the policy before death. So if your cash value is 20,000 dollars, and your death benefit is 100,000 dollars, then really you have a 20k dollar cash account and an 80k dollar insurance policy.
I would rather have the 100k dollars than 20k, obviously.
Again, why don't you get the 20k??? I'm paying a lot of money to only get 100k.
If a 30-year-old man has $100 per month to spend on life insurance and shops the top five cash value companies, he will find he can purchase an average of $125,000 in insurance for his family. The pitch is to get a policy that will build up savings for retirement, which is what a cash value policy does. However, if this same guy purchases 20-year-level term insurance with coverage of $125,000, the cost will be only $7 per month, not $100.
WOW! If he goes with the cash value option, the other $93 per month should be in savings, right? Well, not really; you see, there are expenses.
Expenses? How much?
All of the $93 per month disappears in commissions and expenses for the first three years. After that, the return will average 2.6% per year for whole life, 4.2% for universal life, and 7.4% for the new-and-improved variable life policy that includes mutual funds, according to Consumer Federation of America, Kiplinger's Personal Finance and Fortune magazines. The same mutual funds outside of the policy average 12%.
The Hidden Catch
Worse yet, with whole life and universal life, the savings you finally build up after being ripped off for years don't go to your family upon your death. The only benefit paid to your family is the face value of the policy, the $125,000 in our example.
The truth is that you would be better off to get the $7 term policy and and put the extra $93 in a cookie jar! At least after three years you would have $3,000, and when you died your family would get your savings. (David Ramsey) changed a little bit.
I'm buying term myself and will invest on my own to retire with around 2 million in Roth IRA's if I get 8% return on my funds which again have returned that rate since inception. TAX FREE!!!! I can get 500k life insurance for $30 a month on a 20 year term..
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
Last edited by littleroc02us on Mon Apr 04, 2011 7:53 pm; edited 2 times in total |
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Mon Apr 04, 2011 7:49 pm |
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josht
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Ok if you want to copy and paste from Dave Ramsey that is fine. But I already responded to that on his site so you can read what I said on there.
Josh Thompson
Infinite Banking
You Be the Bank
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Mon Apr 04, 2011 7:50 pm |
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josht
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The fact is why would you want to waste 7 dollars a month? I can have 100 percent of my money available and growing and at the same time use it. You can't use your money in your IRA. You have lost 100 percent of the use of your money until you are old enough to take it out. My money grows tax free and I can still use it. It's about use of money and cash flow, not rate of return.
Josh Thompson
Infinite Banking
You Be the Bank
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Mon Apr 04, 2011 7:55 pm |
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littleroc02us
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quote:
Originally posted by josht
The fact is why would you want to waste 7 dollars a month? I can have 100 percent of my money available and growing and at the same time use it. You can't use your money in your IRA. You have lost 100 percent of the use of your money until you are old enough to take it out. My money grows tax free and I can still use it. It's about use of money and cash flow, not rate of return.
Your money was only 20k. Actually for me it's more about rate of return, I wouldn't need the cash flow since I'm investing with compound interest in hope of making 2-3 million tax free. Could you imagine if I get 12% rate of return? I only need insurance for 20 years since the teens will be gone and the house is paid off. If I need 30 I could do that to, $30 dollars is so cheap.
Also, you incorrect about not being able to use the money in an IRA, you can use the principle and not the earnings from a Roth tax free.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Mon Apr 04, 2011 8:08 pm |
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littleroc02us
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quote:
Originally posted by josht
Ok if you want to copy and paste from Dave Ramsey that is fine. But I already responded to that on his site so you can read what I said on there.
So what are the commission percentages and fee percentages associated with your whole life policy?
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Mon Apr 04, 2011 8:13 pm |
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