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herringauto said:   1.dshibb said:   herringauto, so one huge error here that will a blow a giant hole in your ability to trust anything that agent told you: Dividend rates aren't a 'yield'. If a mutual declares a 7% dividend rate that does not mean that all policies return 7% for the year(and if that was true it would be 7% + guaranteed crediting of probably 4% = 11% minus COI and expenses. I'll come back to this.

2.I want to start from a thought process that will hopefully inspire you to think of things in certain way so you don't make costly mistakes in the future. Let's start with the fact that insurance carriers predominately(usually about 90% of their holdings) invest in fixed income(bonds). Look at your typical bond fund today. Are they yielding anywhere near ~7% or 11%? No! So why do you think an insurance carrier who invests their general assets in much the same way would yield 7%+? Obviously there is a big disconnect.

3.And the first place to start is with the great misinformation and almost outright scammy way that dividends get talked about to clients. What a 7% dividend means is not that you receive 7% additional return on the cash value you've accumulated minus expenses. Instead it's the only industry in the country that reports it's annual profit margin as if that somehow matters as a percentage to policy holders. Profit margin refers to that years annual revenue minus expenses divided by annual revenue(or the percentage of revenue that is profit). The problem is that an insurance carriers annual revenue is a fraction of the size of their general assets(what you indirectly own apart of as a policy holder). This should make sense. Each year their revenue only refers to the combined total premiums they collected + earnings on their general assets for that year. Once a portion of those premiums get added to their general assets they don't count again for the following year in determining the dividend rate.

4.What this means is that the real value of let's say a 7% dividend rate is really maybe only 2% to your actual cash value. So you get your ~4% automatic crediting plus probably ~2% in *actual* dividend yield, but that is before expenses and cost of insurance are removed. In whole life insurance those 2 things are extremely expensive in the beginning and progressively get cheaper and a smaller percentage of cash value over time. If you maintained a pretty normal interest rate market that would likely mean that over your life expectancy you would probably get a net return of probably around ~3.5% on cash value and ~5% on death benefit if you died on your life expectancy.

5.To add insult to injury if you borrow early against your policy you're earning much lower than the 6% you're paying on your loan and end up paying a negative spread(or what is known as a negative 'carry') and actually lose money when you do that.

6.Now just explaining that to you let's look at your meeting with this agent. A guy who's job it is to sell whole life insurance gives you absolutely wrong information on what a dividend rate means(comparing a 6% dividend rate to 5% interest on a loan) when it's no where near an accurate comparison. It's quite likely that he like most insurance agents just doesn't even understand how his own product works(which he should understand if he's going to sell it). Now since that is the case are you really going to trust a word he says after getting something so important wrong? I mean this should end right there if you actually are a legitimate person looking at this.


7.Lastly do you not see the stupidity of putting money into a policy and then borrowing that money out(after fees and expenses) to fund operations? Why not just set that aside as savings? You could claim that you're borrowing against savings when you withdraw if you like. It's really all that is happening. You're dropping money in and then removing it afterward. It's not 'credit' it's the return of your own money and it's the return of less of it than you had before. Where is the sense in that?

If you actually are a legitimate business owner who got presented this and not a whole life salesman masquerading as an interested party than feel free to ask whatever questions you have. If I don't see anything more from you I'll just assume like the others that you were another shill masquerading as an interested party.


Thanks for your response. I will attempt to answer some questions you posed as well as ask a few more of my own.

Paragraph (2) in your response may be the kicker. I obviously don't have a good understanding of "dividends". The salesman who spoke to me made it sound very simple: you pay 5% interest on the loan while receiving 6% on your cash value thus a positive of 1%. Your response makes me think its not quite this simple.

Paragraph (5): His promise was that you are earning 6% on the entire cash value. The cash value is not reduced by borrowing against it.

Paragraph (7): His response to this is the long term nature of the plan. Year one: put in 12K have ~8K in cash value, year two: put in 12K have ~18 in cash value. So on and so forth until year 8 where you have put in 96K and have ~98K in cash value. This trend continues with each year having substantially more than you put into your plan/checking account. By year 30, you have put in 360K and have a cash value of over 700K. If this is accurate, would that not be better than setting the money aside in savings?


