NBC News – Investing In Life Insurance
Posted on February 14th, 2010 in Life Insurance Blog
Investing in life insurance can be an important asset in your investment portfolio.
Investing in life insurance can be an important asset in your investment portfolio.
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This post has 25 comments
February 14th, 2010
TheInsWiz, regarding your 40 year old scenario. When calculating the Value of the DB growth, you are calculating the compounded interest equivalent of the premium, not the initial DB value.
So, a 30 year old person paying 10K in premiums each year for a $1 million policy who dies at age 70 might have a DB of 3.2 million (40 years of paying 10K growing at 8.5%). If he doesn’t die, he’d have 1.2 million+ in CV.
That’s how I calculate it at least. I hope it is more clear now.
February 14th, 2010
TheInsWiz, regarding my calculations. First, my figures are not actual projections, I was just demonstrating the fact that the DB grows. Second, that’s why I said “1 Million+”. I just wanted him to understand that WL DB is not stagnant at its original value.
February 14th, 2010
Matter of fact bweazel listen to the last 4:15 of the video it will tell where the money is invested.
February 14th, 2010
Insurance companies invest in some of the most conservative vehicles around.
Whole life the death benefit and CV is guaranteed.
February 14th, 2010
Not here for another pissing match…..Just want to clear a few things up. You wrote, “Second with the death benefit growing at 8-10% (also tax free), it’s not a bad deal either.”
So are you saying that a 40yr old buys a $1mil WL policy from NWM at age 70 his death benefit would be $10mil+? He makes it to age 85 his death benefit would be over $36mil? I am using 8% growth.
February 14th, 2010
Now if what you are saying is true then that would be a growth of about 4.6%.
You are correct about the CV being guaranteed.
February 14th, 2010
Just following up.
500k to 1 million today is about 2.3%. If that is true then what is the cash value growing at <2.3%? Maybe I am calculating wrong or am I misunderstanding you?
February 14th, 2010
I know what I’m talking about. Any other questions?
February 14th, 2010
Continuing point Four: The “non-guaranteed” column on an illustration is based on the current dividend of the company. Dividend slowly go up and down over time so they won’t always be accurate, but fairly close. None of the top companies have ever had to fall back onto lower “Guaranteed” values.
Fifth, regarding your last 3 sentences, the answer is NO. Once you start paying your premiums, your policies DB and CV start to grow. Whenever you die, your beneficiaries get the “entire” DB.
February 14th, 2010
Is there a fifth?
February 14th, 2010
Third, DB in WL policies grow. They have been for a long time. One of mine has been for 30 years. It’s now worth 4 times its original value. This is one of the big reasons why people/banks/corporations get WL in the first place. This is a fact.
The DB and the CV are related, but not the same.
Fourth, CV is guaranteed. On an illustration there us a “guaranteed” Column and a “non-guaranteed” Column (legally, both have to be shown). Guaranteed values are much lower, but guaranteed.
February 14th, 2010
First, I am not a LI salesmen. However, I “was” once a Financial Rep at Northwestern Mutual.
Second, the investing that happens in Hedge Funds and the investing that takes part at WL LI companies is like night and day. WL LI companies “legally” have to invest conservatively. The 4 top companies have been in business for 150+ years (Guardian is a little shy of 150). During all the US financial crises of the last 150, the top WL companies have been quite strong (including our most recent).
February 14th, 2010
Bweazel, ok . . . I’m going to try and be nice here. Virtually everything you say is wrong regarding WL. I’m going to take it from the top and address all of your questions and misconceptions.
February 14th, 2010
Of course I refered to the cash value. Are you saying the death benefit grows? Umm. From what I understand of whole life policies, it is permenant insurance. If I take out a 500K policy, I’m getting 500K when I die, plus any cash value that I have built up. Are you saying that you have to pay into these plans for a set time before you can have the entire benefit delivered upon your death? There’s doing homework, and then there’s just shitty sales pitches. Yours sounds like the latter.
