Insurance Agent Forum

[ABC]

My field is group health but do sell a few life policies every year but I always sell term.

Life insurance as investment vehicles
How does this work with interest rates being so low?

I understand some people will borrow against their cash value and not have to pay taxes. Is there really an advantage doing that? There are surrender fees?
If we compare the fees to their tax rate how much are they actually saving.

Cost of insurance down the road? What I am seeing in policies is that the cost of insurance is eating up all the cash value after 20 years.

So I really don't understand how Life insurance can be sold as an investment vehicle.

Someone school me on this.

[CHUMPS FROM OXFORD]

"So I really don't understand how Life insurance can be sold as an investment vehicle."

It shouldn't.

[healthagent]

Unless you're a life agent guzzling the Kool Aid by the pitcher, it's not an investment tool.

[arnguy]

Selling life insurance as an investment vehicle really is a no-no.

[Mr. Bill]

Usually you learn about the different insurance products before taking your insurance exam. Did they not teach you? Ultimately life insurance can be the absolute best investment vehicle, however, the optimum value occurs upon death. So, it really depends on what you're trying to accomplish. That said, there are TONS of crappy policies being sold as "investments" out there. Many of them pay nice, fat, juicy commissions. Go figure.

[healthagent]

Can we infer a correlation between high commissions and crappy policies?

[arnguy]

Originally Posted by healthagent

Can we infer a correlation between high commissions and crappy policies?

John, I believe that is what Bill implied.

[Mr. Bill]

Well, the more money the agent makes, the less money there is available for the client to work with. I once went to some dopey seminar and walked out when they started talking about a 20-year surrender period. If some dumba$$ can say that with a straight face to a client, I believe that same dumba$$ will be able to sell a ROP health policy to a 25-year old.

[HomeService]

I used to know a guy in the early 1990's who would get retirees to dump in 100K or more lump sum into UL policies as some sort of estate planning vehicle, I think he would write them 500K policies or a MIL or so. The tax free death benefit was of course a big selling point, and UL's paid better interest on cash value back then. Don't know what that guy is doing today....

[moonlightandmargaritas]

Originally Posted by ABC

So I really don't understand how Life insurance can be sold as an investment vehicle.

In some very limited circumstances, it can actually be an excellent investment vehicle.

Let's say you have a high earning physician that is currently maxing out all tax-favored accounts.

An over funded VUL (non-MEC of course) can be an excellent wealth play. Additionally here in Florida (as in many states) life insurance cash values are creditor-proof.

If he/she can use the DB -- all the better...

[LGilmore]

To add to moon's points... it's what they let you keep and what they count and what you have left over at the end.

Along with RISK.

[ABC]

Originally Posted by moonlightandmargaritas

In some very limited circumstances, it can actually be an excellent investment vehicle.

Let's say you have a high earning physician that is currently maxing out all tax-favored accounts.

An over funded VUL (non-MEC of course) can be an excellent wealth play. Additionally here in Florida (as in many states) life insurance cash values are creditor-proof.

If he/she can use the DB -- all the better...

This would be the exact situation that I am talking about.

A friend of mine specializes in the type of sale. He gets mad at me when I talk about selling Term life. Infact he refuses to sell Term Life. He explained this sell to me a couple of times.I just don't see the tax advantage of taking/borrowing against the cash value. Especially when the client is using after taxed $ to pay the premium.

Thanks for the feedback

[moonlightandmargaritas]

Originally Posted by ABC

I just don't see the tax advantage of taking/borrowing against the cash value. Especially when the client is using after taxed $ to pay the premium.

The advantage is this: growth in the cash value is tax-deferred. You can access this growth tax-free by taking a loan that you don't have to pay back.

This is what's called a "greed" sale.

Term life insurance, on the other hand, is a "need" sale.

[bobson]

Originally Posted by Mr. Bill

Well, the more money the agent makes, the less money there is available for the client to work with. I once went to some dopey seminar and walked out when they started talking about a 20-year surrender period. If some dumba$$ can say that with a straight face to a client, I believe that same dumba$$ will be able to sell a ROP health policy to a 25-year old.

Geez, if we all just donated our time think of the excellent policies consumers could buy. Imagine the benefits a health insurance company could add to a health policy is they didn't have stinking agents to worry about...

[bobson]

Originally Posted by moonlightandmargaritas

The advantage is this: growth in the cash value is tax-deferred. You can access this growth tax-free by taking a loan that you don't have to pay back.

This is what's called a "greed" sale.

Term life insurance, on the other hand, is a "need" sale.

Did you get one of those doctoorate degrees I keep getting in my spam folder? You seem very knowledgable.

[BROWN+4]

Originally Posted by moonlightandmargaritas

The advantage is this: growth in the cash value is tax-deferred. You can access this growth tax-free by taking a loan that you don't have to pay back.

This is what's called a "greed" sale.

Term life insurance, on the other hand, is a "need" sale.

And what happens when the client outlives the term policy and has to rebuy, at an outrageous price in their 60s 70s or 80s?

I like the use of whole life due to the fact of the premiums being level until death. Also the cash in the policy can be used .....SHOULD ONLY BE USED IN EMERGENCY SITUATIONS.

I do sell term as well, mostly to young singles/families just starting out and need insurance but cant afford whole life at the time. And then when they are ready to convert they can do so without any underwriting involved. So I guess I mostly use term as an insurablity protector, while covering the client with the death benefit as well.

OF COURSE THIS IS JMHO

[ABC]

You bring up a good debate.
Term vs. Whole life

Originally Posted by BROWN+4

And what happens when the client outlives the term policy and has to rebuy, at an outrageous price in their 60s 70s or 80s?

I like the use of whole life due to the fact of the premiums being level until death. Also the cash in the policy can be used .....SHOULD ONLY BE USED IN EMERGENCY SITUATIONS.

I do sell term as well, mostly to young singles/families just starting out and need insurance but cant afford whole life at the time. And then when they are ready to convert they can do so without any underwriting involved. So I guess I mostly use term as an insurablity protector, while covering the client with the death benefit as well.

OF COURSE THIS IS JMHO

[James]

There was a time when I actually tried to explain the difference of Savings Vs Investment, obviously that is a wast of time! Yet, can anyone remember the actual return of a good solid PWL that I more then once pasted here?

A good PWL is more then likely the best middle America can get today when it comes to savings and taking into considerations of a more long term needs may it be Insurance or Savings.

As I said more then once, a good PWL is the cheapest of all Life Insurance.

[Mr. Bill]

Back that turnip truck up, john boy! James has come home!!!

Where ya been, boy?