2) He's just simply wrong(either lying or an imbecile). Cash value never yields 6%. You want to see for yourself ask him for a copy of what is known as the "Internal Rate of Return" or IRR sheet on the illustration. It's an option on his software. He can click and print it in 30 seconds. He might give you some bull$hit about not being able to give that to a client since it's "agents use only", but that would be a lie as well. An agent can supply that as a supplement to an illustration. Instead what you'll actually see is cash value way negative for a while and then it'll probably peak out in retirement in the ~4% area. You'll then look at the death benefit column and it will be astronomically high(if you die that year) until you look at about your life expectancy(roughly age 85-90) and you'll see probably ~5.5%. You can't borrow against that yield and instead you borrow against the lower cash value yield. It's actually a way negative spread(hence why smart people only do it towards the end of retirement because at that time the policy has mostly ran it's course and then they don't have to pay taxes on the withdrawal(aka policy loan).

5) His promise is wrong. The net cash value is affected by borrowing. The actual cash value isn't affected. If you're loan balance exceeds the cash value balance the policy lapses(read: blows up). If you're paying more in policy loan than you're earning on cash value that is what will likely happen.

7) Doesn't work that way if you're borrowing against it. If you're borrowing against it then the net cash value(cash value minus loan balance) will be substantially less and it's very likely you'll never get a positive return out of the money you put if you're doing that.

So let's look at this 6% he 'guaranteed':
Year 1: -33.33% -- ($8000 on $12000)
Year 2: -28.61% -- ($18000 on $24000)
Year 8: .51% -- ($98000 on $96000)
Year 30: 4.03% -- ($700000 on $360000)

Where is this 6% he speaks of?

And it's way worse if you borrow against it. And only some of this is available for borrowing since doing so especially early into the policy can threaten a future lapse(for obvious reasons you're borrowing at ~5%(probably higher) and earning ~4%).

Plus you're diverting $1k a month from your business and can only borrow a fraction of that later(which still isn't a good idea) where as if you just even left $1k a month in a savings account and then funded your business with the savings you would be able to fund your business at 0% interest(your savings doesn't carry a loan interest rate because it's yours) and you would get to use all of it and you wouldn't have a way negative spread.

herringauto said:   Another thought I'm having. If I can spare $1000 per month extra, what would happen if I put it toward the principal balance on my house payment. I am at a 30 year fixed at 5.25%. I got the loan 3 years ago and am now paying bi-weekly (for the one extra payment per year) along with an extra $50 per payment towards principal. Would I save more money in the long run putting the extra $1000 per month toward the house than a WL policy?

Instead I would use the $1k a month and invest it elsewhere(stocks and bonds) and hopefully in a retirement account(your firms 401k or a Roth IRA). If you'll need portions of it for your business than put in a conservative place(deposit account or short duration bond fund) and the use that money to fund your business(funding your business generates it's own return on capital that I hope generates a good return otherwise why would you be doing it).


And actually with you being at 5.25% you should actually look at doing a refinance or cash out refinance to lower the rate down to the low 4% territory and use the cash out(check from the lender) to either fund your business with that or again drop it in retirement accounts(401k and IRA) and invest it in stocks and bonds.

SUCKISSTAPLES said:   
If that was the only fee you were paying , you're correct .
But with WL you are paying both the interest and the cost of insurance , so you are not earning more than you're paying in interest and coi.
The coi of WL is far higher than other types of insurance


dshibb said:   
...
Therefore: This margin account is rigged. It's impossible to actually leverage higher returns, margining it only leads to more destruction, you can't even remove what you put in for a very long time or the account margin calls you, they don't even warn you that it's happening, and then when it does like a shark they come in and just finish you off.


At least with a real margin account you actually stand a chance of benefiting financially from using that leverage. The one I speak of above is only designed for one purpose and one purpose only: to allow retirees later in retirement to remove value from their policy without paying taxes. That is it.


