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|Subject: Re: It's Whole Life - not annuities||Date: 5/26/2012 12:55 PM|
|Author: BruceCM||Number: 70712 of 80202|
I think the planner's mouth watered while helping me find potential colleges for my oldest son when I told him about the money...
Why do you refer to him as a "planner"? Do you refer to your local auto dealership person as your "Transportation Consultant"? Insurance people only care about "planning" or "advising" to the extent it sells their company's products. They are sales reps.
And an easier way to think of whether to give your extra dollars to an insurance company to "invest" for you, is to remember the basic rules of investing in the marketplace that we ALL must follow:
1. No one knows what the markets will do next...NO ONE.
2. Insurance companies invest in the same marketplace we all do. They do so on a larger scale, but there is nothing they can invest in that you or I cannot.
3. Insurers must asset allocate and rebalance just like you and I do
4. Insurers do no have access to taxpayers dollars and they don't print money
So, how can an insurer offer investment value? They really can't. What they can and WILL DO with your extra dollars you send to them is subject it to all manner of fees, expenses and other charges that are impossible for you to see and for which they have no requirement to disclose.
And to the previous poster who commented that after X years, the cash surrender value of the whole life (or other permanent insurance) exceeded premiums and thus you're getting the insurance for free.....this is how the insurance industry wants you to think of permanent insurance....and until all states banned the practice, insurers employed this tactic by showing a 'disappearing premium' in their sales illustrations. What this completely ignores is time value of money. So if you've paid, say, $50,000 in premiums over 20 years into a $200,000 whole life policy, you are 55 years old and the 'cash value' (which may not be the surrender value) of the policy has reached $55,000, your real cost is the (premium - 200,000 20 year level term premium) invested over the same 20 years invested in, say, a broad market index (e.g. SPY) at an averqge annual investment return of 7.5%, which would give you about $95,000 (before tax)...meaning you could have gotten the same coverage from the same insurance company over the same period and today could have almost twice the savings amount...that's the cost of this kind of insurance.
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