Life insurance as investment vehicles

[ABC]

My field is group health but do sell a few life policies every year but I always sell term.

Life insurance as investment vehicles
How does this work with interest rates being so low?

I understand some people will borrow against their cash value and not have to pay taxes. Is there really an advantage doing that? There are surrender fees?
If we compare the fees to their tax rate how much are they actually saving.

Cost of insurance down the road? What I am seeing in policies is that the cost of insurance is eating up all the cash value after 20 years.

So I really don't understand how Life insurance can be sold as an investment vehicle.

Someone school me on this.

 

[CHUMPS FROM OXFORD]

"So I really don't understand how Life insurance can be sold as an investment vehicle."

It shouldn't.

 

[Crabcake Johnny]

Unless you're a life agent guzzling the Kool Aid by the pitcher, it's not an investment tool.

 

[arnguy]

Selling life insurance as an investment vehicle really is a no-no.

 

[Mr. Bill]

Usually you learn about the different insurance products before taking your insurance exam. Did they not teach you? Ultimately life insurance can be the absolute best investment vehicle, however, the optimum value occurs upon death. So, it really depends on what you're trying to accomplish. That said, there are TONS of crappy policies being sold as "investments" out there. Many of them pay nice, fat, juicy commissions. Go figure.

 

[Crabcake Johnny]

Can we infer a correlation between high commissions and crappy policies?

 

[arnguy]

Can we infer a correlation between high commissions and crappy policies?

John, I believe that is what Bill implied.

 

[Mr. Bill]

Well, the more money the agent makes, the less money there is available for the client to work with. I once went to some dopey seminar and walked out when they started talking about a 20-year surrender period. If some dumba$$ can say that with a straight face to a client, I believe that same dumba$$ will be able to sell a ROP health policy to a 25-year old.

 

[HomeService]

I used to know a guy in the early 1990's who would get retirees to dump in 100K or more lump sum into UL policies as some sort of estate planning vehicle, I think he would write them 500K policies or a MIL or so. The tax free death benefit was of course a big selling point, and UL's paid better interest on cash value back then. Don't know what that guy is doing today....

 

[moonlightandmargaritas]

So I really don't understand how Life insurance can be sold as an investment vehicle.

In some very limited circumstances, it can actually be an excellent investment vehicle.

Let's say you have a high earning physician that is currently maxing out all tax-favored accounts.

An over funded VUL (non-MEC of course) can be an excellent wealth play. Additionally here in Florida (as in many states) life insurance cash values are creditor-proof.

If he/she can use the DB -- all the better...