Don't get me wrong - I wasn't defending IBC at all. I think that many of us here probably have mutual funds or similar brokerage accounts or, at the very least would view that as a much better option than the IBC option.

All I'm saying - for those that tout the "benefit" of IBC as being able to borrow from themselves - you can seemingly get that same benefit borrowing on margin.

BenH said:   
Don't get me wrong - I wasn't defending IBC at all. I think that many of us here probably have mutual funds or similar brokerage accounts or, at the very least would view that as a much better option than the IBC option.

All I'm saying - for those that tout the "benefit" of IBC as being able to borrow from themselves - you can seemingly get that same benefit borrowing on margin.


Didn't say you were defending it.

You actually can get a benefit of juicing your returns from borrowing on margin in a brokerage account(riskier, but possible to actually benefit). No such benefit exists in permanent insurance it's rigged to lose because that is not the intended purpose of policy loans.

Instead the benefit of policy loans is 100% tax avoidance while alive(and retired). You pay taxes on earnings and sale of assets on a brokerage account when you sell. You don't pay taxes when you borrow against a life insurance policy(unless it's a MEC). But it's stupid to utilize the tax benefits of policy loans until you're well into retirement because as covered above they otherwise have a hefty cost to them.

Instead I would use the $1k a month and invest it elsewhere(stocks and bonds) and hopefully in a retirement account(your firms 401k or a Roth IRA). If you'll need portions of it for your business than put in a conservative place(deposit account or short duration bond fund) and the use that money to fund your business(funding your business generates it's own return on capital that I hope generates a good return otherwise why would you be doing it).


And actually with you being at 5.25% you should actually look at doing a refinance or cash out refinance to lower the rate down to the low 4% territory and use the cash out(check from the lender) to either fund your business with that or again drop it in retirement accounts(401k and IRA) and invest it in stocks and bonds.

Thank you. I have checked into refinancing, but am told I would have to start all over with the mortgage insurance premium which is now at a higher rate??? I have an FHA loan, and am about 3 years from being able to drop the MIP. If I paid more towards principle, I could drop it in about 2 years.

dshibb, Thanks. You are teaching me something and I am grateful. He does say that the net cash value is not affected by borrowing as NYL is a non direct recognition company.

Could you show me how to figure the rate of return? You showed the 700k at 30yrs after having put in 360k to be ~4%. How do I figure that?

Thanks again.

herringauto said:   
Thank you. I have checked into refinancing, but am told I would have to start all over with the mortgage insurance premium which is now at a higher rate??? I have an FHA loan, and am about 3 years from being able to drop the MIP. If I paid more towards principle, I could drop it in about 2 years.


PMI doesn't start all over if you can get the total mortgage loan down to 80% of the homes value. If that was the case you could get rid of PMI tomorrow in a refi.

If in the fall you see mortgage rates drop down to less than 4% again I would do anything you have to put yourself in a position of refinancing conventional at 80% Loan to value(LTV). At that stage I would probably be willing to cash out refinance a car or take a personal loan for $20k(assuming that didn't mess up the debt to income ratio) if it meant I could get a conventional refinance done at a good rate with no PMI.

So yes saving up cash to pay down your mortgage enough to get a 80% LTV conventional mortgage refinance with no PMI is a very smart financial decision on your part if you can swing it.

herringauto said:   dshibb, Thanks. You are teaching me something and I am grateful. He does say that the net cash value is not affected by borrowing as NYL is a non direct recognition company.

Could you show me how to figure the rate of return? You showed the 700k at 30yrs after having put in 360k to be ~4%. How do I figure that?

Thanks again.


Time value of money calculation:
1) Pull up excel spreadsheets
2) Click on a cell
3) Go to formulas, financial, and then click "rate"
4) A box will open that will look like this with the following definitions:

NPER: (number of periods usually number of years, but I can show you how to do other periods like months)
PMT: (payment amount when it's being paid into something you put a negative in front of it so -1000 or -12000)
PV: (present value equals how much do you start with. In this instance zero because you're not contributing a lump sum at the beginning)
FV: (future value equal to the lump sum amount it will have in the future. In this instance the cash value amount in the future or you could also input death benefit to compute death benefit IRR as well).
Type: (it's either 1 or 0. 1 means that payments are paid at the beginning of the period and 0 means the end of the period. Life insurance premium is a category 1. You pay the premium at the beginning of that year of coverage or 1 month of coverage if you paid at the end it would be 0.

