Universal life insurance - yay or nay

[HobokenRolex]

There are many here more sophisticated about managing personal finances than me. Does anyone have this type of policy or know much about them? An insurance guy I met is trying to convince me, largely due to the tax advantages. Good idea or pass?

[azguy]

Do you need life insurance or more long-term retirement investments

[HobokenRolex]

More long term investments and wanting to minimize taxes.

[Tony64]

Originally Posted by HobokenRolex

There are many here more sophisticated about managing personal finances than me. Does anyone have this type of policy or know much about them? An insurance guy I met is trying to convince me, largely due to the tax advantages. Good idea or pass?

I think it's a great idea for your insurance agent, not so sure for you.
Without knowing your specific situation, I'd say pass.

[Boothroyd]

I was an insurance salesman early in my career and many people I know use a financial planner who advocates "overfunding" insurance policies to gain a tax advantage as a retirement investment. Risky strategy based on IRS rules "du jour" and performance of underlying assets. And any way you cut it, you are paying 55% (or thereabouts) of the first year's premium in commission, and a sliding scale after that. That's one heck of a "load" for a mutual fund type investment.

Your mileage may vary, but there are many more direct ways to build up assets. Focus on the appreciation potential more than the tax advantages, to my way of thinking.

If you need insurance coverage long term, there is something to having this sort of investment. But not ahead of fully funding other investments first, IMHO. Term insurance works best for most--cover the potential loss in the cheapest possible manner. Good luck with it--do your research. And talk to your accountant.

[hsfrank]

Originally Posted by Boothroyd

I was an insurance salesman early in my career and many people I know use a financial planner who advocates "overfunding" insurance policies to gain a tax advantage as a retirement investment. Risky strategy based on IRS rules "du jour" and performance of underlying assets. And any way you cut it, you are paying 55% (or thereabouts) of the first year's premium in commission, and a sliding scale after that. That's one heck of a "load" for a mutual fund type investment.

Your mileage may vary, but there are many more direct ways to build up assets. Focus on the appreciation potential more than the tax advantages, to my way of thinking.

If you need insurance coverage long term, there is something to having this sort of investment. But not ahead of fully funding other investments first, IMHO. Term insurance works best for most--cover the potential loss in the cheapest possible manner. Good luck with it--do your research. And talk to your accountant.

Well said! I hate the idea of insurance being sold as an investment. If you need life insurance them buy term. If you want tax free buy tax free bonds. If you want return with limited risk buy treasurys. If you want capital appreciation buy stocks .

[Dr.Brian]

There seems to be little use for this type of insurance/investment for the remotely average person. It's fantastic for your agent though. I just have term plans.

[Star Ferry]

If it sounds too good to be true...

My stance is that, ideally, a man would purchase term life insurance throughout middle age, all while accumulating savings. When he reaches an advanced age, and term life becomes more costly, he can stop buying life insurance if his savings would be enough to suppport his spouse.

I'm somewhat skeptical of whole and very skeptical of universal

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[theloxmyth]

Uncle John (Hancock) has/had a FlexV variable product somewhat similar to the U. Life product.

I have a FlexV policy and I split my money between variable investment funds, within the FlexV policy, of my choosing.

The majority of the funds have performed well and the cash value is something to speak of.

Immediately you have a substantial death benefit and over time the cash value increases but is not guaranteed.

In summation, it is OK.

[uscmatt99]

Originally Posted by Star Ferry

If it sounds too good to be true...

My stance is that, ideally, a man would purchase term life insurance throughout middle age, all while accumulating savings. When he reaches an advanced age, and term life becomes more costly, he can stop buying life insurance if his savings would be enough to suppport his spouse.

I'm somewhat skeptical of whole and very skeptical of universal

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I echo this sentiment. Every year my insurance agent calls and tries to go through the big sell. I think there are better places to park one's money in general, but of course everyone has different needs and preferences.

[RKTudor]

Originally Posted by Star Ferry

If it sounds too good to be true...

My stance is that, ideally, a man would purchase term life insurance throughout middle age, all while accumulating savings. When he reaches an advanced age, and term life becomes more costly, he can stop buying life insurance if his savings would be enough to suppport his spouse.

I'm somewhat skeptical of whole and very skeptical of universal

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Sound advice.

[locutus49]

This is so true.

An example is long term health care insurance (LTHCI). When I worked for the government, in 2003 or so there was a big push by government agencies to get employees to buy LTHC. Policies started at $500 a month for a single person, more for families.

Well, it was good for the government and health insurance companies, not so much for policy holders. Studies show they cover very little due to loopholes, and the terms of the policies.

My mother in law has one that she has paid into for 15 years or so, and she is 96 and they found every reason in the book NOT to cover many expenses.

YMMV.

Originally Posted by Star Ferry

If it sounds too good to be true...

My stance is that, ideally, a man would purchase term life insurance throughout middle age, all while accumulating savings. When he reaches an advanced age, and term life becomes more costly, he can stop buying life insurance if his savings would be enough to suppport his spouse.

I'm somewhat skeptical of whole and very skeptical of universal

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[beshannon]

Originally Posted by HobokenRolex

There are many here more sophisticated about managing personal finances than me. Does anyone have this type of policy or know much about them? An insurance guy I met is trying to convince me, largely due to the tax advantages. Good idea or pass?

