Weaving the Strands: Business, Economics, and Tax Policy 2.0

[FreshFish]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

A last note on permanent life insurance:

If a person said, "it sounds great but I just can't afford it" that would be totally understandable. Term insurance is the next-best alternative in that case.

However, to trash it as a "bad" investment makes little sense. It is a great use of money, if one has the discretionary dollars available to fund it.


Rich people buy huge amounts of permanent life insurance because on a risk-adjusted after-tax basis it is one of the soundest and surest ways to transfer money from one generation to the next. They have all sorts of highly-paid advisors and if it were a bad investment they wouldn't buy so much of it. In many cases, they'd like to buy more, but insurance companies place limits on how much coverage they will issue on one life.




The older one gets, the more one appreciates having acquired it at a young age. If I were to go out and buy a new term insurance policy now, the premiums would be comparable to what I've been paying for permanent insurance....and I don't even need to pay premiums on the permanent insurance any more if I choose to have policy values pay the premiums for me instead.

 

[unofan]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

There's gotta be a joke in here somewhere about the guy who trashes Obamacare and pushes for high deductible, emergency only health insurance plans turning around and trashing term life in favor of whole life. But ****ed if I can find it...

 

[St. Clown]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

There's gotta be a joke in here somewhere about the guy who trashes Obamacare and pushes for high deductible, emergency only health insurance plans turning around and trashing term life in favor of whole life. But ****ed if I can find it...

To be fair, he never specifically called out to be in favor of whole life over universal variable life insurance. Whole life is the least attractive option unless you're extremely risk averse.

 

[dxmnkd316]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

Whole and universal are expensive and generally terrible options.

Term is cheap and fulfills the only need for life insurance in the first place. To supplement lost and necessary income.

The same reason bill Gates doesn't need health insurance or life insurance.

 

[joecct]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

Whole and universal are expensive and generally terrible options.

Term is cheap and fulfills the only need for life insurance in the first place. To supplement lost and necessary income.

The same reason bill Gates doesn't need health insurance or life insurance.

Yet Jerry Falwell paid off all the debt that Liberty U had at the time of his death with the proceeds from his life insurance policy(ies). I wonder what the premiums were, but I can see it if you want to endow something somewhere and you have the cash flow to support it.

 

[dxmnkd316]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

Because he's a moron. He could have much better returns in the market.

Life insurance is one of the most expensive ways of leaving money behind. This line of thinking is just crazy.

 

[unofan]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

Yet Jerry Falwell paid off all the debt that Liberty U had at the time of his death with the proceeds from his life insurance policy(ies). I wonder what the premiums were, but I can see it if you want to endow something somewhere and you have the cash flow to support it.

Because adding in a middleman to take a cut of the profit is clearly always the best way to go about things.

Or do you think life insurance companies offer whole life out of the goodness of their hearts?

 

[joecct]

Because adding in a middleman to take a cut of the profit is clearly always the best way to go about things.

Or do you think life insurance companies offer whole life out of the goodness of their hearts?

I never met a profit I didn't like.

 

[unofan]

I never met a profit I didn't like.

So you're happy taking a 1% profit while everyone else is getting 5%?

 

[dxmnkd316]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

So you're happy taking a 1% profit while everyone else is getting 5%?

Nailed it.

 

[SJHovey]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

Term is cheap and fulfills the only need for life insurance in the first place. To supplement lost and necessary income.

This is not true. Small businesses frequently use life insurance as part of "buy out" provisions in their businesses. Take a group of dentists or oral surgeons. They might have a business partnership in which, upon death, the remaining partners have to pay for the departed partners interest in the company. Rather than have the dentist or doctor, or their families, pay the purchase price, it's financed through life insurance policies paid for by the company.

 

[St. Clown]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

This is not true. Small businesses frequently use life insurance as part of "buy out" provisions in their businesses. Take a group of dentists or oral surgeons. They might have a business partnership in which, upon death, the remaining partners have to pay for the departed partners interest in the company. Rather than have the dentist or doctor, or their families, pay the purchase price, it's financed through life insurance policies paid for by the company.

High-wealth families also us it to pay death taxes in order to avoid taking a large financial hit. It's how they maintain family inheritances. It's also the cornerstone product that built Berkshire Hathaway.

 

[dxmnkd316]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

This is not true. Small businesses frequently use life insurance as part of "buy out" provisions in their businesses. Take a group of dentists or oral surgeons. They might have a business partnership in which, upon death, the remaining partners have to pay for the departed partners interest in the company. Rather than have the dentist or doctor, or their families, pay the purchase price, it's financed through life insurance policies paid for by the company.

Ok, fine. Term is cheap and fulfills the only need for the vast, vast majority of people's need for life insurance in the first place. To supplement lost and necessary income.

 

[dxmnkd316]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

It's how they maintain family inheritances.

This is misleading. Most of the wealth is protected by other vehicles. Some may have it to protect their wealth, but there are far more efficient means of doing so.

 

[joecct]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

Ok, fine. Term is cheap and fulfills the only need for the vast, vast majority of people's need for life insurance in the first place. To supplement lost and necessary income.

Term is cheap when you're young. As you get closer to actuarial death, the premiums become rather steep and eventually unaffordable. With whole, eventually the dividends can offset the premiums (if you start early enough).

 

[dxmnkd316]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

Term is cheap when you're young. As you get closer to actuarial death, the premiums become rather steep and eventually unaffordable. With whole, eventually the dividends can offset the premiums (if you start early enough).

Right, but you shouldn't need term after you retire. The vast majority of people should should only need it to replace necessary income if he or she were to die.

And if you were to invest all of your premiums in straight up Vanguard Total Stock Market shares (or something similar), reinvested the dividends, and let it sit, by the time you're offsetting premiums in a whole/universal plan, you're probably well ahead of the game.

 

[joecct]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

Right, but you shouldn't need term after you retire. The vast majority of people should should only need it to replace necessary income if he or she were to die.

And if you were to invest all of your premiums in straight up Vanguard Total Stock Market shares (or something similar), reinvested the dividends, and let it sit, by the time you're offsetting premiums in a whole/universal plan, you're probably well ahead of the game.

Just enough to cover the cost of the funeral and any other expenses.

 

[dxmnkd316]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

Just enough to cover the cost of the funeral and any other expenses.

You lost me here. I'm not connecting the dots.

 

[Kepler]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

You lost me here. I'm not connecting the dots.

I think he's saying that unless you're replacing essential income to dependents that's the most you should be insured for.

 

[ScoobyDoo]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

I think he's saying that unless you're replacing essential income to dependents that's the most you should be insured for.

Probably. Hopefully whoever is lucky enough to be that way has plenty of "insured" investments (like a savings account). Given what happened in 2008 and how we deregulated those clowns again I don't trust having all my eggs in a diversified Wall Street portfolio.