Now you can either type 30 for NPER for 30 years and then you have to input -12000 for PMT or you can use 360 for NPER for the months and -1000 for PMT. If you do the latter you have to multiple by the result by 12 to get annual return otherwise you only calculate monthly return. There will be a slight difference between the 2 because one is compounded monthly(more accurate) and the other is compounded annually.

So example:
NPER: 30
PMT: -12000
PV = 0
FV = 7000000
Type = 1

it will show up as =Rate(30,-12000,0,700000,1) in the cell

Or compounded monthly:
NPER: 360
PMT: -1000
PV = 0
FV = 700000
Type = 1
Result multiplied by 12

In the cell =12*Rate(30,-1000,0,700000,1)



Of course it's affected. Net cash value is cash value minus loan balance. If you have $30000 in cash value and $20000 in loan balance net cash value is $10000(that is what you would walk away with if you surrendered it today). If net cash value ever hits $0 it blows up. All direct recognition vs. non direct recognition is that you don't get penalized even more for borrowing by having your yield on cash value fall even more and the negative spread be even higher. Basically all he's saying is that cash value growth doesn't slow down when you borrow money. But since loan balance grows faster, *net* cash value continues to careen towards a bad outcome when you borrow.

Also you can recreate the entire IRR report for each and every year by: replacing NPER with a cell code that contained the number of years(or months) for that run and then replaced FV with a cell code that reflected that years cash value.

You then create a column that grows by 1 year(or 12 months) all the way down the page and then you would create another column where you type in each cash value number. You then take the top formula that calculated yield and drag it down that column next to the other 2. It will auto populate the returns for each year and save you some time of typing in the formula mentioned above for each and every one of them.

So it would look like this(assuming the 1st column started at A1 and the 2nd column started at A2)
1 / $8000 / =Rate(A1,-12000, 0, A2, 1)
2 / $18000 / (just drag the top formula down and it will automatically repopulate everything with B1, B2/ C1, C2 / D1, D2 /etc. all the way down the page populating the year for that row and the cash value for that row into each and every formula.
etc.

herringauto said:   BrodyInsurance said:   herringauto said:   Very interesting to find this thread tonight. I met with an IBC guy today. I appreciate all of you're responses and critiques. The guy I spoke with today focused on the idea that one would average a 6% dividend thus negating the 5% interest charged to borrow against your policy.

My business requires the purchase of inventory. The pitch I got was to continue my business practices as I am currently while contributing $1000 per month to a WL policy. The charts I was shown depicted that by year 8 my cash value would be greater than the total I had invested and was shown to grow faster each year afterward. By retirement age (another 30 years) my cash value would be around $700k. His sale was to constantly use this money (starting in year one) to purchase inventory. By year 10 I would have a larger source of funding than the line of credit I currently use. The point was that it isn't a choice to invest in IBC as opposed to something else, rather to use the money in the WL policy to finance my business. Drawing 6% on the cash value the entire time. If this money was invested in stocks etc. it would have to sit there and not be available to fund my business purchases. True I would be paying 5% interest when I take money out, but would still be earning 6% on the total cash value. And also have the death benefit to boot.
Thoughts?


Don't complicate this. All that you would be doing is buying a whole life policy.

Unless whole life insurance makes sense for you, none of this is a good financial move. If whole life insurance makes sense and you need to borrow money, it is simply a question of where to borrow money. Borrowing from the policy only makes sense if the terms of the loan is better then what you can get from a different source.

Loans tend to work in one of two ways.
1)Loans are a variable rate.
2)Loans are a fixed rate.

If they are variable, the loan usually won't impact the dividends that are paid. These loans are not "direct recognition".

If they are fixed, the loan will impact the dividends that are paid. Loaned money earns a different dividend than unloaned money. This is called "direct recognition."

