Bogleheads

Jack Cook · Joined: 04 Jul 2007 Posts: 81

Hi All, This is my first post, although like many others I have lurked for some time and find your discussions very enlightening. Here's my question. My daughter is 32, single and an Ob/Gyn in a 27 doc practice. If you don't know, in South Florida this means no malpractice insurance and a consequent need to do some asset protection. She recently consulted a lawyer and one of his recommendations was that she take out a whole life insurance policy. IMO whole life policies are generally not a good idea. But, since the policy and its cash value is not subject to creditor claims (hopefully she'll never have any) it might be a good idea in her case. What do you think? If you like this idea are there any companies you think are particularly good? I was thinking of Northwest Mutual.

DaveTH · Joined: 05 Apr 2007 Posts: 2447

Your subject line reads "Life Insurance as an investment". I would never consider any insurance policy or product to be an investment. That would be a huge mistake in my opinion.

Jack Cook · Joined: 04 Jul 2007 Posts: 81

Sorry, I should have added that before she bought any insurance she would max out her 401k and IRA. Dave, thanks, I agree with you but as I said asset protection is a key concern here.

mickeyd · Joined: 23 Feb 2007 Posts: 1877 Location: Texas

Hey Jack,

Ken Schwartz · Joined: 27 Feb 2007 Posts: 2254 Location: USA

Jack,

Would a tax-deferred Vanguard Variable Annuity offer asset protection advantages? If so, it might easily be the least of the evils.

Best wishes,
Ken

Norbert Schlenker · Posted: Wed Jul 04, 2007 3:51 pm Post subject:

Before your daughter falls for a life insurance pitch, have her read the asset protection chapters in http://www.rjmintz.com/apptoc.htm .

EmergDoc · Posted: Wed Jul 04, 2007 3:53 pm Post subject:

I cannot imagine practicing without malpractice insurance. I think that is an immensely gutsy decision. I think I would move from Florida before practicing "naked." Even with all that said, I still think life insurance as an investment is a poor idea. You may find this recent thread started by another doc interesting.

http://www.diehards.org/forum/....iable+life

P.S. I own a small (20K) whole life insurance policy with Northwestern. If I could get another insurance company to offer me a policy without a rock climbing rating I'd dump it. After 6 years of contributions of $23/month ($1650) the policy is worth $1100. If you want to calculate a return on that you can, but I'm pretty sure it's negative.
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Jack · Joined: 27 Feb 2007 Posts: 1550

Lon · Posted: Wed Jul 04, 2007 5:17 pm Post subject: An Excellent Idea

Since your daughter will have sufficient income to invest in maxing out a 401K etc., buying a Whole Life Policy with a company like Northwestern is not a bad idea. Assuming she is a standard issue with no extra ratings for hazardous activity or medical problems she will probably have a break even point with the policy in 10 years or less (total cash value minus total premiums). Granted, that does not make it an investment, but does make it fairly cheap insurance as well as the protection from creditors. Holding the policy beyond 10 years could show a gain of 5 or 6%, here again, nothing spectacular, but a nice conservative return. Some people would suggest, I'm sure, that she buy term insurance and invest the difference, but that will not take care of the creditor problem of asset attachment or protection.

Taylor Larimore · Posted: Wed Jul 04, 2007 5:20 pm Post subject: Seeking creditor protection

Hi Jack:
I can think of better ways to get creditor protection than buying high-commission, unneeded insurance.

1. Florida's Homestead Law provides almost unlimited protection from creditors. Suggest that your daughter pay cash or pay-off her mortgage early and perhaps buy a bigger home than necessary.

2. Annuities have about the same creditor protection as life insurance. Vanguard's commission-free, low cost Variable annuity would provide creditor protection for her portfolio.

3. Most IRS approved retirement plans (401K, IRAs, etc) are shielded from most creditors. I am not sure, but I think Florida protects retirement plans better than most states. Your daughter should maximize investments in these.

Warn your daughter that asset-protection lawyers abound in Florida. Unfortunately, some of the schemes they propose are designed to enrich the lawyers--not protect their clients.

I know you are a proud and caring father.

Congratulations and best wishes.
Taylor

Jack Cook · Joined: 04 Jul 2007 Posts: 81

Thanks for all of the replies, a lot of good info. Re the insurance cost, the group dropped the malpractice insurance last year when they were paying 80k per doc for 250k in coverage per doc. Taylor, I think you are right about the annuity and I am not sure why the lawyer didn't mention it. I know him and will ask. I am going to print this thread and give it to dear daughter. Thanks again.

Beardog · Joined: 22 Mar 2007 Posts: 53 Location: Arkansas

I am a 44 year old surgical specialist. I can't imagine practicing with no malpractice coverage, especially in Ob/Gyn (one of the highest rates of lawsuits, except perhaps orthopedic and neurosurgery). With that said, I don't think that whole life insurance is good for anything except estate planning issues for the benefit of heirs. I hate to admit it, but I recently saw the light and cashed in a little over $2 million in whole life insurance coverage that I got totally screwed on by an insurance agent friend of one of my partners. He sold it to me when I first went into practice 12 years ago. I didn't even come close to a 5-6 percent return during that 12 years. My best advice would be DO NOT take the advice of her partners. Most doctors (outside of those like ones who frequent this forum) are investment idiots and have just usually been OK in the long-run because they made enough disposable income to cover a multitude of investment rip-offs.
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Beardog