Life insurance question

[Hummusx 0]

My wife met with a life insurance agent from somewhere last night to talk about an existing policy that her parents set up for her when she was a kid. Anyway, she came home with all kinds of printouts and charts of different available options of what she could buy (of course). I know basically nothing about life insurance, which brings us to my question:

The plan that the woman recommended was a Variable Universal Life insurance policy. Supposedly (I don't know if she actually said all of this, or just said the right things to let my wife conclude this) she could pay in $2500/year from age 25 to 60. At age 60 she would start withdrawing $18000/year for the rest of her life, and would still receive a death benefit of something like $1.3 million if she died at 100 years old.

What wasn't she told? I know that the money paid in is held in assets that may or may not appreciate at the rate that the figures were based on (8%, which seems high). I tried to do some looking via google, but I couldn't find much that gave details on how the numbers were arrived at, for instance how the withdrawal amount is figured, how the amount of the death benefit is figured, etc.

I guess I also thought that almost all life insurance 'expired' at some point well before 100 years old. Everyone dies eventually, I thought the way they made money was by people NOT dieing and collecting the benefits before the plan expired.

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It’s like selling a million grills all at the same time…with extended warranties. -Hank Hill

[kelel01 1]

Whole life policies (such as variable universal life) can either be "paid up" at some age, such as this one (at age 60), or you can continue to pay until you die, but they have to pay you even if you're 90 when you die. Term life policies will expire at a certain age, as in, if you don't die by 65, we won't pay you. An interesting thing about whole life policies, though, is that if you manage to live to 100, they'll pay you the death benefit as you sit there in front of them. Probably can't do much with it at that point, but you'll die a rich, old-ass person.

I used to know how they calculate all that stuff, but it sounds a lot like an annuity with a lump sum death benefit, so it's just based on the present and future value of the money she puts into it. It's (most likely) not a scam, and could be a good investment, if you're interested in putting that much in each year.

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[SLIDER 0]

It kind of depends on what you want from your policy. If your buying the policy to have a benefit in case of death, then the term policy will be cheaper for a larger policy, however if your using it as an part of an investment than you would choose the whole life policy.

From purely an investment or as part of a portfolio, you can almost always get a better return on your money from mutual funds than from any whole life policy. The one who benefits the most from whole life policies is the person who sells it.

Just my 2 cents. I always consult a professional when it comes to this kind of thing.

Scott

"there's a fine line between hobby and mental illness"

[ACMESkydiver 0]

8% IS high. Be cautious, and get a second quote from another insurer before signing the dotted line...

~Jaye
Do not believe that possibly you can escape the reward of your action.

[white_falcon 0]

I am a Licensed insurance agent, Property and Casualty, and will be taking the Life and Health licenseing test w/in the month.

#1 8% sounds H I G H

#2 What company is it? Check them out with your department of insurance or, thru AMBEST.com The only way I would invest in a VARIABLE policy is if the company was rated A+ or better.

#3 Whole life polices in my OPINION are not the greatest investments, but that is a personal opinion.

The best thing I can say, is just to R E A D the policy and ASK questions. There ARE variable products that GUARANTEE rates of return but not too many.

Do your homework and if it IS a sound buy, go for it if you have the $$$ to spend.

Scott