IPB 032: Life Insurance is a Terrible Investment and the Rate of Return Stinks (life insurance myths debunked part 2)
The claim that life insurance returns are terrible is nonsense and a form of weak thinking mostly intended to confuse and mislead. But it's easier for all the financial bloggers and talking heads to agree with each other, so…
It seems that most people's only measure of savings or investment strategy is to look at the rate-of-return. If the return is higher, it must by default be better. Read More…
Over the next few weeks our podcast will look at five of the most common myths people have regarding life insurance. In particular, we're looking at those myths that attack cash value life insurance and the evil people (us) that sell it.
Buy term and invest the difference has long been the mantra of investment salesman(women) and Primerica built an entire company around the idea. The premise behind the concept has always been that one could achieve a greater return with “investments” vs. traditional whole life insurance and it’s cash surrender value build up. Read More…
Three years ago this past Friday we published one of the most significant blog posts on this web site. This post, and a successor post we published last year remain some of the most popular content we’ve created.
For those unfamiliar with the original article, it reported on real historical data provided by a whole life insurance policyholder who was fortunate enough to purchase a decently designed blended whole life insurance policy back in the early 90’s. Read More…
This week's episode is a continuation of the discussion we had last week. If you didn't catch that one, you can go and listen to it now.
Last week we discussed the impact that the economy and more specifically, interest rates, have on whole life insurance. This week is all about how the economy has, can and will impact universal life insurance.
What happens if interest rates go up (as we suspect is going to happen)?
Listen to the full episode to find out more.
Today's episode dives into a discussion of how economic conditions and more specifically how interest rates have and will effect whole life insurance dividends. What happens if rates go down further? I know it doesn't seem likely but there are other countries around the world that have negative short term rates currently.
Or better yet, what happens if rates move higher (as the Fed seems to be indicating will happen throughout the rest of the year)?
I'm pretty sure that no one ever anticipated a world where the Fed would hold short-term interest rates at 0% for as long as it has. Obviously, this has had an impact all along the yield curve (see below).
And it certainly has an impact on life insurance companies.
But probably not in exactly the way that you would expect. Life insurance companies definitely buy boatloads of bonds as they are required to “match” underlying assets with the liability they assume in issuing new policies.
However, they're not under as much pressure as you might think.
Why? Well, listen to the episode to hear more on the specifics.
First, if you haven't listened to the previous episode (IPB 025), you really should. That episode will provide a bit of context for today's episode.
I'm sure that most people who frequent this site and listen to our podcast assume that we think life insurance is a virtual financial swiss army knife.
And while it is indeed a wonderful tool. It's Read More…
One of the biggest problems for most Americans is understanding how to convert the balance they have saved in retirement plans, brokerage accounts etc. into an income they can use during retirement.
The financial services industry has done a masterful job at training “advisors” to help their clients accumulate cash. But very few advisors Read More…
We love paid-up additions and if you've listened to us at all, you're not all that surprised. But we’ve made a little misstep in terms of being so broad in our discussion about them.
And we're always adding new people to our audience. So it bears repeating…
Not all paid-up additions are created equal.
While there are more characteristics with paid-up additions that are similar than different, there are some sharp contrasts that very much matter.
There are four key elements that you need to understand to make an informed decision before purchasing a whole life insurance policy using a paid-up additions rider:
1. Maximum annual paid-up additions payments
2. Lifetime maximum paid-up additions payments
3. Payment flexibility (can the policyholder adjust the paid-up additions rider up and down and can the policyholder make paid-up additions payments as lump sums throughout the year instead of systematically with the premium mode [annual, monthly, quarterly]?)
4. Paid-up addition rider load fees
You can’t just blindly assume that because a policy uses paid-up additions it meets the criteria that we would demand of a properly designed whole life policy.
If you'd like our definitive guide to paid up additions click the button below. Please note that if you already purchased this from us, do not buy it again…the information hasn't changed.
Here's a picture of the Table of Contents to give you a better idea of what's included:
If that looks like something you might find useful, please go over and purchase the guide here.
Edit: We are currently updating the guide and should have it available again soon.