Cash Value Life Insurance as an Asset Class

Recently I've noticed that whole life insurance is generally berated by almost everyone in the known universe. Well, most insurance agents really like it but other than that it’s pretty easy to count the number of folks who really like whole life insurance.

Obviously, we consider it to be an excellent component to an overall investment strategy, and as such I thought it would be useful to elaborate on a few of the applications that whole life insurance can bring to the table. (this could also apply to other types of permanent insurance as well)  And I know I'll get beat up for just mentioning the word investment and life insurance in the same sentence.  But considering a properly structured cash value life insurance policy as a portion of your retirement savings, emergency fund, or your kid(s) college fund is a solid plan. We can and continue to prove it everyday in our practice.

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Today, I’d like to respond to a clip from Dave Ramsey’s television show on Fox Business where he talks about life insurance as being “terrible” and how buying term and investing the difference is a better strategy than using any type of cash value life insurance. Just to clarify before I begin, I agree with lots of what Dave Ramsey has to say about getting out of debt, cutting up credit cards, and putting a stop to out-of-control consumerism.

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A Life insurance policy loan is an often referenced aspect to cash value life insurance. Most agents will bring the topic up casually, and I'd suggest far too casually. Some may discuss only because of their lack of complete understanding, while others have become too comfortable with the topic and have resorted to throwing about industry vernacular without regard to the nuance it poses to the general consumer…I apologize for all the times I have done this and will do this in the future.

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Just like any other savings or investment plan cash value life insurance requires some degree of management, especially when it's purchased for income or wealth accumulation purposes. So what aspects are important and need some degree of periodic check? That's what we'll be reviewing today.

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Indexed universal life insurance showed up in the early 90's to a somewhat mixed reception. For years it was a relatively obscure product, made available by a minority of insurance companies. But then, the 00's turned out to be a really boring decade and the buy-and-hold mantra was starting to show signs of ware.

So, many companies that threw mutuality to curb in the 90's and early 00's (and even a few that didn't) turned to a new idea that would entice market hungry “investors” whose stomaches were turned inside out by a decade with not one but two recession. Actually, in all fairness the second recession came a few years after the popular adoption of the new product.

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For a blog that loves cash value life insurance, I'm about to pull inspiration from a source that might leave many of you scratching your head. About a week ago, Leo Laporte gave a great keynote speech at the New Media Expo (formerly Blog World) that spoke specifically about the advertising world. His speech was about the nuance new media has regarding advertisers and how their adoption of new media will be a bit of a challenge. But there was a comment within that speech about how advertisers (i.e. marketers) view you and me and what (or should I say, who) they target.

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Some time ago, I covered an article written by CBS Market Watch contributor Allan Roth, which was an exposé on the popular book Bank on Yourself®.

I had hoped that it wouldn't die with Allan Roth's swipe at Pam Yellen, but several months passed and I began to think that Pam was going to pull a card from the old public relations bag of tricks and just ignore this until it went away. But about a month ago, Pam struck back, and came out swinging.

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I'll be very up front about the fact that I'm stereotyping badly with today's post regarding financial advisors and cash value life insurance. I realize there's a lot of liberal interpretation regarding what it means to be a “financial advisor.” But for today's purposes, we'll refer to financial advisors as those who primarily focus on gathering assets to manage.

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Whole life blending, as we've discussed before, is a process for designing cash value life insurance to maximize cash value available to the policyholder/client and income potential.

Still, there are those who like to suggest it doesn't matter. Those who would spend time arguing against a policy that is designed to maximize paid-up additions when it comes to your annual outlay.

We recently realized that we made a big mistake when it comes to how we talk about this. And today, we'll fix that mistake.

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