Insurance companies are very regulated and over capitalized. Plus the entire industry is confidence dependent. There has never been a claim not paid as regulators step in when regulatory capital gets below a certain redundancy and takes over and either fixes or sells the business.
Risk is largely around 1) current charges can be increased to guaranteed, or 2) market performance subpar.
#1 can be mitigated because if an insurer raises charges you can roll the policy over to a different insurer (so very rare occurrence as lack of trust in an insurance company = policyholder flight = negative flywheel).
for #2, there are limits to how much cash you can put into an insurance policy and have it still be considered insurance (instead of an investment/MEC). So if you put a lot of cash in right away and have a policy with negative returns that drops AV. You may not be able to put in any more cash and then charges will be a higher % than expected and drag down performance. (This is why, despite the hate on IUL, the fact you can't have negative investment returns makes them pretty decent for tax minimization)
I wouldn't say put all net worth in as Buy, Borrow, Die. But as a diversifier from RE/Investment+bank loan it can make sense.
Lastly, you can set up with trusts or with trust/charity as beneficiary. As soon as you die, auto transfer of owernship so no concern with probate/creditors/etc.
I meant to compared it with Whole Life. Whole life has guaranteed lock costs whereas IUL type policy has variable cost structure. Whole life has a guaranteed yearly growth whereas in IUL if you have a negative market return then you get 0% plus the fees. Whole life has guaranteed death benefit (which really helps spend buy borrow die as you can spend more later in life) where as in IUL rising death benefit costs will force you to manage policy later n life.
The goal with insurance is to take out as many risks as possible and therefore a mutual (owned by policy holders) whole life company makes a lot more sense - its more on conservative side. Use it to store cash while getting ton of other benefits. Your $1 is doing multiple jobs (velocity) - accumulating cash growth, death benefit, ROTH like tax features, ability to borrow with no credit check, liability protection. Also for very little cost you can add disability (they will pay all your premiums including paid up additions) and terminal illness rider.
That makes sense, wondering what the risk is on the universal life plan. Insurance company goes under
Insurance companies are very regulated and over capitalized. Plus the entire industry is confidence dependent. There has never been a claim not paid as regulators step in when regulatory capital gets below a certain redundancy and takes over and either fixes or sells the business.
Risk is largely around 1) current charges can be increased to guaranteed, or 2) market performance subpar.
#1 can be mitigated because if an insurer raises charges you can roll the policy over to a different insurer (so very rare occurrence as lack of trust in an insurance company = policyholder flight = negative flywheel).
for #2, there are limits to how much cash you can put into an insurance policy and have it still be considered insurance (instead of an investment/MEC). So if you put a lot of cash in right away and have a policy with negative returns that drops AV. You may not be able to put in any more cash and then charges will be a higher % than expected and drag down performance. (This is why, despite the hate on IUL, the fact you can't have negative investment returns makes them pretty decent for tax minimization)
I wouldn't say put all net worth in as Buy, Borrow, Die. But as a diversifier from RE/Investment+bank loan it can make sense.
Lastly, you can set up with trusts or with trust/charity as beneficiary. As soon as you die, auto transfer of owernship so no concern with probate/creditors/etc.
This has been my issue as well with this - even though some insurance companies have lasted since mid 19th century.
The risk is lack of guarantees and the costs are higher.
What do you mean by lack of guarantees? Thank you for the info btw
Thought its a insurance set up with the company
I meant to compared it with Whole Life. Whole life has guaranteed lock costs whereas IUL type policy has variable cost structure. Whole life has a guaranteed yearly growth whereas in IUL if you have a negative market return then you get 0% plus the fees. Whole life has guaranteed death benefit (which really helps spend buy borrow die as you can spend more later in life) where as in IUL rising death benefit costs will force you to manage policy later n life.
The goal with insurance is to take out as many risks as possible and therefore a mutual (owned by policy holders) whole life company makes a lot more sense - its more on conservative side. Use it to store cash while getting ton of other benefits. Your $1 is doing multiple jobs (velocity) - accumulating cash growth, death benefit, ROTH like tax features, ability to borrow with no credit check, liability protection. Also for very little cost you can add disability (they will pay all your premiums including paid up additions) and terminal illness rider.
You seem to be really up to date on this stuff interested in coming on and doing a guest post on this? Don't have your email just email us at
bowtiedbull at protonmail dot com