February 15th, 2010
Oh by the way, yes there is a reason. Because people could use that money better on their own, instead of the insurance companies putting into hedge funds that may crash and burn. Your death benefit is garunteed, but I haven’t heard that any cash value in these plans are garunteed at all. Am I mistaken?
February 15th, 2010
Wodendog, there is no reason why life INSURANCE should suplement your retirement. Like I said before, it’s greed on the part of “insurers”, who have now turned into (always been) hedge fund whores.
I was under the impression your cash value grew and your death benefit remained constant. Your death benefit grows? Huh? Since when? 500K policy worth 1mil today… is that additional 500K not your cash value in the policy?
For the second time now, are you a life insurance salesman?
February 15th, 2010
Bweazel, there is no reason why Life Insurance can’t supplement a retirement plan.
When you ask about my “second part” you refer to CV, when I was in fact referring to DB. What have I said that was misleading? DB is the Death Benefit (what is paid out when the insured dies). As the CV grows in the policy, so does the DB. A 500K policy bought in 1980 would be 1 Million+ today (DB).
I have found that very few people commenting on CV LI policies actually do there homework.
February 15th, 2010
What are you an insurance salesman? I didn’t hear the “internal rate” part. There is no reason your life insurance policy should also be your retirement policy, it is simple greed on the part of the insurance companies. I mean hey if you got the money, have at it, but if you have the money, you should be investing into many other things, not life insurance. I’ve done my homework. Your second part is a tad misleading there, at what point during the 20 years will your cash value grow at that rate?
February 15th, 2010
bweazel, first of all 4-5% compounded over 20 years tax free is not a bad investment (it’s not GREAT, but not bad). Second with the death benefit growing at 8-10% (also tax free), it’s not a bad deal either. Third, inflation varies from year to year (ranging annually from 18% to -10.5 since 1914). During the last 20 years it’s been around 3%. It hasn’t reached 4% since 1991.
Do your homework before you make biased uniformed statements.
February 15th, 2010
4-5% over 20 years? That’s a horrible investment, that won’t even keep up with inflation. These guys are giving horrible financial advice. I love how they didn’t say whole life once, glad that other guy called them out on it.
February 15th, 2010
This is a great GIFT that you need to pay in Taxes. IRA is the same so my question for you again what is the vehicle that you recommend to invest the money?
The Lord Bless this Nation
February 15th, 2010
My Pass comment its for obe231. obe231 what is the best vehicle to put my money to grow? Mutuals Funds? IRA? 401K? think about this is simple 1+1=2, this vehicles are great in the pass but look what happen at the time you retired ex. 401K your Tax Bracket change you need to pay to in Taxes 30 to 33% so if you reach to accumulate $500,000 x 30%= $150,000.
February 15th, 2010
Maybe you sound to work with PRIMERICA or some company that only offer Term insurance ahhhhh. You to study more the Insurance Industry. Exist a product that Cash Values and Death Benefit if you die ALL MONEY GOES TO THE BENEFICIARY. If you dont die you can withdraw up to 90% and you dont pay taxes and is approved by IRS. My respect but please dont confuse the people. The old times pass a way because new ways has all ready to cross.
The Lord Bless this Nation
February 15th, 2010
Family meeting folks, need to cut cost, OK how about canceling all insurance policies (frauds anyway) walk away from credit card (Fico: a huge fraud). Hey,..it’s Just a pragmatic family business “got to survive” decision. Got the idea from too Big to fail banks, they are really good at it. Gonna start me a family veggie garden, pop me a cool one, kick back and,.. well fuck it!
February 15th, 2010
obe231: You CLEARLY have NO UNDERSTANDING of how whole life and cash value works!
The cash value is very similar to equity in a house. You can’t just take cash out of the walls, you need to either borrow against it or sell the house and take the equity…same as the cash value. By your logic, you’re saying that buying a house is a rip off since you have to borrow against the equity and you don’t just get a cash hand out! Get a grip and educate yourself before spouting off factless info!