re: Infinite banking with structured whole life policy?

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I disagree. I dont want to derail a thread. But you are welcome to list your reasoning.


1) If they can't afford food and housing, how are they going to afford a pricey whole life policy?

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Well if someone cant get food or housing, then they die. It is one of the basics.../s

You do realize that people under the poverty line have the food and housing thing figured out?

But they cant cover a burial (yes... $5k, $15k, $20k. Whatever a minimum policy would be). They are unable to self insure.

They are also unable to save. Whole life does both. The cash value also helps cover payments when a tight budget becomes no budget.

If anything, whole life makes more sense for under the poverty line than anyone else in this country.
They dont have discretionary income to spend on a term policy that cancels with 1 missed payment and is mathematically designed to help only 3% of its clients.

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I understand where you’re coming from but so few people understand how borrowing from a whole life policy works that to say the poor should get a WL policy because the cash value could help them in the future is irresponsible from a fiduciary perspective

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I disagree.
It is there (like an insurance policy) for an emergency. Not being able to make the monthly insurance payment would be an emergency (cash value can make the payment in duress without cancelling the policy like a term does). Keep the power on? Avoid eviction. These are emergency uses. And the interest is 1%. Paying off a debt is great. But if that debt is at 1% interest then it isnt the worst debt to get by on with interest only payments for a span of time.

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The owner must understand that they either pay it back or risk losing the policy, putting them back at square one at a time when they are older and potentially couldn’t qualify for the same policy again if they lose it due to not paying back the loan and need to buy another one.

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Again. 1% interest payments avoids cancellation of a policy (and that is only after 100% of the cash value is exhausted).

Sad to say, whole life insurance is the most common vehicle to pass along any tangible value to heirs for people under the poverty limit. Like i said, it is this clientele who is best suited to purchase this type of coverage.

For the record, i dont own any whole life. I can afford to self insure (insurance is a contract to transfer risk and is best used by people who cant afford to go without that transfer). My family and i are blessed to not need whole life insurance.

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Funeral costs are skyrocketing and in 30 years I could see the average cost of a funeral easily being $50,000.

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That seems awfully high. And this data from the National Funeral Directors Association (NDFA Statistics)says that median cost of a funeral in 2019 with a funeral and burial was $7,640 and $9,135 with a vault. And the increase in costs from 2014, was about 1.25% annually for funeral and burial costs and 1.43% annually with a vault.

Based on the 2019 figures and the annual growth rates from 2014, it would take until about the year 2171 (about 152 years) to get to $50,000 for a burial and funeral and 2139 (about 120 years) for a vault.

So how do you come to "easily $50,000" in 30 years, that's like 6% annual increase, well above the SKYROCKETING annual increases of less than 1.5% over the recent half decade.

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But they cant cover a burial (yes... $5k, $15k, $20k. Whatever a minimum policy would be). They are unable to self insure.

They are also unable to save. Whole life does both. The cash value also helps cover payments when a tight budget becomes no budget.

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This doesn't make sense. IF they are unable to save, then how can they save to put it in a whole life policy because that requires $ they would put to savings that they can't save for to be put into a whole life policy.

And even then, I think that it would be more valuable to have that money easily accessible especially since they're more likely to access it as person who is alive.

But even then, why would that make more sense than a much cheaper term policy, with a much higher payout?

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It is a mindset of having bill and paying it versus having money and spending it (i.e. not saving it).
If you dont understand someone making $18k/yr, consider yourself lucky.

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Well the scenario we were discussing is not having money left over to even choose to save. And someone making $18,000 a year isn’t suddenly going to have money left over to waste. Regardless, if a person was able to seek out a whole life insurance policy, and was able to consistently pay the premiums, then they have the mindset to learn that there are better options available to put that money and be able to do that. In other words, a person who need to save money, but irresponsibly wasting what little is left to save, is not going to suddenly become some responsible payer of life insurance that they won’t even receive.

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But a permanent life insurance policy is a gift to loved ones.

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What? Not dying and continuing to provide is a gift to loved ones, so life insurance is compensation for a terrible loss both the loss of a loved and loss of financial support. I wouldn’t even consider a large inheritance a gift, but it’s more of a gift because it’s something that they posses to give that could have been given without death, and it’s not to compensate for the loss of financial support.

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97% of term policies never provide a benefit to the owner.

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And that’s the purpose of insurance to never actually need it, and the ideal would be 100% or term policies never provide a benefit because either the person didn’t die and/or they didn’t need to have life insurance when they do die. Health, dental, and vision are the exceptions because it’s good to use it for many services (preventative care) which aren’t really that costly in the first place, and the exception to that would be something like having a baby (costly but something people tend to want). But even those have special advantages (tax savings when deducted payroll, HSA/FSA accounts, etc).