From the owner's standpoint (for a non-direct recognition policy), borrowing from the insurance company isn't different than borrowing from another source if the terms are the same.

From the insurance company's standpoint, lending money to a policy holder at 5% is the exact same as making an investment that pays a guaranteed 5%.


Thanks for your response.

The agent I am speaking with is with NYL. He says it is a fixed rate 5% loan and they are a non recognition company. So you are receiving dividends on the entire amount of cash value even if a loan is made against it.


The agent is wrong or lying or you misinterpreted what he said. It is a non direct recognition company. The loans are VARIABLE.

What would you do if you could borrow money at 5% from your policy and put it into a CD paying 8%? What would everyone else do? Obviously, everyone who was smart would take the money out their policies. From the insurance company's standpoint, they would be investing at 5% when they could be investing at 8% or higher. That is why non direct recognition needs to go with variable loan rates.

BrodyInsurance said:    The loans are VARIABLE.

This too. NYL's policy loans are variable rates based on a high spread over a bond index and not fixed.

Of course it's affected. Net cash value is cash value minus loan balance. If you have $30000 in cash value and $20000 in loan balance net cash value is $10000(that is what you would walk away with if you surrendered it today). If net cash value ever hits $0 it blows up. All direct recognition vs. non direct recognition is that you don't get penalized even more for borrowing by having your yield on cash value fall even more and the negative spread be even higher. Basically all he's saying is that cash value growth doesn't slow down when you borrow money. But *net* cash value continues to careen towards a bad outcome when you borrow.

"Non direct recognition" means that borrowing money will have no impact on dividends.

Jim and John are identical twins. They have identical policies that are "non direct recognition". Jim takes a loan from his policy and pays his loan back at some point in the future. When the loan is repaid, the values of Jim's and John's policies will be identical.

Sue and Sara are identical twins. They have identical policies that are "direct recognition". Sue takes a loan from her policy and pays her loan back at some point in the future. When the loan is repaid, the values of Sue's policies and Sara's policies will be different.

BrodyInsurance said:   
"Non direct recognition" means that borrowing money will have no impact on dividends.

Jim and John are identical twins. They have identical policies that are "non direct recognition". Jim takes a loan from his policy and pays his loan back at some point in the future. When the loan is repaid, the values of Jim's and John's policies will be identical.

Sue and Sara are identical twins. They have identical policies that are "direct recognition". Sue takes a loan from her policy and pays her loan back at some point in the future. When the loan is repaid, the values of Sue's policies and Sara's policies will be different.


You're example is correct, but it is an unrelated example to the issue of net cash value(or net surrender value). Net cash value is the cash value on the policy minus the loan balance. It's what you would get if you surrendered the policy today.

Under non direct recognition you'll get the ~4% in automatic crediting + probably another ~2% or so in dividend payments for 6% minus about on average 2% for cost of insurance and other fees for a net of about 4% and **you'll get that on the entire cash value balance**. You're policies cash value will be sitting there growing at maybe 4% a year(lower if annualized back to the start for most of its existence) and you'll have a loan growing on the other side at probably 5%, 6%, or maybe even 7%+. That means that the loan balance is growing faster than the policy is and net cash/surrender value is likely shrinking(obviously your adding premium payments too so that could be a factor), but your return on capital is for sure shrinking when you look at both the policy and the loan combined.

Under direct recognition you get the 4% in automatic crediting + ~2% in dividend payments for the portion of your cash value that doesn't have a loan against it and 0% in dividend payments for the portion of your cash value that does have a loan against it. So if you borrow half that means you're getting 4% + 2%/2 = 5%. Then you subtract lets say 2% in coi and fees and your at 3% You then have a loan that maybe charges 5%, 6%, or even 7%+ and so now you're really running a negative carry.


The difference isn't huge, but needless to say they're both terrible deals. They're only worthwhile in late retirement because of tax reasons(few years of life left and you only have a few years of negative carry, but the savings on not paying income taxes on withdrawal are huge at that standpoint).

