Originally Posted by SportsNut
If the cash value insurance concept is so fantastic... I would like to know where I can purchase cash value homeowners and cash value auto insurance...?
I see no difference of casualty ins, the cost of pure risk of the potential event or economic loss, to that of life insurance, and the death of the insured being equal to the house burning down, speaking purely economics not emotions. Due to inflation, costs of home and auto ins gets more expensive which emulates that of advancing age of a persons life... Why do we not get priced out of home or auto ins...? Higher cost of insurace but purcasing with inflated dollars, so maybe the cost isn't so much greater, really. Cash value must be the answer there too, huh...? Or maybe not. If one is so much greater for life, why not for casualty too...?
Thank you, SN. Let's look at your two points:
A.
"I would like to know where I can purchase cash value homeowners and cash value auto insurance..." Yes, homeowners and auto insurance are normally available only as one-year contracts (long ago, as in several decades ago, you could get some 2-year and 3-year P&C policies but insurance companies found these not to be as profitable as the one year contracts). Moreover, homeowner and auto insurance policies normally don't offer coverage continuation guarantees beyond the single year expiry. In other words, your question is akin to asking where can you purchase 1-year non-renewable term life insurance with cash value and your answer to that question would be the same as for homeowners and auto insurance.
Moreover, consider that every life insurance policy that provides for a level premium and level coverage for a period exceeding a single year
has "cash value" (though not available to the policyholder). For example a 20-year term fetches a higher premium than the equivalent 1-year term in the early years - the difference "cash value" used to supplement the later years' premiums to create a "level premium" illustration. The only difference is that this "cash value" in a 20-year term is not "cash
surrender value"; in other words not available to the consumer and only available to the insurer... and becoming profit for the insurer when the policyholder lapses earlier than the last year of the level period.
"Due to inflation, costs of home and auto ins gets more expensive which emulates that of advancing age of a persons life..." Whoa whoa...hold onto the reigns of that chariot...U'r heading right over the edge of the cliff with that one.
Inflation doesn't increase the probability of loss but may increase the amount at risk. Age increases the
probability of loss but not the amount at risk. Let's not confuse probabilities with amounts; these are separate variables and not interdependent. Let me try to xplain this to you:
If you throw a 6-faced die, your probability of getting a 3 facing up is 1 out of 6 and it remains that way (assuming that the die or the table are not 'doctored'). That probability, BTW, remains the same and independent among throws. If you bet $100 on such a game of chance then your risk is $100 but if you bet $1,000 your risk is $1,000. Now, if you change the die from a 6-faced one to a 5 faced one, your probability of getting a 3 increases from 1/6 to 1/5 per throw. Inflation has nothing, nada, and zilch to do with such probabilities. Likewise, if 1/10,000 persons in an age/gender/risk class is expected to pass away in a year, the pure risk cost per thousand dollars of life insurance is $1,000*1/10,000=10-cents, so the pure risk premium for that coverage should be 10-cents per $1,000. In other words, the "risk" part of a the term premium for a $500,000 term policy under that scenario should be $50. If you want to have an idea of what the pure "risk" part of the premium for any policy should be in the first year, then simply take the probability as shown in a mortality table and multiply by the amount at risk. (Keep in mind, however, that select risks carry a lower probability of loss than mortality table probabilities; but that's beyond the scope of (what I'm trying to make) a short answer.
Back to your P&C question, I believe that if P&C insurers could justify "cash surrender value" insurance for P&C from a profit standpoint, then I believe that they'd offer it.
Re: Whole Life Insurance
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