Permanent life insurance as an investment?

[Nav13]

Sugarphreak you really need to do your research about insurance before you stop someone else from make a decisions based off your lack on knowledge. You are mixing up the good and bad of 2 different types of policies.

Participating or Whole life polices are bought and paid up in 15-20 years. They make money off of people like yourself who buy term insurance. 90 percent of term insurance doesn't get paid out. That's where the whole life policy owners make the 7 percent dividend every year for the past 120 years.

Universal life is another from of permanent insurance. However this type of policy, part of your premium goes to the cost of insurance. Part of it goes into a investment account which will most of the time be a mutual fund. In other words it earns its money from the market. Universal life policies are risky unlike whole life policies. So yes you can loose your money very quickly in universal.

term is good and cheap to cover a debt like a mortgage. However permanent life insurance can be used to supplement your retirement greatly and is probably the most conservative investment you can ad with out taking a lot of risk.

[ReasonOne]

Personally, I think some form of life insurance is prudent - just do your research and understand what you are getting into. One of the main reasons why insurance has such a huge stigma is that few people understand or comprehend the various types of policies available and what fits their needs. Or even want to. And it certainly doesn't help that there are a LOT of insurance weasels out there trying to give everybody a diaper bag treatment like the majority of investment brokers.

Depending on your lifestyle/budget/needs, there's a place for term and there's a place for participating or universal (among other types of policies).

Don't get mad. Get even. If you don't understand how insurance or investing works... learn. Read a book, take an entry level class if you have the time or talk to someone you know and trust that is knowledgeable in these fields. Some people may know a financially independent elderly relative in their family, who will impart some basic, honest and no-nonsense advice in exchange for an occaisonal visit and some quality time.

Why put your financial well being into someone else's hands? It's easy to blame a broker when thing go south, but if you are in charge there is nobody to blame but yourself. I think that many people are afraid or intimidated of taking ownership of their financial future. And there are companies out there getting paid billions just to convince John and Jane Q. Canadian that they are too stupid to do it themselves. And that - in my opinion - is bullshit.

I have a couple of policies myself. But they are not the end all and be all for my overall investment strategy. In fact, it is an extremely small portion (I don't really consider it an "investment" of any kind, per se). It's there so that my loved ones are cared for in case something happens to me.

Diversification is key. Just don't depend on your life insurance policy (or the cash value in it) as your only saving grace or major windfall. Just my two cents.

[CapnCrunch]

Does anyone have any good recommendations for term life insurance? I'm looking for 20-25 year for $550,000.

[skandalouz_08]

I have PM'd you.

[sputnik]

The words "insurance" and "investment" should never be used together to describe the same thing.

For insurance, just get a good 10-20 year term policy. Sure at the end of it you get nothing, but who cares, it was cheap. It also means you didn't need it (which is a good thing). Making insurance into some "investment" is just a means for an insurance company to leverage your hard earned money to bankroll their operations and other policies while giving you a crappy return.

[skandalouz_08]

Originally posted by sputnik
Making insurance into some "investment" is just a means for an insurance company to leverage your hard earned money to bankroll their operations and other policies while giving you a crappy return.

Just to play devil's advocate, you may think of it as a crappy return just because you aren't physically receiving it, but when you look at the amount of money you put into a permanent/whole/participating life insurance plan compared to how much your beneficiaries get out of it the return is often in excess of 5-8% (depending on your life span) but still that's a good return, especially in these markets and over a 40-60 year time horizon.

[max_boost]

Originally posted by skandalouz_08


Just to play devil's advocate, you may think of it as a crappy return just because you aren't physically receiving it, but when you look at the amount of money you put into a permanent/whole/participating life insurance plan compared to how much your beneficiaries get out of it the return is often in excess of 5-8% (depending on your life span) but still that's a good return, especially in these markets and over a 40-60 year time horizon.

I just hope they don't piss it all away on drugs but actually use it as opportunity to gain knowledge and experiences in life. i.e. education/travel

[sputnik]

Originally posted by skandalouz_08


Just to play devil's advocate, you may think of it as a crappy return just because you aren't physically receiving it, but when you look at the amount of money you put into a permanent/whole/participating life insurance plan compared to how much your beneficiaries get out of it the return is often in excess of 5-8% (depending on your life span) but still that's a good return, especially in these markets and over a 40-60 year time horizon.

