CASH VALUE LIFE INSURANCE — RIP-OFF!
If you are a millionaire purchasing Cash Value Life Insurance “may” be useful. However, you must be able to take full advantage of the Tax and Inheritance Laws.
Check with your Tax Attorney. If you are not wealthy enough to have a TAX ATTORNEY (Law degree and Accountant Degree, not just a guy that does your taxes every year!) You are highly unlikely to qualify for the Tax Advantages.
However, if you are not extremely wealthy, RUN AWAY!
Selling “Cash Value” Life Insurance to the non-wealthy is entirely self-serving for the Insurance Industry, they prey on even the poorest of people, by promoting the ‘Cash Values’, not Insurance.
The Insurance Industry, like every other industry, pushes the product that makes them the most money.
When an Insurance Agent sells a high premium-low Death Benefit “Cash Value” Policy, they get a 70% first-year commission. However, they only receive a 40% first-year commission when selling low premium-high Death Benefit Term Insurance. There is a saying among Life Insurance Agents: “Do you want to Eat, or do you want to Sleep?” (Earning 70% versus 40% commissions)
Usually, the policy owner gets no Cash Values for the first two years, (depends on the actual policy itself, sometimes three!) All your first two- or three years' worth of “savings” (that you will never receive any credit for) went to pay commissions and as immediate profit for the company.
Then if you do buy Cash Value Life, your Agent is still bugging you to BUY MORE INSURANCE every several years, because you are STILL WAY UNDER-INSURED! But you may be paying all you can afford! The agent knows very well you were underinsured when he SOLD you that first policy that was best for… him and his family… not yours!!
He could have sold you a policy with a MUCH higher Death Benefit, at the same premium price or even a much lower premium, but he chose to sell you what immediately benefited him, getting him back at your door and into your pocket every several years. It is what he has been taught to do!
Insurance agents and companies always like to make everything so complicated; they will use words and phrases to obscure the truth. On some policies that I have seen, it would take a CPA a week to figure out. But of course, all that "complication" is entirely in THEIR favor!
Several types of so-called “Savings” policies
From the standard Whole Life insurance, you can get other more expensive policies, where the “savings” portion of the policy is higher and the Life Insurance Death Benefit is much lower. It is a higher premium-lower value “Cash Value” Policy.
Twenty-Year Endowment is extremely expensive, the policy is completely paid in 20 years, and then you are supposed to cash it in and get all the money in the 'account'. You have just taken the “Scrap-Value” of the policy.
Think about paying $40 for a gallon of milk every several days, then getting some of that extra expense money back after twenty years of paying. You have lost all the buying power of that money for all that time, inflation has eaten-up much of it too. You have also lost a ton of interest that you would have earned had you just invested it anywhere else!
Cash Value Loans
Your Insurance Agent will show you illustrations of you “borrowing” your cash value many times for all kinds of reasons. So many times and so often that it never gives you enough time to pay it back before you “borrow” it again.
You pay interest on your “OWN” money when you ‘borrow’ on the ‘Cash Value’ on a standard Whole Life Policy.
You can never collect on BOTH the “Savings” and the Insurance.
If you want the ‘Savings’ you give up on the ‘Insurance’, if you collect the ‘Insurance’ by dying, your family must give up on the ‘Savings’.
You are paying for the Life Insurance AND paying EXTRA for the “Savings” part. The savings “builds” INSIDE the Insurance part, thus reducing the amount owed by the Insurance Company upon your death, by the same amount. You can never collect BOTH savings AND the Full-Face Value Beneficiary amount of the Policy. You can only get one or the other, never BOTH, but you still PAY for BOTH!
If you turn the usual graph that the insurance salesperson shows you, upside down it is easy to understand this. As the “savings” grows, the Insurance part (What the company owes you) decreases by the same amount! However, the Face Value stays the same.
