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!
