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templerfool: "Its no secret, its a variable universal life sold to us by American Express Financial Services. Being a baby Fool, I had my doubts about this investment vehicle. However, considering our debt, would this be considered a Foolish kind of thing to do to protect against the horrible nightmare that I might be killed by Aliens from outerspace? The insurance policy, in the event of my untimely demise, would PAY for our house, car, loans, and my children's education (or at least for the latter would considerably help). Similarly, my wife has life insurance also. The insurance "vehicles" require me to pay 225/mo and hers is 150/mo."

The insurance pros generally hang out on the insurance board; they are usually very nice. I am just a kibitzer. You could run a search on VUL / variable life and just do some reading. I have no inherent problem with insurance. Are you sure that you have enough insurance? I pay approximately $70/month for a 750k a 20 year level term policy - which is 50% more coverage for 1/3 the price you are paying.

"They explained to us that after 10 years AMEX lends us the money but then pays the loan back immediately from our account and "somehow" because its a policy loan we don't have to pay any taxes."

No, you pay interest plus either you pay the loan back or it is deducted from the insurance proceeds before the proceeds are paid to your beneficiary. There is no free lunch. You need to understand your policy (and your other investments) better, IMO.

"In addition over time, as I get older and pay more debt down I can lower the overall pay-out of the life-insurance and thus reduce my premiums.

So on this point can you explain to me how the Wise messed with my coin and what should a Fool do in this case? Jump Ship!?"


FoolWAM has recently posted his indicia of candicacy for VUL insurance on the Insurance board. Find the post and read it and see if it describes your situation. If you need more information, I will dig up my notes regarding earlier discussions. I also like Mike Matheson's suggestion - buy term insurance for temporary needs and buy permanent insurance (whole life, VUL, etc.) for permanent needs.

I also suggest that if you have not already done so, you should read the Fool School articles.

Regards, JAFO


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