DIVIDENDS
They are not taxed because it is NOT a profit to you, but a “Partial return of a PURPOSELY OVERCHARGED PREMIUM” as per a 1911 Treasury Decision. Notice that “Dividends” are projected up to 50 or more years in advance! (See if you can get a one-month advanced estimate of the amount of the annual dividend will be on a regular Stock Investment.) “DIVIDENDS” are FAKE! They are pre-figured way in advance!
HOWEVER, if you receive an offer for two similar policies at similar costs from two different companies, one with Dividends and one without, and the benefits are about the same… take the one that “pays” Dividends, it WILL be cheaper in the long run.
TERM INSURANCE
All insurance is Term insurance, including Health, Automobile, Homeowner’s, and Life. There is nothing ‘Permanent’ about so-called “Permanent Insurance”, when the Insurance Company owes you less and less each year, while you risk your fake “Savings”! Always remember the Life Insurance Industry has had well over one hundred years to perfect its “Code Words” and their “Song and Dance”.
What you most likely want, and need is an “Annual Renewable Term” (ART) Policy; the premium starts out extremely small and gets somewhat bigger over time. Then if you want to have “Savings” from an Insurance Company, purchase ‘savings’ as an Annuity, and then if you die, your beneficiaries receive BOTH the full amount of the Insurance AND the full amount of the Annuity. Alternatively, you can save your money anywhere else!
At 67, I am STILL paying LESS on an ‘ART’ than I was at 22 years of age for a Whole Life Insurance policy that I had (cost per year, per thousand) (it is the equivalent of ‘miles per gallon’)
If you calculate the cost per year, per thousand for the Whole Life AFTER deducting the Cash Value “savings” you still get an INCREASING cost of the insurance portion every year!
Let’s say that you buy a 100K Whole Life policy and the cost per thousand is initially $26.00 per thousand per year, it will cost you $2600 per year.
Much later, let’s say you now have $28,000 in “Cash Value” savings. Subtract $28,000 from $100,000 equals $72,000 that the insurance company owes you. (If you were to die then the company would still pay only $100,000, by kicking in your “OWN” $28K into the pot, and they kick in just the $72,000.) Now calculate your cost per year, per thousand and you get $31.11, you’re still paying $2600 for the policy. $2600/72=$31.11
Later, around age 60, your “Cash Value” is let’s say, $45,000, but the insurance part that you are actually paying for is now only $55,000. You are still paying $2600 for the 100K policy, but the Insurance Company is only on the hook for $55K and you are now paying $47.27 as the cost per year, per thousand. ($2600/55=$47.27)
Your “cost per year, per thousand” has gone up, each and every year since you bought the Whole Life policy, but if you had bought the “ART” you would STILL be paying MUCH LESS per year than $2600 for the 100K policy!
YOU MUST HAVE A LOW-COST STARTING POINT!
With Life Insurance, what starts high only gets higher, but what starts low, still gets higher but only reaches the equivalent of the initial Whole Life Rate at a much older age, than the “Retirement Age” of sixty-five!
There is no conceivable way for ANY Life Insurance costs to NOT go up each year, but it is what you actually pay in ‘cost per thousand’ for the policy that makes all the difference!
Life Insurance for Children
The reason you buy Life insurance is to keep your dependents out of the “Poor House” if you die. You are paying off debts and replacing your income. You are supposed to only insure ASSETS, and never LIABILITIES. Children are a financial liability, not an ‘asset’. Never insure children, especially if that is taking one dime away from the BREADWINNER’S ability to buy insurance!
The Guaranteed Insurability Option
The insurance company will show you a list of times and occasions that you pay extra money for, right now, so you can then buy another policy at the cost of your then-attained age. No matter what is the state of your health.
What if you die next month or even tomorrow?
It is the CURRENT total Face Value of your insurance that counts when you die, not how much you could have bought, had you lived long enough to do so.
Who Wins, Who Loses
I have demonstrated the “who loses” using three fingers, I hold up my index, middle, and ring fingers, naming the index finger as the Insurance Company that makes lots of money selling Cash Value Insurance, and then putting it down. Then naming the ring finger as the Agent who also makes lots of money selling Cash Value Insurance and then putting it down. Leaving only the middle figure still standing as the “Buyer”, who pays for it all.
