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Life Insurance...

Forum: Investments
Author: [Investments] Topic: Life Insurance...
woopdurritis PM woopdurritis
Joined: May 2007
Posts: 22212
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Posted: 7/27/2010 2:09:23 PM
Have a quick question to run by you guys that know about all of this stuff...

I am 24 years old and in graduate school.  I have 15K in the bank... half in CD's and half in savings.  I have a buddy that has a summer internship selling life insurance.  He was trying to sell me on this policy where I put in $100 a month and after like $10 years I break even and by age 65 it is work like $150,000 more than all of the money I would put in combined.  He said the current interest rate they are paying is like 6.5% which is a hell of a lot more than the bank. 

Obviously I am not to concerned with dying... but this long term money making sounds pretty good to me.  Is this something worth considering...

mr_bollox PM mr_bollox
Joined: Oct 2009
Posts: 12691
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Posted: 8/3/2010 8:44:06 PM
dont go by what he says, sit down and do the sums, but normally you can beat any return that a whole life policy offers with sound investing of your own.
depeche2 PM depeche2
Joined: Feb 2002
Posts: 67006
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Posted: 8/3/2010 11:30:36 PM
You don't care about life insurance but you're considering whether to buy a life insurance product?

Your buddy is trying to make a sale.

Think about it.
Wake2002 PM Wake2002
Joined: Apr 2007
Posts: 747
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Posted: 8/4/2010 12:17:32 AM

Life Insurance.   Not Life Investment. 

These universal and whole life policies exist for individuals who don't have the knowledge of how to invest on their own.  With all of these insurance products, you are paying a large premium to have your money passively invested.  Assuming you are not married and have no kids, you have no need for life insurance and should stay away from these products.  6.5% interest sounds great in theory, but like Mr Bollox said above, run your own numbers.  These insurance guys are more salesmen than anything, and in this case, I'd say more likely than not, (s)he is incorrectly quoting the returns.

When the time comes for you to purchase life insurance (i.e., you have the need for the insurance it provides), term policies are the way to go 



mrmyass PM mrmyass
Joined: Oct 2008
Posts: 173
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Posted: 8/4/2010 12:32:12 AM

Albert Einstein said: "The most powerful force in the universe is compound interest"

mrmyass PM mrmyass
Joined: Oct 2008
Posts: 173
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Posted: 8/4/2010 12:39:47 AM
Talk to a broker cause you can get a way better return than 6% and add compounding interest to the picture and your pretty much set. Thats good your looking into different investment vehicles but that one may not be for you.
pjrez PM pjrez
Joined: Feb 2007
Posts: 4040
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Posted: 8/4/2010 8:12:59 AM
The insurance rates inside of a whole/universal/variable life policy are actually term costs.  Like mentioned before though, you could do better investing outside of the policy, BUT don't underestimate 1 thing.  Insurability.  I obtained a policy when I was 22 and another when i married at 25.  I am now 32 and still in fine shape, but a few pounds heavier, some family medical issues have popped up in my parents that weren't known a few years before, and all WILL raise those rates.  While many people will tell you you are young, you don't need it, there is no crystal ball to tell you to buy it the day before you get in that car wreck or get diagnosed with diabetes.

I have 500k in insurance and have great rates.  I'd be paying considerably more if I waited til age 32.
Kasper11 PM Kasper11
Joined: Oct 2006
Posts: 291
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Posted: 8/4/2010 12:43:08 PM

My advise would be:

Purchase a term policy.  Most allow for conversion to permanent insurance (universal, variable, whole life) without evidence of insurabilty,,,meaning you dont have to go through the underwriting process again..

Max out your contributions to all qualified plans you have available to you (401k, def comp, etc).  If you are making a boatload of $$$, then consider life insurance as an alternative/additional investment..

Forum: Investments
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