by Guest » Tue Jan 11, 2011 06:09 pm
I'm looking for some term life insurance that builds cash value. Can someone please help me? I know that Primerica and Northern Mutual are the best. But that's all that I know...Thanks!
Posted: Tue Jan 11, 2011 06:59 pm Post Subject:
I'm looking for some term life insurance that builds cash value.
There is NO SUCH THING! Term insurance = no cash value.
Additionally, there are no such insurance companies as Prime America or Nothern Mutual. There is a Primerica Life Insurance Co and a Northwestern Mutual Life Insurance Co.
If you want something like "term + cash value" then you will be looking for something called "universal life insurance". It is not inexpensive and it may not suit your needs. Quote you get for such policies will probably be much lower than you actually need to be paying to keep the policy in force for many years, and this could cause the policy to lapse within 10-20 years of the time it is issued.
Alternatively, you could purchase a term life policy and commit additional dollars to a savings plan outside the life insurance policy. There are both advantages and disadvantages to this approach.
Click on the link below to send me an email, and we can discuss your situation more fully and confidentially. There is nothing for sale.
Posted: Wed Jan 12, 2011 05:33 pm Post Subject: cash surrender value of term life insurance
There is NO SUCH THING! Term insurance = no cash value.
The OP obviously is clueless, but Max, you are incorrect.
Term insurance usually has no cash value, but there are term policies that do have cash surrender values.
Posted: Thu Jan 13, 2011 07:11 am Post Subject:
there are term policies that do have cash surrender values.
Yes, there are two [somewhat obscure] types: Deposit term, generally used for 1035 Exchanges from cash value policies, and Extended Term policies issued under the nonforfeiture provision of a cash value policy, which may be surrendered for the declining unearned premium. This latter contract is not marketed as a new product, but is required to be available under state nonforfeiture laws.
Other than those two instances, I know of no other term policies with cash surrender values. I don't know of any companies that are actively marketing deposit term for the purpose of writing tons of new business compared to the rare 1035 Exchange. Ball's in your court.
There were some goofy hybrid policies being written in the mid-late 1970s that were marketed as 10-year renewable term insurance with a cash value that could be used to pay down the renewal premium at the 10-year mark. Or the policy could be surrendered and the cash value taken. A closer look at those contracts today would probably reveal that they were a preliminary form of Universal Life that began to flood the market by 1978 or so.
Posted: Thu Jan 13, 2011 04:21 pm Post Subject: term life insurance vs cash value
ROP term builds cash value....no, it won't build it forever and it won't exceed the premiums paid, but it does build cash value.
Posted: Thu Jan 13, 2011 04:56 pm Post Subject:
Nice to see you back. I guess you could say that ROP term builds cash value, but I don't present it that way. After all, 2% of premiums paid 10-years into a 20-year term policy doesn't exactly sound like "cash value". But I'll concede the point.
Posted: Thu Jan 13, 2011 07:15 pm Post Subject: term life insurance builds cash value
100% at 20 years sounds like cash value to me. How much at 10 years depends upon the policy.
Max, the frustrating thing about having conversations with you is that despite my assumption that you have the most knowledge of anybody on this board, you often post information that is inaccurate (even if that information is mostly true).
Term insurance doesn't equal no cash value.
Term insurance equals insurance for a finite period of time.
The fact that most term policies have no cash value is irrelevant to the fact that it is possible to have a term policy with a cash surrender value.
Posted: Fri Jan 14, 2011 12:49 am Post Subject:
Term insurance doesn't equal no cash value . . . it is possible to have a term policy with a cash surrender value.
So, I will agree that in today's universe of insurance products, my original statement was, perhaps, too absolute, even though the concept is essentially legitimate ("The fact that most term policies have no cash value"). But most does not equal all, and I stand corrected and have the lumps to show for it!
And there's no real argument about this from me, either. Mostly, from my perspective, it's a philosophical distinction/discussion (plus it's what students need to know across the country to pass any state's life agent license exam).