Mortgage Insurance STANDARD INDUSTRY PRACTICE:
Sell Reducing Term Insurance, to cover a home mortgage (likely a fair value at a reasonable price) and the Agent collects his 40% Commission.
Several years later, your Agent comes back to sell you a Cash-Value Policy, Converting or REPLACING all or some of the Reducing Term Mortgage Policy, with a Whole Life Policy. The big sales pitch is, that you can eventually use the Cash-Value to pay off the loan early …and the Agent collects a 70% commission on the entire cost of the new policy!
R I G H T !
NOTICE: He will never mention or document WHEN it will happen that you can pay off the mortgage and how much you will save on the interest!
It will most likely be in the last five years of a 30-year mortgage when almost all the interest has already been paid! Had you not purchased the New Cash Value Policy that was offered, and instead taken what you would have paid for the ‘Increase in Premium’ of his Cash Value policy that your wonderful insurance agent wanted to sell you, but instead put that amount directly on the payment of the mortgage every month, you would have paid it off much, much faster, saving you a ton of mortgage interest!
Most people understand that the overwhelming majority of the interest paid is in the early years of a loan, sometimes your first payment only pays back less than a dollar of principal, while all the rest goes to interest. Therefore, if you add just $10 to your payment it all goes to the Principal, you forgo all the monthly payments and Interest that were covered by that extra amount of Principal that you paid. Of course, there is no immediate benefit to you, but you will pay off your loan that much faster.
Search online for: < Loan Amortization > < interest rate calculator > < Interest Calculator > or < Compound Interest Calculator >
Loan Amortization Example
Loan Amount $200,000
Loan Term 30 years
Interest Rate (APR) 4%
Calculate
Monthly Pay: $954.83
Total of 360 Loan Payments $343,739.01
Total Interest $143,739.00
NOTE: You will pay off the first 50% of the loan, between the 20th and 21st year.
Loan Amount $200,000
Loan Term 20 years (saving 10 years of payments)
Interest Rate (APR) 4%
Calculate
Monthly Pay: $1,211.96 (paying an extra $267.13 per month)
Total of 240 Loan Payments $290,870.56
Total Interest $90,870.56 (saving a total of $52,868.44)
NOTE: You will pay off the first 50% of the loan, between the 12th and 13th year.
Your Insurance Agent only helps himself to the contents of your back pocket... again!
What you get, however, is just a Much BIGGER Premium to pay, but NO increase in Life Insurance Coverage!
Now your wonderful Agent collects 70% Commission, but not on just the ‘Increase in Premium’ over and above the premium of the Term policy, but on the full premium amount of the entire New Cash Value Policy!
Insurance Agents Are Trained to Do These Things.
Much of the time even the Field Agents have no clue as to how bad you are being taken to the cleaners, it is what they have been taught!
These rip-offs are taught in the Life Industry’s, “Life Underwriter Training Classes” Alternatively, it is better known as the “LUTC”.
But I call the LUTC training: “How to rip-off the Public and keep them smiling!”
Insurance agents love to sell you more and more policies all the time, each of these bundles of paper costs you an extra $30 or more per year, they call it a “Quantity Discount Factor”, but it is just a policy fee.
There is what is known as “Non-forfeiture Values” it will be in your policy papers.
You have several options, which all involve never making another payment, (however, any current cash-value loan does not present a problem)
Option 1 Take a reduced death benefit, but paid-up for life.
Option 2 Take a full death benefit, but paid-up for a certain length of time.
Option 3 Take the cash value money and give up the policy.
(Take the cash-value money and Run!)
When my daughter was born, we bought a Whole Life Policy for her, (I did not understand about insurance at that time and trusted the Agent and the Company to do the right thing)
Later when I was wised up and she was 8 years old, we took Option 2, and the full policy value was in force until she was 35 years old, before it ran out. YES, the EXTRA premium for the Cash-Value had OVERPAID the policy that far in advance!
