Indexed Universal Life Insurance

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So you'll put in $400,000 and draw out $75,000. That's 19% not including gains

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Not total...it would be yearly.

No. I cannot stand universal life products in general. The income rider can be breached. The index part defeats the whole purpose of permanent insurance. I'm one of the few here, who do like permanent insurance, but universal life is not traditional whole life and long term it is terrible.

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All depends on you and your situation.

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This is the standard response of somebody who either sells Universal/whole life products, or someone who has no idea what they are talking about and wants to sound intelligent. NO it really doesn't depend on him and his situation, no person or situation conforms to a piece of shite product.

Read the fine print on those riders. I'd be willing to bet that most of that shite is not guaranteed. There's only so much guarantees that any type of UL policy can offer and I don't trust indexed products at all. Those things are loosely regulated and will get hammered one day. What company is the policy through? If its not a highly rated company then don't bother.

If you want guarantees in insurance, use whole life from a mutual company. If you want an investment, buy funds or have someone manage a portfolio.

I like your thinking and ambition but I would be very cautious of that product.

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Vols&Shaft83

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Sorry, just saw your post.

I mean, as part of an overall portfolio, there are tons of reasons. Do want just examples for individuals? If so, estate planning is one realm I can go into detail if you want.

Many of the big banks use them as executive bonus/compensation plans.

As far as just overall reasoning why traditional whole life (not universal), it is an asset that is guaranteed to never lose you money. Conceptually, if I brought a business plan to you with the pitch that you would lose money for the first couple of years, and then guarantee to make you money every year for the rest of your life, would you want that on your balance sheet? I would say that is a pretty logical reason to have some as a part of your overall portfolio.

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Indexed Universal Life

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Conceptually, if I brought a business plan to you with the pitch that you would lose money for the first couple of years, and then guarantee to make you money every year for the rest of your life, would you want that on your balance sheet? I would say that is a pretty logical reason to have some as a part of your overall portfolio.

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I assume you're talking about the commission fees and expenses with traditional whole life, so just to simplify it I'm gonna say I forfeit the first 3 years of premiums ( if I'm wrong, I apologize). Now with a 20 year term policy, I forfeit 20 years of premiums if I don't die, right?

Here's the difference (again, these aren't exact, I'm using industry standards, I understand that individual rates vary) :

I'm 30, male, in good health. If I have $100/month to spend on life insurance, I go and compare whole life rates and find out that $100 will buy me $125,000 of cash value permanent life insurance.

The same $125,000 in a 20 year term would cost me about $7/month.

$93/month or $1116/year savings for the same death benefit.

Now let's look at the next 20 years (although it usually takes at least 30 for most Whole life products to mature). For the first 3 years, the extra $93/month pays fees and commissions so it earns nothing. After that, the return will average 2.6% per year for whole life, 4.2% for universal life, and 7.4% for the new-and-improved variable life policy that includes mutual funds, according to Consumer Federation of America, Kiplinger's Personal Finance and Fortune magazines. If I die, the death benefit is still $125,000.

$24,000 invested over 20 years, for a maturity value (assuming I get the top of the market) of $40,618.58, if I surrender the policy. Minus penalties, etc. Remember, the investment is completely illiquid.



Term Policy costs $7/ Month. Over the same 20 year period, the cost of the death benefit of $125,000 is $1680.

So what if I take the $93/month savings and invest it on my own.

Same $24,000 invested over 20 years, same $125,000 death benefit, and let's say I just suck as investor and only average 7.4% per year. My Maturity value is $50,868.89. No surrender fees, no penalties, and the investment is liquid.

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Averaging 7.4% would be pretty good. You would also have to pay taxes along the way and at liquidation of your $50k.

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7.4 after taxes would be below average. 7.4 before taxes is WAY below average.

Whether it's whole life or term life, you still invest with post tax income. And if you are investing with post tax income, you pay capital gains and/or dividend tax at a max of 23.8% (which is very tough to reach btw, most likely you'd qualify for the long term rates of 0-15%, and only dividends are taxed as income, most likely capping at 15%, 20% if you're in the maximum tax bracket) along the way, not at liquidation.

1. Don't do it.

If you want to answer your question properly, ask for a specimen policy and READ it. If you understand the contract and still like it, then go ahead and do it.
But, if you cannot understand it, then you will have to ask yourself "why don't I understand this", and then decide whether to do it.

I am willing to bet that the agent doesn't fully understand the policy.