Thank you all for your help. Amazing that he told me the 5% interest rate on loans was fixed and not variable. Thank you both for helping me avoid a "shill". (Did I use that term correctly?) And thank you for the formula's dshibb.

" But since loan balance grows faster, *net* cash value continues to careen towards a bad outcome when you borrow." --Thinking that this tells me all I need to know about this "deal".

herringauto said:   Thank you all for your help. Amazing that he told me the 5% interest rate on loans was fixed and not variable. Thank you both for helping me avoid a "shill". (Did I use that term correctly?) And thank you for the formula's dshibb.

" But since loan balance grows faster, *net* cash value continues to careen towards a bad outcome when you borrow." --Thinking that this tells me all I need to know about this "deal".


You're more than welcome! Anytime.

Under direct recognition you get the 4% in automatic crediting + ~2% in dividend payments for the portion of your cash value that doesn't have a loan against it and 0% in dividend payments for the portion of your cash value that does have a loan against it.

With direct recognition, the dividend for the portion that has a loan will be different (almost always lower), but it usually (almost always?) still pays a dividend.

BrodyInsurance said:   Under direct recognition you get the 4% in automatic crediting + ~2% in dividend payments for the portion of your cash value that doesn't have a loan against it and 0% in dividend payments for the portion of your cash value that does have a loan against it.

With direct recognition, the dividend for the portion that has a loan will be different (almost always lower), but it usually (almost always?) still pays a dividend.


Actually I believe you're right about that. They'll post a different 'scale'(which they claim is proprietary information that doesn't have to be shared with the public).

Also it's really impossible to know what % of dividends you're actually going to receive in any given year anyway(again they claim their scale is 'proprietary'), but usually it gets applied based on some complex formula that can be best described as "units of death benefit". So the guy who has more in cash value and less death benefit is likely receiving less dividends as a percentage of cash value than the guy who has more death benefit and less cash value. One ever so slight negative to paying things over a shorter period of time(like a single pay or a 7 pay).

herringauto said:   Another thought I'm having. If I can spare $1000 per month extra, what would happen if I put it toward the principal balance on my house payment. I am at a 30 year fixed at 5.25%. I got the loan 3 years ago and am now paying bi-weekly (for the one extra payment per year) along with an extra $50 per payment towards principal. Would I save more money in the long run putting the extra $1000 per month toward the house than a WL policy?
You'd be better off paying down your mortgage with a spare $1000 than buying WL

dshibb said:   

So let's look at this 6% he 'guaranteed':
Year 1: -33.33% -- ($8000 on $12000)
Year 2: -28.61% -- ($18000 on $24000)
Year 8: .51% -- ($98000 on $96000)
Year 30: 4.03% -- ($700000 on $360000)

Where is this 6% he speaks of?

And it's way worse if you borrow against it. .


Listen carefully to the above herring auto.
Your "investment" is actually negative for the first 8 years, only 0.51% at year 8, and only 4% at year 30. That's not even considering that your balance at year 8, or year 30 will be much much less than projected if you take a single loan from it

Just avoid .

BrodyInsurance said:   Under direct recognition you get the 4% in automatic crediting + ~2% in dividend payments for the portion of your cash value that doesn't have a loan against it and 0% in dividend payments for the portion of your cash value that does have a loan against it.

With direct recognition, the dividend for the portion that has a loan will be different (almost always lower), but it usually (almost always?) still pays a dividend.


I just noticed that Guardian actually pays a higher dividend for loaned amounts for the first 20 years. This because policy loans are at an interest rate that is higher than what they can currently earn on their general portfolio assets.

Where is that within a guardian policy?

dhodson said:   Where is that within a guardian policy?

It doesn't matter. It's all about the spread. The individual rates themselves are meaningless. The spread determines what *you physically lose of your own money* each year.

Every carrier in whole life deliberately sets their policy loan rate at or above the estimated death benefit return of all policy holders to life expectancy. And then the spread is even larger between cash value IRR and the loan interest rate.

