Comments on: Insurance Coverage and Opportunity Cost

By: Pinyo

Pinyo — Tue, 01 Sep 2009 15:28:42 +0000

@Fred – I am doing perfectly fine. I understand stock market volatility and my investment portfolio is properly allocated. I recovered most of the loss from last year and I am in a much better position to move forward. Thank you for asking.

By: Fred

Fred — Tue, 01 Sep 2009 15:25:49 +0000

How’s that “opportunity cost” thing working out for you now? You shouldn’t have assumed an 8% annual return. Funny thing is….my whole life policy actually increased in value this year. my IRA and all my other investments have taken a huge hit that will take several more years to recover. In fact, my whole life policy premium was $1,200 and the dividend payment from the insurance company was $1,750. I guess in a way my life insurance premium is tax free! (you might have to really think about that)

By: bb

bb — Fri, 07 Nov 2008 23:20:57 +0000

You’re right, term life insurance is cheap and there’s a reason. Less than 1% of all polices ever pay a claim. The time to get your greatest return with a term policy is if you die on the way home from signing the contract. So, do you think term policies make them a lot of money?

And you’re not borrowing your own money when you take out a policy loan. You borrow from the life insurance company and your cash value still earns interest. So, as you’re paying back the balance with interest on a decreasing balance, you’re earning compounding interest on the cash value within the policy.

I guarantee you, if you research on how to utilize a whole life insurance policy in order to “be a bank”, you’ll be far ahead of the rest. Don’t buy term and invest the different. You can buy whole life, take out a policy loan, and invest in the same exact thing.

Banks invest in whole life insurance policies (BOLI – bank owned life insurance). They understand how to velocitize their money, make it do more than one thing.

By: Dewey

Dewey — Fri, 31 Oct 2008 18:53:03 +0000

Ok so with a whole life policy you are paying for two things, 1. Insurance(Death benefit and 2. Cash value. If you die you get only one…the death benefit. The cash value goes to the ins company. Now in the above example where you they say you can access your cash value at any time, tax free…that is exactly right. How ever what they failed to mention is that the insurance company requires you to pay interest on any money you borrow from your cash value. You must pay the ins company interest for borrowing your own money! God forbid you still owe at the time of your death they subtract what you owe from your death benefit. If you don’t believe just consult you policy, its all in there in black and white. All of this isn’t the real issue. I don’t think whole life is something anybody should have let alone a kid. No parent wants to profit off the death of a child, however at a time like that you don’t want to be passing around a collection plate at the funeral. Term ins is all most always cheaper then whole life and for a child $12K is all you would need, I have a child rider on my TERM policy and its $7 for all the kids listed on the policy. Also the our ins company cover them until age 25 at which time they are guarruteed a policy of their own without having to prove insurability. You are better off getting ONE TERM policy with a spouse rider and child rider. Agent that sell whole life most always do separate policy because there is a policy fee attached to each one so they get paid more if they do individual polices on the whole family. Ask your agent what he makes the most commission on Whole life or Term. He’ll probably tell you Term is “discount ins” for people that can’t afford it. Buy term ins and with what you save invest that and you’ll be better off. That’s what we did. Sorry I got carried away…LOL

By: bb

bb — Tue, 14 Oct 2008 22:32:17 +0000

I’m not an insurance agent either. But whole life insurance is a product that I love. It is the backbone of our financial plan. The problem with whole life insurance is that many people don’t understand it…even insurance agents! There are many “living” benefits to whole life that many don’t know. For example, you can access your cash value whenever you want tax free, it is protected from creditors in most states, there is a guaranteed rate of return, and velocitizes your money. Can a 401k provide any of that? No.

Best of all, you can create your own personal bank where you can recapture the interest you pay to financial institutions (The Infinite Banking Concept). We conducted an interview with R. Nelson Nash, author of Becoming Your Own Banker. He offered some insight and provided us some free downloads. Check it out at http://www.choose-financial-fr.....-nash.html. Before you shut down whole life insurance, investigate it because it may be the best financial decision of your life.

By: childfreelife

childfreelife — Thu, 19 Jun 2008 19:27:20 +0000

if your child dies, you likely will not want to work, but you will also have that bank account that covers that time off. When your child is an adult, he can do something else with that money, fund retirement and put a beneficiary on the account that will get it when he dies. You can keep a small portion of what you saved for him in an berevance account for yourself to take time off for any deaths in the family. (your parents, children, siblings). In the meantime, when everyone is healthy and young, I agree that saving the money is a better choice, (if you actually follow through and save it for him).

By: Friday Finance Findings for June 6th : Generation X Finance

Friday Finance Findings for June 6th : Generation X Finance — Mon, 09 Jun 2008 00:30:11 +0000

[...] Insurance Coverage and Opportunity Cost -I hate insurance. It is one of those necessary financial evils. When you never have to use it (which is really a good thing), it feels like you’re throwing money away. But when you need it, you’re glad it is there. This article takes a look at the opportunity cost associated with insurance. [...]

By: Weekly Roundup - Vacation Edition

Weekly Roundup - Vacation Edition — Sun, 08 Jun 2008 15:39:23 +0000

[...] wrote about Insurance Coverage and Opportunity Cost [...]

By: Ralph

Ralph — Sun, 08 Jun 2008 02:43:05 +0000

I really enjoyed the breakdown. Ultimately, the purchasing of peace of mind is an intangible that is difficult to measure, but on a purely financial basis the death benefit is certainly the clear loser. Looking forward to hearing what you decide in the end.

By: Pinyo

Pinyo — Fri, 06 Jun 2008 21:48:36 +0000

@J – You do sound like an agent.

But that’s a good point about subtracting term from whole to isolate the insurance money from investment money. I’ll have to ask my agent. I think he’s not too happy with all the questions I’m asking lately.