Bogleheads

[mephistophles]

[mephistophles]

Please answer all the questions I asked of you.

What, if any, credentials do you have to post hear as a person who is knowledgeable about life insurance?

Why don't you have a CLU?

Why don't you read the Bogleheads book or learn the Boglehead philosophy of investing?

[bearcat98]

Insurance Guy,

There's something that you've been saying that troubles me a bit. I think you will agree that:

1) Given expected rates of return, aggressive investments (total stock market, perhaps some slice and dice with emerging markets and small value or something else thrown in) are likely to give you a better total return than whole life insurance. On the other hand, whole life shows way less volatility. Therefore, you advocate comparing whole life to the more conservative portion of your portfolio.

2) You can access the cash value of your policy by taking out a loan from the insurance company, which results in you paying interest on money that came from you and is being let back to you. This makes whole life a less convenient and more expensive place to pull money from than many more ordinary investment vehicles. Therefore, you advocate not using whole life to invest money that you need to keep liquid.

My issue is this: most folks invest some money conservatively so they will have money to spend in retirement if their aggressive investments tank. Therefore, liquidity is an essential feature of the truly conservative portion of the typical retirees portfolio. In terms of planning for a person's life, then, whole life should go on the end of the spectrum where you expect higher returns...an illiquidity premium, in addition to the bond returns.

Of course, that's not necessarily true in terms of planning for a person's death. Even the folks who are picking at you pretty hard have agreed that whole life can have uses in the estate tax planning and business planning. I can also understand that some people are more concerned with protecting their financial legacy after death than with maximizing their legacy by investing aggressively when alive.

But it seems to me that the combination of conservative/mediocre returns with restricted access to the asset would make whole life inappropriate as a retirement planning tool. Let me know if you disagree.

[bolt]

[removed at request of poster]

[LH]

[EmergDoc]

[mephistophles]

Just for the record, LH. I post often on the subject of life insurance and I do not recall ever saying that whole life is never appropriate.

I have repeatedly said that whole life and or other forms of permanent insurance are frequently good solutions in the estate and business markets and in a minority of family market situations. I also frequently state, the vast majority of Americans insuring for family market needs should use term insurance because of its low cost and practicality.

ole meph

[LH]

[mephistophles]

Forgot what OP means.

[Willy]

Insurance Guy, one comment and one question:

Comment: While some may see it otherwise, my non-expert's take on this and the other insurance mega-thread is that you have been exceedingly well mannered and fair. Your peers should be glad they have you representing them.

Question: In your opinion, would it be wrong and/or grossly overly simplifying things to say that the question about the value of WL insurance often boils down to whether or not the unique tax advantages of WL are sufficient to outweigh the otherwise avoidable costs, e.g., hefty early commissions, administrative costs, etc.?

Cheers, Bill

[EmergDoc]

[retengr]

My partner and I live on my pension and savings. When I start getting SS, it will substitute for most of the savings and take care of some inflation.

When I die, all that income will stop. My partner has no pension and cannot qualify to share my SS. His SS benefit will be small.

So if I need life insurance at all, I think I need it until I die, not until someone 'leaves the nest'.

I have a small Universal Life policy (outside of my estate). I did not buy it for any of the reasons I have outlined (I bought it for other, probably wrong reasons).

Perhaps we are part of the fringe for whom this product offers some value?

[EmergDoc]

Someone without significant assets living off a pension may qualify. The problem however, is this:

1) You may now be so old that you are no longer insurable or buying a whole life policy is no longer financially reasonable or

2) You are young enough that you would be better off investing traditionally

It seems you could solve your issue more simply than a universal life policy. How about using your savings to purchase a single premium whole life policy or an annuity that would begin upon your death and last until your partner's death? A single premium policy is much more transparent to price in my opinion.
_________________
1) Invest you must 2) Time is your friend 3) Impulse is your enemy
4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

[MP173]

Insurance Guy:

I really appreciate your explanation of the WL insurance product. I have a couple of small policies (taken out at ages 2 and 10) and have never really understood them. Investing an hour on this thread has helped.

Also, for the record, term life insurance has been an important part of financial planning for my family. The low cost for high $$$ amount certainly is a valuable method of managing risk.

There appear to be solid reasons for certain people to own WL. Blanket statements tend to always exclude certain scenarios. If there was never a valid reason for WL to be sold, the product would have disappeared by now.

BTW, does anyone (either IG or OleM) have data on either the value of WL insurance policies being sold, or the number of policies being sold on an historic basis. Surely the number of policies has dropped over the years, but I wonder if the value per policy has risen?

BTW, IG did you have a chance to take a look at my 401k question I asked you?

Again, thanks.

ed