Maybe someone else in your family can get term coverage to cover the home. Otherwise, another option would be to look into an annuity.

Feel free to email me if you have any questions.

2) From my father, a marine and very knowledgeable and educated man: “Never argue with a fool”

It’s obvious to me that both quotes fit the same guy. David, you got way more patience than I.

As to your other concerns, you’re mistaken in your assumptions. Insurers aren’t idiots. Some insurance companies *do* buy gold. For example, Northwestern Mutual buys gold to hold in its investment portfolio. If you thought hyperinflation was on its way, Northwestern mutual could insure your risks better than you could as an individual. After all, if you could fully self-insure, you would be an insurance company.

Finally, I do not know whether you would “need” your death benefit or not later on in life. Often times, though not always, I find individuals are very confused about life insurance and how to properly assess whether it’s necessary or not. The confusion often stems from not having a very good understanding of what insurance *is*, and sadly the industry doesn’t do a stellar job of educating the public, their protestations notwithstanding.

For what it’s worth, if you don’t know how your insurance policy works, and it sounds like you have some questions about that (which is understandable), then you are in absolutely no position to decide whether you will or will not need that insurance. At this point, the answer to that question is beyond you.

Ok, now my two questions. First, if my cash value is accumilating and it causes my death benefit to increase, when I die ( assuming before age 100 which is end of my policy) do I only receive my FACE VALUE of my policy or the higher NET Death value due to cash accumulations.

Second question: do my PAID UP ADDITIONS actually pay out and cause my FACE VALUE number to increase AND will that be paid out upon my death IF before age 100 ( end of policy)

Last question, as my cash value increases on the term of the whole life ……….IF I live to age 100, is that the only time I would receive my cash value since it should equal my DEATH BENEFIT? Both are so high and above the FACE VALUE of my poiicy. It appears to me this is the ONLY time I would recieve a greater death beneift. IT APPEARS ANY DEATH during the policy, The insurance company keeps the cash value, which may be greater than the FACE VALUE. Is this true? Yes or NO.

Thank you

I’ve tried to be civil. I really have. OK. Let’s discuss the substance of your rant, to the extent that there is substance in it.

You said nothing in response to the fact that eventually your cash value clients are paying the insurance company to hold their savings as it is replacing the face value. You smoke screen again by saying “zero percent NET rate plicy loan”.

That’s because your point is irrelevant. It doesn’t matter what investment you buy into. You always pay a custodian to hold your cash. Sometimes the fee is small, and sometimes it’s “hidden” as is the case for savings accounts and just about every 401(k) plan on the market. As to your rant about policy loans, that’s been discussed in this post and elsewhere on my blog. There’s no smoke screen. In fact, it’s not like it’s a big secret how a life insurance policy loan works. You borrow money against the value of the policy. It’s true, the insurer holds the money. The cash value represents a cash advance against that death benefit. More accurately, it’s a cash reserve set aside to pay for the future death benefit claim. The alternative to this arrangement is to put your money into a government-created retirement account. What’s that? You say that the money in your 401(k) plan or IRA is your money? Think again. It’s in a trust account. It ain’t yours until you withdraw the money. You thought getting money out of a life insurance policy was difficult? Try getting money from a 401(k) plan. Withdrawals are tough, and loans max out at one-half of your account balance up to $50,000. In addition to that, the government may change the laws regarding these accounts (and has done so in the past) and the fiduciary may take whatever action deemed necessary for your benefit regardless of your wishes. Your alternative to a retirement account? An ordinary investment account. Not bad, but you don’t exactly use them to invest in financial products which rely on steady compound interest, since taxes are a significant drag on your performance.

Tell me (everyone) straight out, does this mean the person “using” their savings pays absolutely no interest at all in any way shape or form? You can play with figures a lot when you throw in a concept such as “net” in the equation.

OK Ed–”straight out”, the person using the cash value of the policy pays a net loan rate of zero percent. Playing with numbers? Let me break it down for you: The insurer charges you a certain interest rate on the loan amount you take against the policy. You got it? Are you with me? Are you sure? I don’t think you are, so let me go slower. The insurance company charges you interest on the loan you take against your policy. Let’s use 6 percent as an example. The insurer hands you a loan. You take the loan. You cash the check. The insurer secures the loan with money in your policy. Then, the insurance company credits that secured amount in your policy with interest. It could be 6 percent. It could be 5 percent. But it could also be 8 percent depending on how well the policy is performing.

But wait, you say, it’s not fair. If they charge me 6 percent and I’m only earning 5 percent, they’re charging me interest. David, you lying bastard you! To which I respond, Ed, your alternative is to pay ordinary income tax like you would from your mutual fund investments inside of your IRA or whathaveyou when you retire and draw an income. Or, pay capital gains tax. Do you happen to know what either of those tax rates are? Do you? It sure as hell ain’t 1 percent. And, if you think it’s better to pay 15 percent to the government in taxes than it is to pay 1 percent to an insurance company, then you’re mentally retarded and should sign over all of your financial affairs to someone else because there is no hope for you.