Everybody should just accept one thing when looking at this(because it makes complete sense): It is going to be basically impossible for a person to ever get an arbitrage(or positive carry) from borrowing against a (non VUL) permanent insurance policy at a lower rate than what it's yielding. Why in God's name would a carrier ever allow that to happen since they're the provider of both the loan and the policy? That's a pretty easy thing to figure out and they have teams of smart mathematicians. A different lender doesn't mind if you get a positive carry on somebody else's asset, but when it's provided by the same entity **they will not allow that to happen.**

It will always be an equal or negative carry. That is all you need to know. There is no angle here. It's impossible to capture any value. There is no benefit to one carrier charging 6% loan and another 8%. There is only a benefit one carrier having a -1% spread vs. the next having a -2% spread.

dhodson said:   Where is that within a guardian policy?

That specific information won't be in the policy. What will be in the policy is that with a fixed interest loan, the dividends may differ for loaned an unloaded money. It makes sense that if the loan interest rate is higher than what the insurance company can earn, the insurance company wants to encourage loans. When loans are at a lower rate than the company can earn, they want to discourage loans. With a fixed interest rate loan, the insurance company needs this ability to manipulate dividends.

The reason people get involved in these "programs" is because it is a forced savings plan. I do no agree with WL as an investment, but if you do not have the discipline or the knowledge than you work with what you have. So, all you need is more knowledge and discipline and then you can be your own bank and have a term policy that covers your untimely death. My goal is to be self insured and to stop paying all premiums to the insurance companies. Although, for those using WL I thank you. Because I am invested with several insurance companies. I know, I am a bit twisted

mikeivancic said:   The reason people get involved in these "programs" is because it is a forced savings plan. I do no agree with WL as an investment, but if you do not have the discipline or the knowledge than you work with what you have. So, all you need is more knowledge and discipline and then you can be your own bank and have a term policy that covers your untimely death. My goal is to be self insured and to stop paying all premiums to the insurance companies. Although, for those using WL I thank you. Because I am invested with several insurance companies. I know, I am a bit twisted

1)Using whole life as "forced savings" is just plain stupid. If one can't save using other means, they most likely won't save using life insurance.

2)I have sold countless life insurance policies. Never were they sold or purchased as forced savings. I was never trained to sell it as forced savings nor have I ever trained an agent to do so.

Also, I always like to argue about the term "self insurance". You won't be "self insured". Rather, you simply won't need insurance any longer. Groups can "self insure". Individuals can't.

BrodyInsurance said:   mikeivancic said:   The reason people get involved in these "programs" is because it is a forced savings plan. I do no agree with WL as an investment, but if you do not have the discipline or the knowledge than you work with what you have. So, all you need is more knowledge and discipline and then you can be your own bank and have a term policy that covers your untimely death. My goal is to be self insured and to stop paying all premiums to the insurance companies. Although, for those using WL I thank you. Because I am invested with several insurance companies. I know, I am a bit twisted

1)Using whole life as "forced savings" is just plain stupid. If one can't save using other means, they most likely won't save using life insurance.

2)I have sold countless life insurance policies. Never were they sold or purchased as forced savings. I was never trained to sell it as forced savings nor have I ever trained an agent to do so.


Additionally such people are likely to be paying monthly which has higher costs and higher lapse/surrender rates then those who pay yearly. Some agents like to pretend insurance changes people and thus produces forced savings. The evidence is the exact opposite.

herringauto said:   Another thought I'm having. If I can spare $1000 per month extra, what would happen if I put it toward the principal balance on my house payment. I am at a 30 year fixed at 5.25%. I got the loan 3 years ago and am now paying bi-weekly (for the one extra payment per year) along with an extra $50 per payment towards principal. Would I save more money in the long run putting the extra $1000 per month toward the house than a WL policy?

Without doing the math, you'd be better off paying extra toward your mortgage. As dshibb pointed out, your return is negative for at least 8 years and, at 4% at 30 years, isn't hot later on, either. Money going toward principle on your mortgage has an immediate positive return, especially if you are able to get to 20% equity and can stop paying PMI.

You should definitely look into refinancing, btw. Rates aren't as good now as they were last year or maybe even a few months ago, but you can easily do better than 5.25 assuming you have decent credit.



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