Life Insurance

[AZ Typed]

Sonny D: First: EIL is limited in what it can earn - it's capped in growth. By time you take out the fees, you're lucky to net 2% to 6%. Second, investing your home equity is unwise for the average Joe because most people who do this are already heavily in debt, not saving enough as it is, and have no idea what they are actually getting into. A life-insruanced licesne salesman is trying to make a commission (an EIL pays pretty darn good). The unsuspecting client thinks that taking $50,000 out of their home and investing it will get them closer to retirement when in fact it's their VIEW OF MONEY that needs to change, not WHERE they invest. Taking equity out of a home to invest in any type of variable product is against the law. The only reason money-hungry salesman are able to get away with it using EIL is because the product is backed up by the insurance company. The SEC is hitting this topic HARD right now and I expect to see the rules change real soon: 1) you'll need to have a securities lic. to sell EIL & 2) you won't be able to use home equity to purchase an EIL policy. If someone can afford to fund and EIL, then they likely have enough wealth so they don't have to tap into their home. Third, using a life insurance product as an investment has been, and will likely be for a very long time, an unwise decision, as Bandit60 pointed out above. Why would you use life insurance as a growth vehicle? Additionally, why would you use a growth vehicle like an IRA or 401(k) as life insurance? Each has their roll.

If someone wants to look down the EIL road, I'd point them towards a principal protected VA. The BIG problem is that people don't focus on the FUNDAMENTALS. Get simple term (if necessary - thankx Bandit60 again), have emergency cash, keep debt in check, fund the 401(k) to max and IRA to max. Then if someone has money left over...we can talk about EIL. Until then, I'm sorry to say (and I mean no offence), it is a seminar sales gimmick to fill some salesman's pockets who is too lazy to get appropriately licensed in the financial business (securities license).

Whew!


PS: Employer life insurance, unless paid by your employer (limit is $50,000 or else taxes come into play) is totally overpriced and you lose it when you leave the job. Get an individual term policy - rates are at historic lows!

 

[needa medical]

I'm kind of new here to flight info but think I am getting the hang of it. I'm thinking the intent here (this particular thread) is to write without thinking... I wish there was a computer chip I could carry with me so when I get on a commercial flight I would know if one of you (that have been elucidating about insurance and its value or not (with some (thank God) exceptions) was part of the crew. If so I would promptly ask to be re-scheduled...on a safer flight...(on a flight crewed by rational, not self deluded pilots incapable of thinking that other people in the world could help) I have the distinct impression 90% of the respondent in this thread have egos so large they can't possibly admit an insurance professional might be able to know more about the application of their product than you, the professional pilot... get over it. I'm not an insurance salesman but do believe there is a time and place for everything under the sun... I also believe that those so narrowly focused never really see the big picture. Let me tell you my story... 30 years ago I bought a "LeCar" a French thing that got about 35 mpg... I decided to save $15.00 and change the oil myself. I drove to a distant city and on the way back home I burned up the transmission... Upon inspection the transmission had absolutely no transmission fluid but the crankcase had twice as much oi;l as it should have... Hmmmm I did notice the oil I drained was green but just thought that was french oil... guess not. Moral of the story is I wanted to save 15 bucks but paid $400 to do it. (cost of new tranny) What I see here is you guys/gals doing the same thing, only with much more severe consequences. (wait 'till you find out the indexed annuity someone said paid 5 or 6 percent really was indexed in a way to pay only 1/10th of the performance of the index performance which was 5 or 6 percent. (Here's one: Suzie Orman sells books...thats her day job. She is not in the business of being held responsible for what she says...(she does not have a clue) She flys an unregulated airplane and has never had a flight lesson and wants as many paying passengers as possible. Thank you all for an interesting break but I have to go back to my day job now... Good luck!

 

[TOGA]

AZ Typed -

Not that it makes much difference, but I didn't pay for the seminar. I'm just learning, so I appreciate your input. I do have some comments (in blue), though.