We took Option 3 on our own policies and I had previously taken a loan out on one of them, as I was “Insurance Poor” (Way too much Premium, and nowhere near enough coverage) However, that loan was NOT a problem, we just received that much less, in the Cash Value Return (Cash-Value, minus loan, minus the current amount of interest owed.)
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Over 55 Life Insurance
There is an “Age 55 and over - No Questions Asked,” Life policy advertised on TV that is “only” $9.95 per WEEK, for a lousy 2,000 dollars in coverage.
$9.95 x 52 = $517.40 per year. However, for the first two years, you have “Limited Benefits” …this means all there is available if you die, is “Return of All Premiums Paid”.
$2,000 Death Benefit, divided by $517.40 per year, equals 3.87 years. At that time, you have paid in all the money that you can possibly receive back!
In less than 4 years, you have paid in everything you can possibly get back, but you’re STILL continuing to pay for the Policy!
So, therefore, in reality, you only have the “Insurance” that you thought you bought, for less than two years (only 1.87 years) (3.87 years, minus the 2 years of “Limited Benefits”), meanwhile, you have paid them the entire $2,000 and are STILL Paying, and may continue paying for another 20 years!
I call that another Rip-off!
Any time a life or health policy is “No Questions Asked” about your health, the policy is sold at a guaranteed profit to the Company. It does not matter who buys it, or the status of their health, the Company WILL still make BIG Money, because of the outrageous premium that they charge, and the fact that they know and understand the Mortality Tables!
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DEDUCTIBLES
“Deductibles” are a part of the “cost” of insurance!
No one actually has any “Insurance” until they pay all the deductibles because until then, NOTHING is “covered”!
OBAMA (DON’T) CARE
I am all for “Coverage for Pre-Existing Conditions” ONLY IF that ‘coverage’ was fully covered under a Pre-Existing Insurance Policy!
Otherwise, that would be like waiting to buy Fire Insurance until after your house is on fire.
Buying insurance before you NEED it is always a gamble.
But that is the way it is SUPPOSED to work!
However, if you could buy insurance only if and when you have been in an accident or your doctor has diagnosed that you have a disease, or need expensive medicine, then people will tend to not purchase it until needed!
Due to Obamacare’s “Coverage for Pre-Existing Conditions”, many currently healthy people will refrain from purchasing until needed.
Those NEW “Pre-Existing Conditions” may last a lifetime, asking for 30% extra for ONLY ONE year as in Obamacare, is a little price to pay for delaying the purchasing of quality insurance!
In a free market, you should not be able to buy any Health Insurance without a physical to prove you are not bringing expensive Pre-Existing problems. Without some kind of premium adjustment or complete physical, it would be like being able to buy Homeowners Insurance while your house is burning down or Automobile Insurance AFTER you have had an accident.
However, being able to TRANSFER to a different health policy, and have those Pre-Existing conditions covered... only IF they were covered under the OLD policy and only up to the limits of the old policy, as long as it would be otherwise naturally covered in the new policy, is an entirely different story!
The combination of two Obamacare mandates—requiring insurers to accept all applicants and prohibiting them from denying coverage for Pre-Existing conditions—created a perverse incentive for people to delay obtaining health insurance coverage until they REALLY need medical care, and to drop coverage once they have been treated, and health is restored.
If the coverage of Pre-Existing Conditions covers sickness and infirmity that was NOT covered on the OLD Policy, then people will just get the cheapest “Low Coverage” policy possible.
Then only if and when they have a major problem, they will purchase a quality policy and under Obamacare, automatically be covered on their new higher value Policy.
Signed: Former Insurance Agent
You have my permission to copy and use this document as long as you retain this entire statement and credit the source, with this link:
https://www.common-sense-science-and-religion.org/analytical-articles/cash-value-life-insurance-rip-off