Million Dollar Baby with Life Insurance... ugh

[DHK]

Making this thread primarily for search engines and people can search for the title and read my post.

Just got off the phone with a newly licensed agent in another state. She was telling me about how "million dollar baby" was presented in a presentation she saw.

The agent said that if you put in $500 a month into a policy for your child, your child will have a MILLION DOLLARS by the time they're 18 years old.

Let's do the math on that with a financial calculator for a newborn:

Present Value (PV): $0
Payments (PMT): -$6,000 (it's negative because you're making a payment out of pocket and INTO the policy)
Number of years (N): 18
Future Value (FV): $1,000,000

Solve for Interest rate (i): 22.47% rate of return required each and every year for 18 years after costs of insurance.

This... will not happen. Ever. With any policy.

Agents representing a policy to expecting to put in $108,000 over that 18 years and expecting a million dollars... is borderline FRAUD. I doubt E&O would protect those agents against misrepresentation and ignorance charges. [EXTERNAL LINK] - National Ethics Association

Now, I'm certainly not against having life insurance coverage on children. I support it (after the parents are properly covered and max-funding their own policies), but these kinds of presentations... should be CRIMINAL.

/end rant

 

[STIBROKER]

I am sorry.....I only deal with Billion Dollar Babies......

 

[Allen Trent]

Making this thread primarily for search engines and people can search for the title and read my post.

Just got off the phone with a newly licensed agent in another state. She was telling me about how "million dollar baby" was presented in a presentation she saw.

The agent said that if you put in $500 a month into a policy for your child, your child will have a MILLION DOLLARS by the time they're 18 years old.

Let's do the math on that with a financial calculator for a newborn:

Present Value (PV): $0
Payments (PMT): -$6,000 (it's negative because you're making a payment out of pocket and INTO the policy)
Number of years (N): 18
Future Value (FV): $1,000,000

Solve for Interest rate (i): 22.47% rate of return required each and every year for 18 years after costs of insurance.

This... will not happen. Ever. With any policy.

Agents representing a policy to expecting to put in $108,000 over that 18 years and expecting a million dollars... is borderline FRAUD. I doubt E&O would protect those agents against misrepresentation and ignorance charges. [EXTERNAL LINK] - National Ethics Association

Now, I'm certainly not against having life insurance coverage on children. I support it (after the parents are properly covered and max-funding their own policies), but these kinds of presentations... should be CRIMINAL.

/end rant

Crazy how so many people, including agents can't use a basic calculator & realize you can't turn 100k into a 1 million in 18 years. Let me guess, there isn't a million projected in year 18 but instead projecting distributions over another 20-30 years that total a million & therefore is the million dollar plan. And agents are selling these to parents of newborns that called looking to start 529 college plans

 

[bill3173]

A sinking fund with a guaranteed 22% for 18 years..that's a product that would sell easily..so much better than buying junk bonds.

 

[fed up]

Looks like she may have misheard.

 

[marindependent]

According to Merriam-Webster a Scam is defined as "a fraudulent or deceptive act or operation"

 

[marindependent]

Let's do the math on that with a financial calculator for a newborn:

So - QQ @DHK - what kind of monthly amount would be required for the child to have a $1MM "Future Value" in place by the time the kiddo was 18, in order to avoid the Million Dollar Bay Life Insurance plan being a scam???

#milliondollarbabylifeinsurance #dhkrocks

 

[DHK]

So - QQ @DHK - what kind of monthly amount would be required for the child to have a $1MM "Future Value" in place by the time the kiddo was 18, in order to avoid the Million Dollar Bay Life Insurance plan being a scam???

#milliondollarbabylifeinsurance #dhkrocks

Thanks.

Based on the following:

Future Value (FV): $1,000,000
Number of years (N): 18
Present Value (PV): $0 (starting from zero)
Interest rate assumption (i): 6%

Solve for Payment (PMT): $32,356 per year

And that's not including any costs of insurance, so it would have to be more if building it within a life policy.

Btw, that's contributing $582,417 into the plan over 18 years... so that number is completely realistic for the math.

 

[Allen Trent]

Thanks.

Based on the following:

Future Value (FV): $1,000,000
Number of years (N): 18
Present Value (PV): $0 (starting from zero)
Interest rate assumption (i): 6%

Solve for Payment (PMT): $32,356 per year

And that's not including any costs of insurance, so it would have to be more if building it within a life policy.

Btw, that's contributing $582,417 into the plan over 18 years... so that number is completely realistic for the math.

Yup, and based on how most policies are slow to grow in initial years from from end loading from costs &/or premium load fees, likely looking at closer to $35k-40k year in premiums. Most financial UW from carriers may not allow that much face on a kid & question the premiums. I have been involved in a couple of cases of premiums of that size on minors, but it was extremely uniques estate planning cases of extremely wealthy individuals where the child was already the beneficiary of irrevocable trusts.

 

[Allen Trent]

Lol. This is really a trademarked thing, but the materials I see on here talk about age 65 having $1M, not at age 18

[EXTERNAL LINK] - The Million Dollar Baby Savings Plan | Life Insurance |