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Any whole life policy that makes it 2+ years is going to have cash value, surrender value, and if not cancelles will have thousands of dollars guaranteed for family.

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OK? And the alternative is a term policy with lower costs and higher payouts if one does die and it’s needed OR enough assets where life insurance was never needed in the first place.

I cannot think of a single situation where one would have a whole life policy INSTEAD of a term policy. And if there is ever value of having a whole life policy, which I’ve get to actual seem evidence to support, it would be in addition to term and any other investments.

But regardless, the point of insurance is to protect against some risk you never want to happen but it would be necessary if it did happen. Term covers that risk at a much lower cost and much higher payout. Once that risk is covered, then there are far superior options to put one’s money.

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You have 2 choices.

$35/mo for a $100,000 term policy where mathematicians have determined a 97% chance that you lose.

$45/mo for $20,000 whole life policy that is guaranteed to pay your family. Or you can cancel it for for a few thousand dollars surrender value.
Or you can skip payments when times get hard and you don't lose the $20,000 life policy.

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Well here is a real-world example of the 2 choices. I have a $250,000 30-year term policy that has about 27 years left. That's less than 60 dollars a month. And I would have taken out more, but I was in a defined benefit plan that had a pretty generous life policy (I have since changed jobs though). And I was the least healthy I had ever been when I did the health screening. It was the worst year of work ever, I had gained like 40 pounds; I had high blood pressure for the first time, there were multiple nights every week I got no sleep; I stopped working out; I was eating crap; and despite not smoking, I had nicotine in my system when I did the health screening from trying some nicotine gum to combat exhaustion (stupid I know, but it did work).

I've lost all that weight, exercising again, and eating healthy, but at that time I could not have been much less healthy during the screening. So I think that added like $20 a month, but it is still less than $60 a month.

I also have a $300,000 policy through work (obviously conditional on employment), and I pay like $8 bi-weekly. So altogether I have $550,000 in life insurance coverage, for less than $75 per month.

Now I just did some whole life insurance quotes based on my much healthier self, and for $50,000, I was quoted at $50 per month. So almost 1/5th of the coverage of my term policy still has 27 years left, and that was based on a much healthier person than when I took out the term insurance.

And for $45 dollars a month, I could invest that in the stock market, and that would be worth that $20,000 in about 16 years. And for the very reason people are unlikely to ever get a payout for term policy, they are unlikely to die in the next 16 years anyways.

The fact is term policy is far superior as insurance, and investing the money in the market is far superior as an investment. Whole life policy is like a poor version of both, which is why the only people who ever RECOMMEND it that actually understand insurance and finance, are those who are selling it.

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And you think someone on $18,000/yr income wants the term? Ok.

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They may not want term, but if they don't, they aren't suddenly going to want whole life unless someone talks them into it against their best interests.

If whole life was a good option, then people with no conflict of interest would recommend it as a good option. They don't though. AT BEST they will say that there are some specific situations where it MAY be ACCEPTABLE as more of a last resort, but I've yet to see anyone actually even show the math. When it comes to term life insurance, health insurance, car insurance, homeowners insurance, etc., as well as investing, saving, paying off debt, etc., you can find pretty much anyone who is knowledgeable who will recommend those things. The same is not true for whole life insurance.

You are comparing your personal life experience and decisions with someone below the poverty limit. You dont see the fallacy in that?

You think someone under 18k/yr income is going to invest the difference ($10/month) in the stock market and come out ahead?

Im with you. You are making a smarter decision for you. What i dont understand is why you are offended that everyone else in all different types of circumstances cant be "smarter" and take your same approach. Life doesnt work that way. Mindsets are different. Priorities are different. "Invest the rest" is different.

Lets agree to disagree. I say other people are different than you and they dont need to do everything you do without being labeled inferior.

(For the record, cost of life insurance is higher per thousand the smaller the policy. And many life insurance policies do not use physical exams when the amount of coverage is less than $250k or $100k depending upon the policy type. The lack of health evidence on the application is another reason why the cost per thousand is going to be higher. All of that to say that you probably are comparing apples and oranges to my scenario of a policy which is shrunk down in size to maintain affordability).

If you make less than $30,000/yr as a household income and you have to pay the expense of burying a family member, then you may have a different opinion on the matter. Invest the rest in my scenario is $10/month x 12 months x your illustration of 16 years later = $1920 principal investment. How does invest the rest bury someone at $10/month difference in cost? Hell, a lot of people are older than you and 16 years to them might as well be 100.