by Guest » Tue Jan 11, 2011 06:09 pm
I'm looking for some term life insurance that builds cash value. Can someone please help me? I know that Primerica and Northern Mutual are the best. But that's all that I know...Thanks!
Posted: Sat Jan 22, 2011 08:09 pm Post Subject:
In every single instance, a policy’s cash value is nothing more than an overpayment of premiums plus some sort of earning potential.
Mark . . . If you spend a little time chasing them, you'll find a couple of extensive threads where I knocked heads relentlessly trying to get this point across to a few others.
But, I'm sure they'll be popping up here, again, too.
The respondent I was taking/being taken to task over term policies and cash value was trying to equate the ROP return with the CV in a life policy -- which may look like the same thing to him, but is not to me, or to anyone else who really understands the concept of CV.
CV is part of the "nonforfeiture" provisions that permit a policyowner to do something with the cash value of a whole life (or other CV policy) if they choose to no longer pay premiums. They can surrender the policy for its available CV or use the CV to fund an extended term policy or a reduced paid-up policy. Contract language simply "permits" the policyowner to borrow the CV in lieu of surrendering the contract to get at the CV -- what better way to keep the premiums flowing to the insurance company coffers?
Some might say that an extended term policy has cash value, because it may be terminated early and the unearned premiums would be refunded. But this is not "cash value", the same would be true of a single premium 30-year term policy that someone chose to cancel any time before the end of the 30-year term. The insurance company is not entitled to keep unearned premium, so it's not cash value, it's merely a refund of premiums paid.
ROP equals: Get all your premiums back (nothing more) if you outlive the policy’s term.
I only have two minor "disagreements" with that statement. (1) As we all know, "your" premiums have long since been consumed by the insurance company for the payment of claims, commissions, overhead, and the excess will forever (or nearly that long) remain invested as long as the company is profitable. What you get back is someone else's money (present premiums) before it ever has a chance to go into reserves. (2) re: "Nothing more" . . . you do get the privilege of paying 30% or more in extra premiums, money which results in a very poor rate of return (less than the actual "return" in CV growth in a WL policy over 40-60-100 years), and which could be funding a person's ROTH IRA and eventually yield the true TAX-FREE benefit of that plan (as long as Congress doesn't change the rules.
So . . . we're really on the same page, Mark, 100%!! Have a prosperous 2011!!
Posted: Sun Jan 23, 2011 12:14 am Post Subject:
Max, thanks for the feedback. Ya know, I anticipated / half-expected you to put far too much into a response - and you did. That's fine, because I agree with you completely.
In my line of work, I frequently have people (including counsel) look at me and exclaim "explain this to me like I was a 6th grader." And this is exactly what I was attempting to do.
I'm confident you and I could literally converse for hours, or until the beer ran out, about pretax, after-tax, extended, level, decreasing, ROP, nonguaranteed, yearly renewable and convertable term policies. How the insurance company spends the money and which of these products offer the policyholder and/or the insurance company the greatest element of control. This, however, was not my intent in the above post.
(2) re: "Nothing more" . . . you do get the privilege of paying 30% or more in extra premiums, money which results in a very poor rate of return (less than the actual "return" in CV growth in a WL policy over 40-60-100 years), and which could be funding a person's ROTH IRA and eventually yield the true TAX-FREE benefit of that plan (as long as Congress doesn't change the rules.
LOL, try explaining that to a 6th grader.
Be well, my friend.
Posted: Sun Jan 23, 2011 02:39 pm Post Subject:
The last time that I checked, the correct term for "cash value" was actually "cash surrender value". This is the amount of money that one would get if they choose to surrender the policy. It is certainly the definition that matters to the client.
If the question is, "Is it possible for a term policy to have a cash surrender value?", the answer is "Yes".
The fact that the majority of policies don't have this doesn't change the answer. The fact that the policies that do have this are usually not what is in the best interest of the client doesn't change this from being the correct answer.
If you want to shout a true answer, shout, "TERM INSURANCE = NO CASH SURRENDER VALUE (most of the time)"
Posted: Mon Jan 24, 2011 07:33 am Post Subject:
The last time that I checked, the correct term for "cash value" was actually "cash surrender value".
If you really want to get TECHNICAL, it's neither CASH VALUE nor CASH SURRENDER VALUE -- either of which is a reference to NONFORFEITURE options as required by law -- it is "INSIDE BUILD-UP". That's the textbook term of the relationship between reserves and premiums and face amount, and the one the actuaries use when calculating rates.
When you get to that point, NONE OF IT APPLIES TO TERM LIFE INSURANCE. There is no inside build-up in a term policy. ROP all happens EXTERNAL to the face amount of insurance, which is why the VALUE of premiums paid is what is being returned to the beneficiary with either the death benefit or the policyowner at the exxpiration of the term.
