Traditional Life Insurance High Cash Value Life Insurance
-35 year old male. Standard Health. $10,000 premium per year.
What you are essentially looking at is a policy designed for high cash value. It essentially exchanges death benefit for cash value. This high cash value life insurance policy has a couple of interesting things to note:
- Immediately, over 70% of the first year’s contribution is in cash value.
- After 7 years, every dollar contributed is in cash value. The policy is break-even.
- Over the 35 year period the internal rate of return is 4.36% (not to mention you also have over $1M death benefit).
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High cash value life insurance is not expensive. You break even in 7 years, and over the 35 year period illustrated, it produces a 4.36% return. Contrast that to term insurance, where ever dollar you put in is gone… rate of return is -100% every year unless you cash in (die), which 98% of policies don’t. Each have their place in a financial plan, but of the two, the mathematically more expensive option is term.
“The Returns Are Really Bad!”
Well anyone who thinks in today’s economic environment that 4.36% is low needs to think again. Did you hit the jackpot? No. But compared to the stock market matrix by Crestmont Research, it’s better than investors have done in the S&P 500 over the last 15 years.
Now historically, 4.36% is conservative, compared to 2 case studies on whole life insurance returns. One by Mass Mutual (4.49% to 6.52% Returns), and Assurity Life (5.65% Return). What’s even more interesting is the fact that these case studies were designed around the traditional life insurance policy and would have seen even higher growth had they been designed for high cash value.
Is 4.36% not enough? What happens if you come across an opportunity to invest in a business, real estate, gold, or whatever else might come up? Great. As you can see in the infographic below, you have all the access in the world. Take the money and invest it. The policy will only help you save money on taxes, and increase the total profits from your investment.
“You Have To Pay Premiums Your Whole Life!”
Think you know insurance? Think again. In a cash value life insurance policy, you can eliminate premium whenever you want to and just let the cash value grow. A great option in hundreds of scenarios. About to retire? Lost a job? Keep the money growing, keep it safe, keep it liquid, and keep the death benefit. Example below:
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