Guys,

Excellant discussions! Please continue sharing your opinion and experience on this valuable subject!

This business of cashvalue in 15-20 Years is only an estimate! It is based on assumptions that are sometimes very optimistic and furthermore, it is you the individual that has to determine the asset allocation for your investments, ie where the premium less insurance cost is invested.

Clearly, most people will choose a conservative/moderate allocation. This allocation will rarely yield a rate of return in excess of 6 to 7%. With these projected rates of return, it would be difficult to produce cashvalue of the policies that the insurance agents are estimating!

Most Insurance agents will produce projections based on historical averages, and these averages will undoubtly include the exuberances of the late 80's! Hence, the rates of returns are not very accurate. Historical rates of return over the last 15-20 years have resulted in rates of return in excess of 13%. But, take a longer period of time and the rate is further reduced to 8%!

Also, never rely on Insurance agents projections of future cashvalue, these are always manipulated to entice a prospect to purchase a whole life policy!

I don't think that the cashvalue should be the determining factor when purchasing a whole life policy. In fact, there are several factors to be considered including those mentioned by members in this tread.

Dont forget, the investment aspect or the cash value that is invested in the stock market through managed funds etc, is growing at a tax free rate! This is a significant feature of the Whole life policy. Imagine you are invested in a mutual fund that is growing tax deferred at 8-10% year!

All the dividends and capital gains are growing tax free. This alone is what is responsible for a rapid growth in the whole life cash value component of a whole life policy. But, remember the significant growth takes place in years 12 onwards. This is when the there is no cash surrender value component.

I own a $1million dollar whole life policy and the cash value is growing very rapidly after 12 years.

To me, the whole life is the answer if you can afford it!

Is Life insurance death benefit taxable?

Do the beneficiaries have to pay federal income tax?

What if the deceased estate exceeds the $2m exemption amount?

Thanks for your response.

A great discussion topic, and I am impressed by the debate on this subject. I would personally like to input my knowledge of this area. A whole life insurance policy is beneficial, from my experience, and it offers the following advantages, as follows:

1. The whole life offers you the ‘death benefit’ that never reduces. Along with the ‘death benefit’ no federal income taxes are charged to the beneficiary upon the death of those insured.
2. The ‘cash value’ is an important feature of whole life insurance policy; the cash value is an investment that grows based upon the assets allocation chosen by the insured. In my case, I chose an aggressive allocation for my policy that I acquired fifteen years ago. The returns have grown tax-free, and I’ve received a substantial cash value that exceeds my original investment in the whole life policy.
3. Premium levels are always consistent. The premium that you pay will always stay the same, unlike a term policy which requires a renewal at much, higher rate.
4. The whole life policy allows the insured to borrow against the cash value of his or her policy.

I found the advantages of whole life insurance are worthwhile.

I was able to borrow 90% of the cash value from my whole life Insurance policy.

Of course, I repaid it, but I used the funds for my downpayment on my home! Also, the interest rate at that time that I was charged was below 5%!

I strongly recommend it, as it forces you to save money! Slowly and steadily it will build a nice healthy cash value over 10-15 years!

Wow! Great thread discussion on Life insurance..Excellant response and I found the thread very useful, but I would like some discussion on Term Insurance as well!

I like whole life because it forces me to save money! Period! Plus all the other benefits mentioned by other members.

Don't forget that the insurance company has one of the most efficient and least expensive management fees associated with the whole life investment. So, rates of returns are going to be slightly higher in the long run compared to mutual fund investing.

However, I would advice members here, that it is important to struture the policy correctly and select the right asset allocation based on your risk tolerance.

It is important to understand the purpose of purchasing the Life insurance in the first place. Once you can identify the purchase, it is very easy to determine whether you need to buy Term or Permanent Policy.

Clearly, there are a lot of advantages of both types of policy, but, the permanent policy is the one I prefer, because, IT IS PERMANENT. My family will get some benefit eventually.

Secondly, there is an element of LONG TERM savings involved in this instrument. What this means is that I can save towards the future and let the investments earn returns of the general stock market tax free!!

Over a long period of time, this could grow into something meaningful in terms of the CASH VALUE. I would advise Permanent Policy holders to over-fund their policies subject to their own financial limitations and IRS limitations.

Anerd has great comments on life insurance , Yes life insurance just like you have owned.I really admire your way of thinking.I am new member and just have a look on Posts.

One disadvantage would be the premium that you pay in a Whole life insurance would be pricier compared to a term insurance on the short term run. Other than that it has a bunch of advantages like guaranteed protection, long term value, tax deferred cash build up and increased death benefits.