5-8% is a crappy return on a 40-60 year investment strategy.

[sputnik]

Originally posted by max_boost
I just hope they don't piss it all away on drugs but actually use it as opportunity to gain knowledge and experiences in life. i.e. education/travel

My life insurance policy will be over when I am 52.

By then my mortgage will be paid off, my kids will be adults and my wife won't need to support them.

Not sure why anyone would want a life insurance policy just so that their kids can hit the lottery when they die.

[max_boost]

Originally posted by sputnik


My life insurance policy will be over when I am 52.

By then my mortgage will be paid off, my kids will be adults and my wife won't need to support them.

Not sure why anyone would want a life insurance policy just so that their kids can hit the lottery when they die.

Yea you do it your way buddy.

[cet]

I follow the same strategy with regard to insurance/investing. I ave group insurance through work that will take care of my family for years should I die. I then have term insurance to cover the mortgage. Once the mortgage is paid off I have no more need for the term insurance. All investments are handled seperatly.

Originally posted by sputnik


My life insurance policy will be over when I am 52.

By then my mortgage will be paid off, my kids will be adults and my wife won't need to support them.

Not sure why anyone would want a life insurance policy just so that their kids can hit the lottery when they die.

[ExtraSlow]

Originally posted by sputnik


My life insurance policy will be over when I am 52.

By then my mortgage will be paid off, my kids will be adults and my wife won't need to support them.

Not sure why anyone would want a life insurance policy just so that their kids can hit the lottery when they die.

Originally posted by cet
I follow the same strategy with regard to insurance/investing. I ave group insurance through work that will take care of my family for years should I die. I then have term insurance to cover the mortgage. Once the mortgage is paid off I have no more need for the term insurance. All investments are handled seperatly.

Yep, that's my strategy as well. I don't plan on carrying life insurance past about age 50.

[skandalouz_08]

Originally posted by sputnik


5-8% is a crappy return on a 40-60 year investment strategy.

It's ONE of your investments strategies, its not your only one. Never put all your eggs in one basket. Technically your return could be 50+% but that would mean you died before your life expectancy.

Would you rather live in retirement watching your pennies knowing there are still expenses to be paid after your death (funeral, final taxes, probate, etc.) or live without a care knowing your insurance will cover that and you can spend every last dime you've saved in your retirement?

[Nav13]

Lots of people with mortgage insurance dont realize that a butt load of them dont pay out. Even when you think you are insured the bank insurance company does not have to pay.

For example people dont realize that the underwriting is done after death with mortgage insurance instead of before. Meaning the insurance company can still get out of paying the death benefit if they find anything irregular.

Also people tend to lie on their mortgage insurance application to get a lower rate. If you pass away and they find anything that doesnt match up, they will decline your claim. Also meaning your wife and kids are SOL. The bank can also then claim full payment of your mortgage if they find out there is a death.

heres a link to a video that people with mortgage insurance should watch. www.cbc.ca/marketplace/in_denial/

Weather you get permanent or term its way better to get your own policy rather then the banks. It usuall the same price as the banks or sometimes cheaper and you get a level death benefit rather then a declining on like your bank insurance.

[ExtraSlow]

yep, mortgage insurance is a rip-off. Term insurance of similar value is much better deal.

[craigcd]

Originally posted by ExtraSlow
Yep, that's my strategy as well. I don't plan on carrying life insurance past about age 50.

Agreed

[Xtrema]

Terms insurance is cheaper, especially if you need higher coverage.

I'm with Sputnik, the risk is during kids growing up and mortgage not paid off. Once kids are on their own and you have no debt, it easier to deal with money that's on your hand than in insurance company's hands.

All these 15-20 years plan have a out. If insurance investment doesn't work out, they can ask for top up and push payments beyond original term. And if you don't agree to it, the withdrawal value is usually about 30% less than what you have put in.

Each product is designed for a different goal. Term covers the period of risk, whole life is for inheritance.

[dawerks]

Give your kids enough money to do something. But not so much that they do nothing.