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First, I feel the need to provide context for this post. 99% of our clients want to use cash value life insurance as an asset class. Which means people need to distinguish whole life insurance from indexed universal life insurance.
Yes, there are other products.
But none that we feel are worthy of consideration.
Which is better?
What are the pros and cons of each? Why would a person use one versus the other?
The fixed premium in whole life insurance gives many people a fear of commitment. But, it doesn’t have to be this way. You need not approach whole life insurance with apprehension. The annual premium is not the massive financial commitment it appears to be.
If buying whole life, don't buy a policy that commits you to 100% of the premium each year it's due.
Paid-up Additions are a crucial component to whole life insurance when someone wants to focus on cash value accumulation. In fact, we declared the rider–the magic of cash value life insurance a long time ago.
But we’ve tended to be real loosey-goosey about a very important distinction between paid-up additions, which was entirely by accident. And today I’m going to try to further solidify precisely what we look at when it comes to sorting out coveted policy features specifically regarding whole life insurance as those features pertain to life insurance as a low risk asset class.
We love paid up additions. That has never been much of a mystery around the Insurance Pro Blog. And we get a lot of questions about paid-up additions. The one questions that by far sticks out the most involves the variation in loads among various carriers. So in the interest of making this somewhat more readily available (though trust us, we’re more than happy to receive your emails so keep them coming), we figured we’d compile a quick reference guide for paid-up additions loads.
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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(Complete Show Notes Below)
In the 28th episode of the Financial Procast:
The Fed performed its most recent round of “stress tests” for the largest banks in America. You know, the ones that are supposedly “too big to fail”. Anyway, it seems that 17 of the 18 largest banks passed the test but there's one that didn't quite cut it. Who's that you ask…Ally? Who? Yeah that bank that seemingly came out of nowhere and suddenly owned prime time media with all of its commercials.
I know it seems like a question that Fast Eddie would ask you as soon as walked onto the used car lot. You know the drill, “So how much are you looking for your monthly payments to be?”
Yeah we’ve all heard that classic line. And no that’s not exactly what I’m talking about but I discovered just a couple of weeks ago that I can sort of sound that way at times.
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.
This week the New York times ran a piece on their web site that took a little knock at Whole Life Insurance. So, when a writer at the NY Times takes a shot at whole life insurance like so many financial wannabes have in the past, what do you suppose its readers do in response? The answer might shock you…
Following up on the Cash Value Life Insurance as an Asset Class post, I wanted to spend some time talking about how Cash Value Life Insurance get's used for retirement and wealth accumulation.
Believe it or not, there's not a lot oversight when it comes to the financial services industry when it comes to what you can and cannot reasonably recommend as long as you don't violate the really big rules. Like a real estate agent who suddenly turns into a financial and business adviser in order to convince a client to take a 10% haircut on their selling price because he or she wants to close the deal, financial advice can often be driven by someone's need to pay a mortgage, pay down a credit card debt, afford a vacation, etc. And for the most part, sadly, no one cares. It's not until someone kills a sacred cow that problems begin to arise. Put a 65 year old's entire portfolio into midcap stocks, spread that sale around into different funds so as to avoid the sales load breakpoint, and do it all a few days before the dividend date and you'll really upset some people. Those are concrete examples of big no-no's any compliance officer should be more than capable of thwarting. These examples are a violation of suitability. On the topic of cash value life insurance, and its place as a retirement vehicle, the question is one of suitability. Is it suitable?