Why do you need "tax advantages"?
Why do you need to insure your income?

What is your overall net worth?
Do you have other investments?

In other words too many questions to answer easily. If someone is trying to "convince" you, he is trying to get a commission.

[Pix]

Depends on lifestyle, as a small business owner most lenders require it so the loan is repaid if something happens, also if you have dependents and a risky hobby its good to take care of them.

[77T]

My general theory of financial strategy is never buy a product solely for its "tax advantaged" status today. This also goes for insurance products.

If you need a steady growth rate for an investment stream over 20+ years, go to an index fund IMHO.

Insurance should be decoupled - go term and use your employer's group rate if you have that option.

Why not count on the tax advantages? Boothroyd hit it - Congress can change that if more revenue must be generated. For example, at my employer, key managers had up to 4x life gratis. Now retired, and IRS rules make me pay taxes on it's value as imputed income each year.

[Etschell]

Originally Posted by 77T

My general theory of financial strategy is never buy a product solely for its "tax advantaged" status today. This also goes for insurance products.

If you need a steady growth rate for an investment stream over 20+ years, go to an index fund IMHO.

Insurance should be decoupled - go term and use your employer's group rate if you have that option.

Why not count on the tax advantages? Boothroyd hit it - Congress can change that if more revenue must be generated. For example, at my employer, key managers had up to 4x life gratis. Now retired, and IRS rules make me pay taxes on it's value as imputed income each year.

plus if the insurer goes under you are SOL.

[77T]

Originally Posted by Etschell

plus if the insurer goes under you are SOL.

So true, times two - your cash value and your coverage.
But that risk is mitigated in your choice of insurer.


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[Andad]

I have no life insurance at my time of life (68).

I would rather take my wife on a world trip every year.

And a new bike (Thruxton R matte black on the way), new car, Rolex etc. etc.

Stay safe on the roads....

As my dear departed mum would have said "yere a lang time deid"

[Big Jay]

I'm an FA/FP in NJ. It REALLY depends on your personal situation. It's something you have to evaluate.

- Age
- Health
- Total needs
- Time horizon

Many of my high net worth clients will buy IUL just for the permanent factor of it. If you would like, shoot me a PM. I'd be glad to help you if I can.

[CamSLC]

As others have mentioned there are many variables in discussing whether or not this is an appropriate policy for someone. UL and VUL can be valuable tools, but more commonly so when Estate planning opposed to the general needs for life insurance.

[Etschell]

ill say one more thing read the policy. most dont cover what you think they would. in general term life is a waste of money. if you dont die its gone. whole or universal is better.

[BLACKHORSE 6]

Originally Posted by Etschell

ill say one more thing read the policy. most dont cover what you think they would. in general term life is a waste of money. if you dont die its gone. whole or universal is better.

Yes, but term insurance is so much cheaper than the whole or universal insurance policies I've looked into. Getting term insurance and then investing the difference seems like a better option.

[Etschell]

Originally Posted by BLACKHORSE 6

Yes, but term insurance is so much cheaper than the whole or universal insurance policies I've looked into. Getting term insurance and then investing the difference seems like a better option.

there's a reason its cheap, its not cheap if you are 60 and go to get a policy. volcano insurance in indiana is dirt cheap.

[Big Jay]

Originally Posted by BLACKHORSE 6

Yes, but term insurance is so much cheaper than the whole or universal insurance policies I've looked into. Getting term insurance and then investing the difference seems like a better option.

The concept of buy term invest the difference is a valid concern. Another frequently overlooked concept is the idea of term conversion options attached to many policies.

As everyone and myself said though, it's really a person to person variable. Can't really tell what's best until we analyze the whole picture.

[68camaro]

Originally Posted by BLACKHORSE 6

Getting term insurance and then investing the difference seems like a better option.

Winner winner chicken dinner

[BLACKHORSE 6]

I only buy term insurance. I don't look at insurance as a way to invest, as I just don't see how it's better than the market or investment property. One day, I hope to not need insurance after any kids are off on their own and by that time the wife and I will have (hopefully) accumulated enough assets to be fine if something happens.

But then, I'm a fairly simple/straightforward type of investor...

[locutus49]

I agree with this. I don't consider insurance an investment, and I've been investing for 40 years.

Originally Posted by BLACKHORSE 6

I only buy term insurance. I don't look at insurance as a way to invest, as I just don't see how it's better than the market or investment property. One day, I hope to not need insurance after any kids are off on their own and by that time the wife and I will have (hopefully) accumulated enough assets to be fine if something happens.

But then, I'm a fairly simple/straightforward type of investor...

[Etschell]

Originally Posted by locutus49

I agree with this. I don't consider insurance an investment, and I've been investing for 40 years.

agree it is simply a hedge bet. if you want to invest buy a tax free annuity.

[68camaro]

Insurance - get term
Investment - get mutual fund or stocks.

No need to combine the two.

[MILGAUSS88]

Lets put it this way.
Insurance agents get a 50% commission in perpituity for universal life insurance.

Well someone is going to benefit if you buy this insurance. Unforunately it wont be you.
Buy term life insurance.