However, "philosophically", using the term "cash value" to describe the accumulation of the (roughly) 30% additional premium used to fund the "return of premium" at the end of the contract is, to my way of thinking, a bit of a misnomer, too. Unlike true cash value policies, there is no loan value and there are none of the other "nonforfeiture" values that define cash value policies in insurance laws. Now I haven't seen all the marketing materials for ROP term that exist (actually, I've only seen them for about a dozen policies), but those I've seen have not explicitly described the contracts as having cash value in the same manner as CV policy marketing materials do ("money for retirement, college education, etc").
Please feel free to equate that accumulation with "cash value" if you want to, it's just something I choose not to do. It doesn't invalidate either of our positions from a marketing perspective. It's mostly just a sales tool. I can market ROP term life just as easily without ever discussing "cash value".
And please don't get me wrong, I am in full agreement that ROP term is generally a great product, in concept, because it helps to reinforce the proposition that purchasing life insurance is something for the "long term" not something you do now for the next few years and then let go. And as term insurance, it provides a larger death benefit, dollar-for-dollar, compared to whole life for persons of the same age and underwriting classification.
Most companies, in my opinion, in executing the contract, simply charge too much for the privilege (I've seen $10,000-$20,000 face amount policies in which the ROP rider premium was more than the premium for the basic death benefit!! I would never offer a product like that to anyone) and, apparently, they must still expect the majority of the contracts to fall off the books long before the end of the term, otherwise the early termination ROP percentages could be higher -- arguably, it could be said, they are set low in order to influence the policyowner to keep paying a few more years, until the percentages are significantly higher.
The (usually) big additional premium, in my mind, also defeats a significant part of the advantage that pure term offers over most cash value policies (in terms of raw premium expense for the amount of death benefit protection), and the "cash value" we might speak of is only measured against the total premium paid (as dgoldenz also stated), not the face amount as in a whole life policy -- which is a fundamental difference -- and that extra premium could probably be invested somewhere else for a greater rate of return.
We all know that insurance companies are in business to make money, and they typically don't do anything for "free" unless required by law. Compared to the terminal illness riders that companies never charge for (they're just the right thing to do, not required by law), ROP term is seen as another profit center. If profits were relatively unimportant, an ROP rider could be an almost "free" addition to the policy -- I would think +10% is sufficient (about the same as most charge for a Waiver of Premium rider charge).
The company will have the use of the bulk of the paid-in premiums (including the ROP upcharge), essentially, in perpetuity. Long after the policy ends, or even after a death claim is paid, that money will remain invested, since current premium dollars are used first (before they've had a chance to be invested) to pay current claims and other operating expenses and commissions (that's no different than with cash value policies) -- and end of term/early termination return premiums. That should be profitable in its own right -- similar to any other company's long term invested reserves.
And if you go back to the OP's original opening line:
I'm pretty sure ROP term is not what was on his mind -- otherwise his question would probably have been phrased differently. If he paid $300 per year for 20 years, I think "cash value" would mean more to him than $6000.I'm looking for some term life insurance that builds cash value.
Posted: Sat Jan 22, 2011 06:22 am Post Subject:
Max is a great guy and extremely knowledgeable in a very broad sense. I have seen him use a great deal of patience to carefully and methodically educate someone who really “hasn’t a clue.” It makes me happy to see someone actually benefit from the information they’ve received on this site.
I’ve been investigating Life Insurance Fraud in America for over 17 years and have spoken at dozens of seminars and/or workshops attended by all sorts of people. I cannot express how much enjoyment I get when I look out into an audience and see the proverbial lights come on. You see, the vast majority of all insured simply have no idea how [life] insurance works and whether-or-not their policy’s broken. These people meet with an agent, purchase a policy – which they often just stick in a sock drawer, make premium payments religiously, and TRUST the policy will be in force when their beneficiaries need it the most. That’s it – end of the story.