But, it doesn’t always happen that you pay interest on those loans. In fact, many times you don’t. Though, admittedly, this depends entirely on the issuing insurance company and their internal policies and procedures for policy loans. Some companies are, frankly, better than others.

So, to answer your question: When there is a net policy loan rate of zero, then NO, you don’t pay interest on those loans. At least not out of pocket. I suppose you could say interest is paid out of earnings. OK. Ya got me. Back to our example, 6 percent interest. Still better than ordinary income tax or capital gains tax. But, really, the out of pocket cost to the policyholder is zilch in those cases.

There is too much smoke screen about the correct TYPE.

I don’t want to get too philosophical on your ass, but we call this intrinsicism. There is no correct type of life insurance which is inherently better than others. Some policies are better at achieving certain things than others. That’s about it. Just like there is no one type of insurance which is “more expensive.” People who say that truly have absolutely no idea what they’re talking about. Premiums represent more than just the “cost” for the death benefit. Most of that premium must be held as a cash reserve to meet the future promises of the policy. So, even if you bought term and invested the difference, your cash outlay would be the same.

As for singles or couples with no dependants, I do not know why anyone would mess with cash value insurance policies when there are so many great mutual funds available in various vehicles.

There are so many great mutual funds available? Really? Is this why most actively managed funds fail to outperform the underlying index on which they’re based? Surely, you jest. But, aside from that, you’re comparing apples to oranges. Investing in a mutual fund isn’t the same as the investments which underlie a life insurance policy (at least, not whole life). Shit, you might as well try to build an iPod using parts from a Walkman. You’d have an easier go of it than trying to compare whole life to a mutual fund (assuming you are trying to remain intellectually honest).

A person who would be interested in whole life for its cash values would not be interested in a mutual fund as his core financial holdings for the same reason a mutual fund investor would not be interested in life insurance for his core holding. It amazes me that the “termites” keep pushing the issue that BTID is somehow inherently better and they try to throw a million graphs and charts at you to convince you that returns are linear and you should forget about goals and investment ability. You can just invest in this or that mutual fund and everything will be hunky dory. I’m sorry, but financial plans aren’t build that way.

If you want to waste your money investing in a cash value policy, go for it. But your insurance needs are much more important so PLEASE do not combine both. They are two totally different goals and should be handled in different manners.

You can’t really avoid doing both. When you accumulate a savings, regardless of whether you do so inside or outside of a life insurance policy, you are replacing your need for life insurance death benefit. Inside the policy, the net amount at risk decreases and you are actually buying less death benefit. Outside of the policy, you’re doing something similar. Your net amount at risk doesn’t decrease though. You just eliminate your need for insurance death benefit. Of course, this is assuming your debts are paid off and you have no further liabilities and the only thing you need your savings for is to provide an income for you if you decide to retire. At the end of the day, the purpose of insurance is to get a cash advance on your future savings. If you die before you accumulate a set amount of money, the death benefit is there for your family. If you live, you’re supposed to have a savings to replace the insurance. They are, in a sense, the same: savings. Combine them or keep the insurance function separate from the savings/investment function. It doesn’t matter. What matters is how your policy is structured, and whether or not it meets your financial goals.

I care only to help educate those in need of insurance enough that they do not get sold a policy that could ruin their lives..

I once had someone tell me that selling whole life was immoral. That’s the mark of an idiot. An insurance policy isn’t going to ruin your life. Improper planning will. I still say that it’s impossible to know which policy will work for an individual prior to understanding their financial situation. I can only speak from my personal experience. Whole life has a few very good things going for it. You really can’t beat it for estate planning and wealth transfer. Want to move that 401(k) in the most tax-efficient manner? Whole life is excellent for that. Retirement planning? Whole life was the original savings tool used by many people before all of these fancy government programs and it still does an excellent job of accumulating cash if you know what you’re doing with it. Need additional death benefit? Try adding a convertible term rider if you need a boost in your permanent policy. It converts to permanent coverage and eventually you get back all of your premiums plus interest. Want to invest in something outside of the policy? No need to risk 100 percent of your savings. Use some of your policy values. Instead of trying to make 100 percent of your money earn 10 percent or more, flip the investment world on it’s ear. Make 90 percent of your money earn a conservative return and use 10 or 20 percent to push the envelope on something which has an amazing investment return potential.

…anyway, it’s been real, but I think I’m done for tonight. I still find it difficult to believe that you cannot read what’s written on my blog. I used English, proper punctuation and everything…