Cash Value Savings with Life Insurance

NO.
You can buy term life insurance much more cheaply, and then invest the difference in any kind of savings (straight account, money markets, whatever) and come out better.

Kate J has it right. Some people don't like it and some financial "guru's" say invest elsewhere cause the rate of return is low. That's because its primary function is LIFE INSURANCE. The "return" is similar to a bond - low but secure.

The key with Cash Value life insurance is that you have it until you actually die - which is not the case with most term policies and why they are so cheap. Cash value life insurance is expensive because the insurance companies actually expect to pay the benefit to you or your beneficiary. If you have cash value life insurance when you are older, it gives you the ability to spend ALL of your other financial investment assets down because you will have the death benefit to leverage. It's pretty amazing stuff when done right.

Going thru Dave Ramsey's Financial Peace University right now and we just talked about this two weeks ago. Cash Value is the WORST place to put money. The premiums are extremely high and there really is no return on your money. When you draw from it there are a lot of fees and if you do die your loved ones only get the value of the policy. The insurance company keeps the savings account money. We watch a video in the class and at the beginning and the end there were all of these people who used to sell cash value saying the reason insurance companies push them is because they make SO much money on them. It is like a 62% profit because the premium rate, the savings account and the fees. Get a good term policy and then find a good mutual fund to put your money in. The rate of retun in mutual funds averages 12%, the insurance average is around 1.5%.
Check out Ramsey's website www.daveramsey.com. He has a ton of tools as well as a list of good investment brokers in your area that are listed under is ELP(endorsed local provider) link on the site.
Good Luck!!!

It's a bad place to "invest" or "save" money. Term insurance will protect your family through your earning years. 10-15x your annual salary will allow the surviving spouse to invest and roughly replace the lost income.

Term insurance is way better. With Cash Value you do not get both the Cash Value and the Death Benifet you only get one.

The key is to think through what your objectives are. If you want to have money saved in case you die to protect your children, then term life is the most cost effective. You pick an age at which you believe the children will be self sufficient and then you buy term until that age. You can get a level term or a decreasing term - the second is cheaper as the value decreases as you age. If you want to save money for inheritance purposes, then other vehicles are likely much cheaper. If you are looking for a guaranteed income in old age beyond your pension/social security, then certain annuities may be good, though some will argue that you are usually better off just saving in a mutual fund etc. But the annuity can eliminate risk but you pay a hefty price for that.
I would get some books from the library and really bone up on the math behind these policies and think through your goals before you decide. Most of the financial guys out there get a great commission on some of these products and so they are not very objective. Good Luck.

I do not think cash values are a good idea. Read Dave Ramsey's book or check his website. I believe he has more detail on this.

Hi K.,

Kate has a great answer.

We also have a combination of term/cash value life insurance. We intend to use the cash value portion of it to help pay our son's college & to help us purchase future cars with cash, etc. When done right, this can be a great vehicle of money savings. You definitely should consider rounding out investments, as well.

If you have any questions, I recommend talking with a financial advisor. You may want to talk with one that can sell insurance, and a fee-only to see what the opinions of each may be.

Good luck!

T.

K.:

At one time, cash value was an important thing, but it doesn't really mean much.

Depending on what your goals are, I would recommend one of the following: Think about a return of premium Term option, at the end of the Term - you get your money back. Get just enough of Whole Life to take care of Final Expense + a little more. Or a plan that offers Term coverage, but has comprehensive options, should you chose to "convert" to Whole Life.

If you do have a plan that has cash value built up, but you see that there are other more competative options available, have the agent quote you on doing a 1035 exchange, this may pay up a few years and you don't pay until that money is used up OR added to that value of the new plan.

So many options, but a Good Agent will help you find a solution to fit your requirements.

Best of luck!!!!

S. H

We have both term life insurance and cash value (as well as 401k/403b). It is true that the return on the cash value is not as high as you can get with other investment methods. For this reason, it should not be used as the main method of investment for your retirement portfolio, but be one of many diverse investments.

My hubby and I just had this conversation with my aunt and cousin a few weeks ago. They are multi millionaires who own have a very successful investment firm, and they told us that our strategy was right on the money (pun intended.)