People like Max, Gary, Lori and several others on this site give people a reason to take out their policies, dust them off, and often make life-changing decisions regarding those policies they wouldn’t otherwise have felt confident enough to make. If your car runs like crap, but still gets you to work, you might not think much of it – that’s life. Someone comes along one day, teaches you how to change the spark plugs and you’ve got a brand new car.
You see, if you have no idea how the theory of internal combustion works, you are quite literally at the mercy of others that do. However, once you’ve gotten a firm enough grasp on the subject to know that a dirty carburetor cannot possibly cause your front end to vibrate at 65 miles per hour, you’ve made progress. The very next time your trusted mechanic tells you a $65 cooling system flush will help your car shift at highway speeds, you’ll have the information needed to keep from being a sucker.
Guys, correct me if I’m wrong but as Experts, we take a huge amount of satisfaction from educating the public – the average policy holder. We try hard to give people enough information about their policies to keep them from being taken advantage of by unscrupulous agents or making bad (uninformed) decisions regarding their policies.
I’m proud to be part of the group.
Posted: Sat Jan 22, 2011 06:28 am Post Subject: life insurance
At this point I would suggest that you both take term life insurance. It is much cheaper than other forms of life insurance. For a small amount of money you can buy a great deal of insurance. I would suggest 30 year term which means that you will have that insurance for thirty years. The insurance rate at the beginning will be higher but in the long run you will be paying less.
Most life insurance agents will suggest some form of permeant life insurance. Their sales technique is to convince you that it is better since you will be getting money back at the end of the policy, will be able to borrow from it and have tax advantages. Most consumer advices believe that you are better off taking the difference in the premiums between term and permanent insurance and investing it. Instance agents receive very little commission on term insurance but almost the first years premium on permanent life. Do not be hoodwinked. They are living on your money. Most permanent insurance policies are front loaded which means that you have very little growth of your money in the first ten years or so of the policy. If you cancel as many people do, you have almost nothing to show for a large investment. Many people do cancel.
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http://www.freecheapinsurance.org
Posted: Sat Jan 22, 2011 07:30 am Post Subject:
Max, the frustrating thing about having conversations with you is that despite my assumption that you have the most knowledge of anybody on this board, you often post information that is inaccurate (even if that information is mostly true).
The “despite my assumption” comment was hilarious.
Ok, with that in mind, let me throw in my two cents worth.
Term insurance doesn't equal no cash value.
Despite the double negative, you are absolutely correct.
Term insurance equals insurance for a finite period of time.
Someone paid attention in class. Good answer.
The fact that most term policies have no cash value
Back in the 70s – early 80s, I’m pretty sure there were actually a couple of companies that sold term policies that earned dividends at some point. As I understood it; these dividends could only be used to offset the future cost of insurance. These policies were obviously the test-beds for today’s level term plans. Of course agents represented that policy holders could withdraw the dividend value to use as they wished. The resulting law suits were probably at least part of the reason these plans were taken off the market.
That aside, you are correct again. Term policies have absolutely no/zero/nada cash value - ever.
… is irrelevant to the fact that it is possible to have a term policy with a cash surrender value.
Whatever.... Term life insurance does not have a cash value. In every single instance, a policy’s cash value is nothing more than an overpayment of premiums plus some sort of earning potential. If you were to cancel the policy, you would not receive any cash upon surrender.
The exception would be for a term insurance policy with a Return of Premium (ROP) rider. In fact, AIG has a line of term plans with ROP riders. With a ROP term policy, all premiums paid are returned to the policy owner at the end of the term selected (e.g. 15, 20, or 30 years). Do you think the company is going to share one penny of the earnings they’ve generated from your premiums over the policy’s term? This, of course would be classified as cash value and the answer is no.
Cash Value equals: Overpayment of premiums plus some sort of earning potential that you can borrow from or get back when you surrender the policy.
ROP equals: Get all your premiums back (nothing more) if you outlive the policy’s term.
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