Sonny D: First: EIL is limited in what it can earn - it's capped in growth. By time you take out the fees, you're lucky to net 2% to 6%. Please read my above post about growth & fees. Growth is capped at 12-15%/yr and guaranteed to be at least 1-3%/yr. Second, investing your home equity is unwise for the average Joe because most people who do this are already heavily in debt, not saving enough as it is, and have no idea what they are actually getting into. Which is why I said it's not for everyone & requires self discipline A life-insruanced licesne salesman is trying to make a commission (an EIL pays pretty darn good). Nobody's in it for the fun of it. The unsuspecting client thinks that taking $50,000 out of their home and investing it will get them closer to retirement when in fact it's their VIEW OF MONEY that needs to change, I would agree with that not WHERE they invest. but, not necessarily that Taking equity out of a home to invest in any type of variable product is against the law. EIULs don't fall into this definition of "variable" (they're life insurance), please elaborate if you know otherwise The only reason money-hungry salesman see above are able to get away with it using EIL is because the product is backed up by the insurance company. which provides a degree of safety and stability unattainable in any other investment, since insurance companies are required by law to maintain adequate cash reserves The SEC is hitting this topic HARD right now and I expect to see the rules change real soon: 1) you'll need to have a securities lic. to sell EIL I can't imagine why, it's an insurance policy & 2) you won't be able to use home equity to purchase an EIL policy. Why? If someone can afford to fund and EIL, then they likely have enough wealth so they don't have to tap into their home. They also have enough wealth to understand the tax advantages provided by an EIUL, and would realize that they're tapping their equity because they choose to, not because they "have to" Third, using a life insurance product as an investment has been, and will likely be for a very long time, an unwise decision, as Bandit60 pointed out above. As far as I can see Bandit60 was opining that life insurance is unneccesary unless needed to care for heirs, not that it's necessarily a bad investment vehicle Why would you use life insurance as a growth vehicle? Because of the tax advantages, safety and stability Additionally, why would you use a growth vehicle like an IRA or 401(k) as life insurance? Indeed, why? Each has their roll. Role? I agree.

If someone wants to look down the EIL road, I'd point them towards a principal protected VA. I've never heard of it . . . do tell The BIG problem is that people don't focus on the FUNDAMENTALS. Get simple term (if necessary - thankx Bandit60 again), have emergency cash, keep debt in check, fund the 401(k) to max and IRA to max. So you can pay max income tax on the withdrawal end? Run the math through some long term growth/tax calculators & you'll see that, unless your company offers a phenomenal match, all your doing is putting aside your employer's money to pay the IRS later. I suggest maximizing the match & no more . . . if even that Then if someone has money left over...we can talk about EIL. Until then, I'm sorry to say (and I mean no offence), it is a seminar sales gimmick to fill some salesman's pockets who is too lazy How I'm supposed to not take offense to that I'm not sure, but I'm trying to get appropriately licensed in the financial business (securities license). Why would I spend thousands of dollars and dozens (or hundreds) of hours when I'm not interested in selling variable products right now? I see selling EIULs as helping my fellow pilots (who are in the right situation) keep the IRS out of their pockets now and later. If I come across someone who's a better fit for a product I can't sell, I'll refer them to someone else. Also, if my carrier goes T.U., you can bet I'll be getting that securities license and diving in head first.

Whew!


PS: Employer life insurance, unless paid by your employer (limit is $50,000 or else taxes come into play) is totally overpriced and you lose it when you leave the job. Get an individual term policy - rates are at historic lows!

I got some pretty amazing deals on group term through my employer and through ALPA. No, it's not an investment, and you don't keep it . . . but it's a large, cheap safety net for the time being. Believe me, I'd rather buy an EIUL, but six years at a regional including four in the right seat (freakin' 9/11!) + two kids + mom at home = no home equity!