BiggerPockets

I was listening to some old podcasts from "The Real Estate Guys" today. They had a special guest speaking about using life insurance as a better bank account for REI's.

Has anyone used Whole Life Insurance as a bank account? What has your experience been? Any lessons learned?

For most people buying term and investing the difference between term and whole life is the best strategy. This is a good question for your non-commission financial advisor.

There are some elaborate "bank" insurance strategies out there sold by hungry RIAs....smoke and mirrors mostly!

Patrick, couldn't agree more. Mutual funds may not be the last place I would put money, but not far from it.

I would not suggest using a life insurance policy as a bank account.

I was an insurance broker and worked with Metropolitan and Prudential when A L Williams came on the scene with this. My feather in my cap from those days, was using a a paid up at 65 whole life plan that had stronger additioanl paid up inusrance and cash value and then borrow from the cash values to pay the premiums after, generally seven years, depending on age and ratings. Farmers loved it, because the premiums were tax deductable and at that time the interest expense as well, did alot of estate planning as well, so the real cost of coverage was less than the term the company sold. I devised this as a new agent/broker, invited to Houston and presented the program I was selling, they dubbed it the VOP, variable outlay program.

Contrary to popular belief, there is a place for permenate insurance, especially in by sell agreements and corporate financing and estate planning, if you know what the heck you're doing!.

I generally advised term for most people who actiually need life insurance. Most people buy way too much because they 'love their family" and do not advocate buying a mutual fund with the difference between term and whole life as it is a silly numbers game to promote other products pushed by ins companies! Who says you have to invest more with that agent just because whole life costs more????? Dah!

Remeber you have the right to acquire additional during any policy period up to the amount you carry at the premium in effect at that time at your age, you can always get more even if you become uninsurable, there is a value to that. Higher future premiums are paid with future dollars, not for the ten years prior when you were paying for more than you really needed....but the commission check to the agen t is more...LOL! Good luck!

Thanks for the information! I still have some more learning to do to completely understand this concept, but now I have a good direction to head in.

Patric, I tried to search the site you provided without success, sorry.

Can you make your point here or provide the site so that I can "click" to get there....

If you advocate using a life insurance product, of any kind, to advance any real estate investing goal within the scope generally found on this site, please give us your idea.

Thanks goodness there is no prohibition against purchasing BOTH a Term insurance policy and a permanent insurance policy ... sometime in the same policy.

I find that most people have a real need (understood or not) for BOTH TERM and permanent insurance. The bulk of their insurance needs can be filled with term insurance as most of the need (while raising children) will disappear once the kids have left college. It is rare for a family to pay off the mortgage due to trade ups). Additionally, those with pensions may do better to have some permanent insurance on the pensioner as opposed to taking the reduced pension payout on two lives.

Parents with dependent children also have a permanent need for life insurance.

There are other reasons to consider permanent life insurance too.

Best bet, talk to an independent advisor ... even if you have to pay a fee and NOT rely on a website's message board.

Financeexaminer,

Email me at [REMOVED] and I will email the links to you...I don't think it is your computer, it's the board..

I agree that people should seek a financial adviser to discuss how to take care of their temporary and/or permanent insurance needs. Often though the worst adviser to talk to is an insurance agent.

IMO many people get sold a permanent life solution that goes along ways toward helping an agent, but does poorly for protecting an estate or protecting a families long term financial needs.

The investment return inside a whole life policy is extremely poor IMHO. For those that can't manage to save this can be an option forcing them to save something.

There are other issues to consider and choosing a financial adviser that is well versed on a wide range of investment vehicles is important. The adviser also needs to understand the individual or family's specific needs, financial position, risk tolerance, goals, etc.

First, I'll limit my discussion on this topic. This thread nor this website are not the best forums for involved discussions of insurance topics.

@Bryan

I'm not a fan of people using term insurance, a product with a limited life by design to solve a permanent problem. It would be like taking a trip from New York to Los Angeles in a car that would take one only to Kansas City.

The real question is what life insurance needs ... what would happen - financially - to a family if one member dies at each stage of life? IMHO it is rare for a person's needs to completely disappear at any point in his/her life. Many things can happen after the kids are grown and the house is paid off. Often these days, the kids return to the nest, the parents decide on a different home or -- a biggie -- medical expenses during the senior years especially nonmedical care at home or in a nursing home (@ $5,000 to $10,000 per month).

Even without the above expenses, what about pension plans or social security? Most pension plans offer the pensioner one amount per month for the rest of his/her life but a lesser amount per month if the pensioner chooses the joint lives of himself/herself and spouse. SS survivor benefits are also lower.

My "understood or not" comment refers to the many people who refuse to realize the risks later in life with a "that is not going to happen to me" attitude.

Talk to the spouse or other close family member of someone who has spent a year in a nursing home.

@Charles

Historically the return inside a Whole Life policy is extremely poor. These days with near zero interest rate on bank savings, some of the older policies (Whole life or universal life) offered guaranteed minimums of 2% or 3%.

But you are very correct that taking a long-term view of one's financial life with due consideration to the risks - even risks we cannot foresee is the best way to plan ahead. Talking to a qualified, unbiased third party is a good step and worth the money.