Life Insurance Policies Under The Janszen Scenario

[gugion]

Good Day,

I was wondering if anyone had any opinions on buying long-term (30 year) term life insurance policies now before an assumed increase in inflation over that time. On the one hand inflation will decrease the value of a payout, but at the same time the premiums will decrease as well. If someone is young and healthy and can get the lowest rates possible now, should one purchase a large amount of life insurance now? Any thoughts/ideas would be greatly appreciated.

Thanks

[aaron]

Re: Life Insurance Policies Under The Janszen Scenario

Do you need life insurance? Get a cheap term policy. If you want to save money, buy gold.

I ended up with an AIG whole life policy (whatever they want to call it) back in '04. It is expensive as hell. The fees are huge, and I do not know for what. There was a "floor" of 2% interest in the contract. At the time, it seemed silly. Now, that is all it is "making". The fees are about 1.9% . As they say, there is a sucker born every minute. I have to learn lessons the hard way, I guess. If you look at the FINSTER dollar index, my "investment" is worth half. Inflation does not help you at all.

I am sure you can find some insurance people to answer your questions. Pay for a lawyer (not your insurance SALESman) to review the 100 page contract with tiny print before you sign.

There is NO way it works out to your advantage (except if you die soon). Annuities and whole life policies are the I in FIRE.

[charliebrown]

Re: Life Insurance Policies Under The Janszen Scenario

I will only speak in generalities.

Do you have dependents that rely on your income? If so, continue reading otherwise stop and just get enough insurance to cover your estate so your family
is not burdened by your demise.

Next, I was thinking about LI as an investment. It is a tax, and lawsuit shield, and maybe it might be immune to some of the cash grabs that may occur in the not
so distant future. I did read the fine print and read "payouts are only guaranteed by the claims paying ability of ________ insurance company".

Assuming a conservative portfolio of 40 stocks, 60 bonds, under a Janszen Scenario, will you insurance company be solvent? I'm sure if several large insurance
fail the state insurance backup plan which insures the insurance company is going under too. Additionally the aging of Americans over the next decades will
put pressure on the holdings too, as more people go from payers in to, recievers of benefits.

If the policy is being used as an investment/tax shelter, I would rather hold the assets closer to me than indirectly through an insurance company.

[mikedev10]

Re: Life Insurance Policies Under The Janszen Scenario

there is the concept of becoming your own bank with whole life, and lending out money to yourself at some point after it has accrued - it's complicated enough to the point i can't really tell if there are situations where it really is advantageous or not. thoughts from the itulip community?

[globaleconomicollaps]

Re: Life Insurance Policies Under The Janszen Scenario

there is the concept of becoming your own bank with whole life, and lending out money to yourself at some point after it has accrued - it's complicated enough to the point i can't really tell if there are situations where it really is advantageous or not. Thoughts from the itulip community?

Life insurance is a scam. They took my parents for every dime. Entirely aside from the moral and ethical dimension, What exactly am I supposed to get out of it?

[gugion]

Re: Life Insurance Policies Under The Janszen Scenario

Life insurance is a scam. They took my parents for every dime. Entirely aside from the moral and ethical dimension, What exactly am I supposed to get out of it?

If something happens to you, your spouse will be taken care of in the future and won't have to worry about how they'll live on a one-income salary. Also, the payout will hopefully help the grieving cope. No?

[c1ue]

Re: Life Insurance Policies Under The Janszen Scenario

I think the key is this:

In an era of ZIRP - almost all of the scenarios for the future involve either static or increasing interest rates.

The problem with this is that your payout is defined as a function of present interest rates. Thus a non-term policy seems very risky.

The inflation eroding the payout, of course, is also a risk - but isn't as obvious as the benefit to payout ratio risk as written.

A term policy makes sense for the purpose of income should something untoward befall you - and provide income for your kids/wife.

I'd look at the payments vs. payout to see - probably makes sense if you're young, not so much if you're older.

[davidstvz]

Re: Life Insurance Policies Under The Janszen Scenario

The book "Aftershock" (same authors as America's Bubble Economy, minus EJ's guest appearance) has a section near the end concerning particular investment vehicles and the mention whole life in particular. Not surprisingly, they agree with everyone here writing that whole life insurance companies invest in bonds, mortgages, real-estate and stocks... all of which will do poorly when the meltdown happens. So unless you want to get in line for a bailout...

[globaleconomicollaps]

Re: Life Insurance Policies Under The Janszen Scenario

If something happens to you, your spouse will be taken care of in the future and won't have to worry about how they'll live on a one-income salary. Also, the payout will hopefully help the grieving cope. No?

It is a way to make your wife and kids wish you where dead. As for a savings vehicle, check the other posts in this thread.

[Fiat Currency]

Re: Life Insurance Policies Under The Janszen Scenario

there is the concept of becoming your own bank with whole life, and lending out money to yourself at some point ...

You can, and should, do this anyway. I do this.

You do not need life insurance to do this.

I have never had life insurance - biggest scam around.

[charliebrown]

Re: Life Insurance Policies Under The Janszen Scenario

being old school, taking out a loan is bad, unless that loan is self funding. Such as I need a reliable car to get to work to make money. Otherwise loans for consumption should not be taken. A car to get to work need only be 10K for a decent reliable car. At 3.x% interest for a mortgage, and the gvt paying 30% of your interest, it doesn't cost that much to buy an affordable house. A 200k house might cost you less that 4K a year in interest charges. How much insurance do you have to buy so you can borrow 160K to buy a house??? I just don't see a reason to borrow large amounts of money now.

I did look into this a little while ago. It seemed very complicated to set up the bank on yourself concept and make sure it was acceptable to the IRS. Like I might need a tax accountant complex. There goes my savings ...

[charliebrown]

Re: Life Insurance Policies Under The Janszen Scenario

care to elaborate a little on this FC?

[jk]

Re: Life Insurance Policies Under The Janszen Scenario

take a scenario of a youngish person with young kids. he has not had time to accumulate significant assets, not to mention the cost of raising kids! such an individual should buy level term life insurance- say a 20 year policy. you are locking in the coverage for a significant time, so that if - in the meantime- you should become uninsurable, you have some coverage. unless your extended family has wealth and can be relied on to support your nuclear family, imo this is the only responsible thing to do. if your investments do really, really well, you can always cancel the policy. it's insurance, it's not an investment. get hit by a truck on the way home from work and what happens to your kids? that's the question to ask.

[leegs]

Re: Life Insurance Policies Under The Janszen Scenario

The OP clearly asked about TERM life insurance. Why all the talk of other types of life insurance? Although his phrasing the question in the context of inflation confused the issue a bit.

[santafe2]

Re: Life Insurance Policies Under The Janszen Scenario

This reminds me of the how much should you pay for a car thread. Same answer, save money. Buy something you want when you have saved enough to afford it. Your family will be better off if you follow this idea with regard to protecting their future.