TERM LIFE INSURANCE = NO CASH VALUE, PERIOD, as originally stated. Get a textbook on the subject and check it out. Anything from the American College will do.
Posted: Mon Jan 24, 2011 10:57 am Post Subject: cash value of term life insurance
Get your mind out of the text book. Cash value or cash surrender value can be a reference to a non-forfeiture option. As insurance professionals, that is how we tend to think of it. You are correct that it is a reference to nonforfeiture options.
However, the companies that sell ROP also call the value that the person can get, "cash surrender value". It seems like a pretty descriptive term since it tells the owner exactly how much money he'll get when he surrenders the policy.
Max, you can't choose a definition and then decide that all other definitions of the same word are wrong. If someone wants a term policy that builds cash value, they can buy one. It is incorrect to say that there is only money at the end of the term. With many policies, the amount of money returned will be based upon year of surrender and it's not all or nothing.
Term insurance sometimes = temporary insurance. It may or may not equal no cash value.
Posted: Mon Jan 24, 2011 02:48 pm Post Subject: Transamerica term life insurance builds cash value
Thanks everybody. I found exactly what I wanted. I'm buying a policy from Transamerica. It is a 20 year policy and builds cash value. After 20 years, I get all of my money back, and lesser amounts before that.
Posted: Mon Jan 24, 2011 04:56 pm Post Subject:
The last time that I checked, the correct term for "cash value" was actually "cash surrender value".
WAIT A MINUTE!! You work for PRIMERICA, don't you? This clearly explains your statement,
This is the amount of money that one would get if they choose to surrender the policy. It is certainly the definition that matters to the client.
You are correct in that regard. When you go out to repalce "Trash Value" policies, the Surrender Value IS what's most important to you. Hey Max, I've got it all figured out.
Your company doesn't require you even know how to spell The American College or know anything about career advancement within the industry. And really, what good would it do to have a MBA with vast experience in Life Insurance/Bad Faith Law?
If you want to shout a true answer, shout, "TERM INSURANCE = NO CASH SURRENDER VALUE (most of the time)"
LMFAO Try telling 1.6 million teenagers in America "NO MARRIAGE = No BABIES (most of the time).
Posted: Mon Jan 24, 2011 05:21 pm Post Subject:
However, the companies that sell ROP also call the value that the person can get, "cash surrender value". It seems like a pretty descriptive term since it tells the owner exactly how much money he'll get when he surrenders the policy.
I love word problems......
Let's say you open a savings account at a local bank. This is a very special bank in that it pays absolutely NO/ZERO/NADA INTEREST on your money - NOTHING. If you were to deposit $50 each and every month into your savings account for five years, and then close the account, how much would you have earned (Profit) on your money?
[Hint] The exact amount someone will earn on their RETURN OF PREMIUM policy at the end of a 20-year term.
Posted: Mon Jan 24, 2011 06:59 pm Post Subject:
It has always been my understanding that Deposit Term Life Insurance is a policy in which (in addition to the periodic premium) the insured deposits a sum with the insurer for the policy period (usually 10 years) on which interest accumulates. After the expiry of the policy period the insured may roll over the sum for another period (and the subsequent periods), or convert the term policy to ordinary (cash value) life policy, without the need for the evidence of insurability. However, if the insured cancels the policy before the expiry of the first policy period, he or she loses both the deposit and the interest. If the insured dies while the policy is in force, the deposit plus interest is added to the death benefit.
I will concede that a Deposit Term policy does theoretically have a cash value. However, it's not generated within the policy as is with a traditional (WL / UL) plan.
After a great deal of thought, I will also submit to the premise that a Term policy with a RETURN OF PREMIUM rider generates a cash value in that:
If one were to completely disregard the nearly 30% higher premium for a policy with an ROP rider, some type of earning potential must exist in order to replace the percentage of premiums applied to the policy's basic cost of insurance for, let's say a 20 year period.
Posted: Wed Jan 26, 2011 02:25 am Post Subject:
Mark,
All that I'm saying is that there are some term policies that have a cash surrender value. I'm not saying that they are a good value or that anyone should purchase them or anything else. I just can't stand when knowlegeable people like Max will say something that is usually true, but make it sound like it is always true.
If you look at an in-force illustration of a return of premium term policy, there is a cash surrender value. The number may be low and the premium high, but this doesn't change the facts.
It is simply a fact that it is possible for a term policy to have a cash surrender value. To argue otherwise, is just plain wrong. Do the vast majority of term policies have a cash surrender value? Nope. So what?
P.S. I'm not a Primerica guy. I sell lots of permanent policies and have only sold one ROP policy in my life and it was against my advice.
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