Insurance or Investment?

[leonard]

Would you clarify the flaws in Infinite Banking [I am not disagreeing with you, but want to see the problems]

So after reading this thread, what is everyones opinion about whole life polices? I have had a large policy for about 3 years and the value in that policy is outpacing the stock market consistently. I purchased it as an insurance policy first, and a savings account (of sorts) second. The dividends it has paid since I have purchased it are rolled over into the cash value of the policy. Seems to work well for me.

Also, has anyone read The Infinite Banking Concept by Nelson R Nash? I know that there are some flaws in his numbers in the book but I have found the idea of his strategy to be pretty sound.

 

[Dave020]

The cash value won't make a difference when you die.....you could probably get a no-lapse UL with 2-3x the death benefit for the same cost you are paying now.

Which would be more valuable if he dies sooner, not later. PUAs and the corridor effect on a qualify WL par product can create an old-age DB perhaps 5x-7x the orignal DB or more, depending on the performance. Or he can take a reduced, paid up FE policy which will still grow even though no premiums are paid.

 

[stormtracker]

It may be naive thinking on my part, but I am not comfortable crossing the line in which "performance" is a variable. I keep it safe, with non-par products. In my state (Texas) it is forbidden to even use the term "investment" when discussing an insurance product.

 

[Dave020]

I am thinking of performance based results for carriers like Northwestern Mutual. Dividend paying WL par since 1857 with no year in which a dividend was not paid (including the great depression). That is pretty rock solid performance.

And I agree, this is never about "investing", it is about "insuring".

 

[stormtracker]

I am thinking of performance based results for carriers like Northwestern Mutual. Dividend paying WL par since 1857 with no year in which a dividend was not paid (including the great depression). That is pretty rock solid performance.

And I agree, this is never about "investing", it is about "insuring".

That is stout!

 

[pistol_saf]

I have to agree with all the others. Insurance is not, and should not be used as an investment. Insurance is first and foremost income protection. Some do use Whole Life to make sure estate taxes are paid(if their net worth is over 2 Million) and some like the idea of "forced savings". But for many, term insurance and tax-deferred annuities is the way to go.

 

[NMFNMDRT]

I've been a producer for Northwestern for 3 years now, and I can certainly say that we do keep our investments and insurance seperate. We sell insurance as a savings tool in hope of it being a rock solid protector against market swings.

The difference between savings and investing are the guarantees involved. Northwestern's approach is having a guaranteed aspect to the policy along with paying dividends that change from year to year based on the company's general investment account. Investments have no guarantees, but arguably a better long term return.

I just pose one question. What 55 year old do you know wishes they bought a substantial whole life policy when they were 25? If they were educated about the policy I can tell you that the vast majority would be very grateful after this horrid investment climate has swept through in the past year. I can run a policy that never looks back after 4 years. Premium in will always be less than the CV increase past that point. The guarantees within the policy don't let the CV go backward. It can only slow down or speed up once it gets to certain point.

 

[DavidD1]

Insurance is not an investment, never has been, never will be. You can't legally call it that either without violating NAIC Model Advertising code. Insurance is based on guarantees, not risk. Investments have inherent risk, including Variable Insurance products. That's why they're regulated by the feds.

Insurance does, however, have more tax benefits than any other financial product. I use tax benefits to explain LI. I frequently sum it up this way:

"The insurance industry believes, and trains its agents to believe -- that you're going to die tomorrow...and that somebody else needs the money.

On the other hand

I believe you will probably die of old age, and just want to live better in the meantime -- and still take care of your beneficiaries.

Which assumption would you like your finances to follow?"

People today have been burned by "investments", and many want the security of guarantees. Insurance is the perfect financial product for them.

atlantainsguy

good point

 

[Dave020]

I will always maintain that if I went back into life insurance full-time I would re-contract with Northwestern Mutual. Nobody can beat their products!

 

[motoxxx]

The cash value won't make a difference when you die.....you could probably get a no-lapse UL with 2-3x the death benefit for the same cost you are paying now.

Since my wife and I don't have any children, the reason we purchased was more for an insurance policy but with some solid savings/growth/dividends and it has done really well. I agree with you that I could have had a no lapse UL for the same cost but after looking at both, dividend paying whole life had a much more solid track record without some of the ups and downs that the UL stuff we looked at had.