by jcgreene » Tue Feb 02, 2010 08:42 pm
I can use the money now. If I would cash in my whole life take out the $12,000, Buy a $50,000 term for life which is $2000 more than I have now. Does that sound doable.
Thanks
John
Thanks
John
Posted: Thu Feb 04, 2010 04:36 am Post Subject:
On a side note, if your cash value is $12k and your death benefit is $48k, you are really only insured for $36k....just throwing that out there too.
Really, so if the insured dies does the insurance company give the beneficiary the 12k possible subject to taxes and then a death benefit of 36k?
:|
Posted: Thu Feb 04, 2010 04:40 am Post Subject:
No, but $12k of that money is already yours...you're only insuring against the difference since you could walk away with the $12k at any time. If your death benefit is $1,000,000 and you have $900,000 in cash value, you are only "insured" for $100k. The only difference is the taxable consequences. If you didn't want the money and just wanted to pass along the death benefit, and you were healthy enough to exchange your $900k for a single premium UL policy at this guy's age, you could get a new policy for $4 million+. An extreme example, but you can see what I am getting at.
Posted: Thu Feb 04, 2010 05:41 pm Post Subject: Term
Thank you all very much. I have a lot to think about.
Earlier you said it sounds like a Primerica deal Who are they? I have not heard of them, sounds like something to stay away from.
Posted: Thu Feb 04, 2010 07:33 pm Post Subject:
No, but $12k of that money is already yours...you're only insuring against the difference since you could walk away with the $12k at any time. If your death benefit is $1,000,000 and you have $900,000 in cash value, you are only "insured" for $100k. The only difference is the taxable consequences. If you didn't want the money and just wanted to pass along the death benefit, and you were healthy enough to exchange your $900k for a single premium UL policy at this guy's age, you could get a new policy for $4 million+. An extreme example, but you can see what I am getting at.
Yeah I know what you mean, but I could also say you are only getting 3.1 million in life insurance since you already have $900,000 in cash. Far better than our hypothetical 900k with 1 mill db, yes. But we'd be hard pressed to find a WL policy in that situation, endowment contract yes, but there was a completely different point behind those.
Also with the guaranteed UL, if we pay premiums until age 100 he'll have paid $38700 in premiums. There's no cash value associated with guaranteed UL's (well there is, but we know you don't generally touch it), so by age 100 can we not then say that he's now only insured for $11,300?
The whole life policy on the other hand will most likely endow at age 100, it appears old enough to be a 1980 CSO product. At 85/mo and 12k in cash with a $48,000 death benefit, I'm guessing dividends are going towards paid up adds, meaning he'll end up with much more than $50,000 in death benefit and cash. In fact, it won't be too many years before his death benefit is higher than that.
And he has the flexiblity of taking money out of the policy if he wishes before endowment.
Posted: Thu Feb 04, 2010 09:17 pm Post Subject:
And that is why you have different options....it's not always a good idea to replace WL with guaranteed UL, it just depends on the specific situation, their current health status, and other factors (like needing the cash value). At $75/month and putting $12k cash back in your pocket, you essentially have about 13 years of premiums there already. Sometimes it works, sometimes it doesn't. If he can't get preferred rates, it would make it less attractive.
The way I look at it is this...if he's had this policy for let's say....10 years now, somewhere in that range. If a 47 year old was buying a new policy today at preferred rates, they could get $50k whole life or $100k guaranteed UL. I would personally take the $100k UL if death benefit was my objective. Some people are enamored with cash value and would take the $50k WL. There's something for everyone.
Posted: Thu Feb 04, 2010 10:31 pm Post Subject:
I know, I just love the constant back and forth you and I have on this topic. ;)
Posted: Fri Feb 05, 2010 04:16 pm Post Subject: Term
I would like to know why Men's Health Magazine--Money Magazine--USA Today--Newsweek--Suze Orman--It's Your Money Dave Ramsey--The Money Answer Book, All say that Term insurance is the better way togo for life insurance. Is the new way of thinking about this in our life time changing? The old school way of thinking about life insurance might be out of tune with todays ways. What do you all think??
Posted: Fri Feb 05, 2010 04:33 pm Post Subject:
Nah it's not out of tune. Think about some of these sources, Men's Health, USA Today, and Newsweek...hardly places I think to go for financial advice.
Suze Orman: Former broker for Morgan or Merrill (can't remember which one at the moment) who tells people they should just invest their money in an indexed fund that follows the S&P 500 while she herself is a big time bond investor. She once suggested that people buy some bonds, because the bonds she sold (back in the 80s) paid yields of 13+ percent. Find me a investment grade bond with that yield today and I'll give you all my money.
Dave Ramsey is the epidome of the disinformation super highway. A guy who get's his financial wisdom from the internet(s) and God--I guess. His interest in term insurance has a lot to do with the company he's affiliated with that sells term insurance me thinks.
The theory the BTIDers (buy term and invest the difference) all talk about is a cookie cutter world wherein everything works out right, you never have a financial crsis in your life while you are young, and the stock market always yields at least 8% annually (but more like 10 or 12 to make their assumptions work out right).
They point to the fact that over the past 20 years (if you pick the buy and sell dates perfectly) the annualized return on the S&P 500 is higher than that of say participating wholel ife insurance, and they think they pointed out something worthy of a noble prize (and hey, maybe they did do something worthy, afterall still not sure what made Barak Obama so deserving).
These are people who think life insurance is merely to cover loss of income and funeral expenses while you are young and serves no other purpose. Spend 15 minutes with me and I can show you things life insurance can do that these guys either don't understand, or don't want to admit.
Also, this isn't a new age idea. It's been around for decades, the introduction of new methods of communication have simply made it along with lots of other things more visible.
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