All Forum Posts by: Kevin Yeats

This is not a perfect analogy but it illustrates my point.

If you went to Home Depot or Lowes and described to a worker the problem that you had with one of your houses/apartments, and the worker then suggested that you needed this piece of equipment to install plus these wires, plus these tube plus this additional hardware and then this (drywall, panelling, or whatever) to cover it up and then these 87 tools to complete the job, would most people start to ask the clerk and others if there were a simpler way to solve the problem?

To me, when someone offers a Whole Life insurance policy as solution to banking needs, I start to ask the same question "Is there an easier way to overcome this same problem?"

For instance, buying a lesser amount of permanent insurance (Whole Life or Universal Life or Variable Universal Life or Private Placement UL) along with a substantial amount of term insurance.

$6,000 per year FOR LIFE is a long term commitment.

Will part of the life insurance need disappear as your wealth grows? Such as when you own your residence free and clear? when the kids leave the nest? When you own properties free and clear? If yes, then a 30 year term policy will fill that need very well.

I agree with Bill. Meeting with several professionals - a lawyer, an accountant and a financial planner (preferably one not selling product) will clarify the many, complex and interwoven issues involved with life long planning of financial issues. This whole thread has only skimmed the surface of these issues.

BEFORE meeting with these professionals, think about your long term GOALS for your life. Write them down and discuss them with the professionals and ask for guidance around the potholes and speed bumps on these roads.

Good Luck

Whole Life Insurance has a place in the market - namely for those who want guarantees - but those uses are becoming more limited. WL owners pay for those guarantees with low returns.

There are other types of permanent life insurance - Universal Life, Variable Universal Life and Private Placement UL that offer (without guarantees) much better returns on the cash values within the life insurance than a whole life policy offers. There are also ways to design these policies that allow for greater cash value accumulation.

Sometimes the toughest part of the insurance selection is qualifying for the coverage. Many, many people have health conditions that limit their choices to second best or third best.

Bryan, I hope that you have learned a little more about insurance and realize that it is tough to make blanket statement recommending term insurance in all circumstances.

Vikram shoots ... and SCORES!

Point, Team V

Sorry ... I did not realize the updates have character limits.

continuing ...

after 10 years the business is now worth $20 million. All of a sudden, Vikram dies (Sorry V).

Bryan you are now partnering with Vikram's heirs who you don't like or who may not have Vikram's talents. Either way, you have to find a way to buy them out (or they buy out you). You could liquidate properties at below market prices or you could have had a life insurance policy on Vikram.

By the way, term insurance may not work best in this situation because 1) the death benefit is fixed (no increases) and the length of the term may not be long enough. I don't know Vikram's age (and I hope V looks better than the avatar). If Vikram is 55, the longest term length may be 15 years. Your partnership may last longer than that.

What Vikram said

Thanks for getting my back Vikram :)

Vikram hit some of the answers.

Politically correct Key person life insurance protects a business who has a key person ... a real rainmaker within the company. The company and its investors would really suffer if that person were no longer around. That would apply not only to life insurance but to disability insurance. Funny, marital status and family composition does not matter here.

Consider a second example. Bryan and Vikram start a business partnership together (50/50 split). Bryan finds deals and Vikram funds them and they split the profits. The business grows and prospers as Bryan can really pick 'em and Vikram has all the right connections to get them funded. Fast forward a few years and one of them has passed away. The deceased shares in this partnership pass along to intended heirs who are unfortunately "mental midgets" when it comes to business. Now the surviving partner either has to deal with these "new partners" or find a way to buy them out? Would life insurance on the partner made sense? Yes and again, marital status and family composition make no difference.

Global Wealth above touched on a very advanced area of life insurance - Private Placement Life insurance. My opinion is that this type of life insurance is very interesting, very opportunistic and comes with commensurate high costs. As it is advanced, anyone considering using PPLI MUST talk to several qualified professionals including a legal team.

Why would a single person with no dependents ever consider life insurance coverage?

There are several reasons and I hope that people who read these message boards and participate in BP nation have considered them.

There was a recent thread that discussed many aspects and uses, pro and cons of the different types of life insurance, as Bryan mentioned.

Find that thread and read it.

Then go talk to a fee-based financial planner who sells no products. Expect to pay for any answers that you require or receive.

Bottom line to your posing this question is there are many good and bad uses of life insurance of all types (term, Whole Life, Universal Life and Variable Universal Life). No one here on BP knows your current income, assets, debts, liabilties, and FINANCIAL GOALS. So no one here can give you any worthwhile advice on which product to purchase or which strategy to follow.

Go talk to a professional.

Carolyn, this is really a legal question and since lawyers don't post on website message boards, you won't find a valid answer here (only opinions).

Go talk to a lawyer experienced in this subject.

Reading between the lines, if I were in your shoes and wanted to make this loan, I would require collateral and take possession of the same to assure repayment. In other words become a pawn shop.

The information that you provide leads me to believe that the borrower is not creditworthy and you are trying to "help out." Loans made in these sorts of circumstances often become "gifts."

Perhaps a better way to help is to find a way to help the borrower earn more income.

Good Luck in any case

Not an exact analogy but when GM & Chrysler were heading down the drain, their bondholders didn't "withdraw" their funds. Instead, they sold their notes on the secondary market for less than face value (a form of withdrawl. Newly issued bonds from these issuers brought higher yields.

I beleive that sould banks, initially, would be painted with the same "panic paintbrush" as troubled banks. But if I operated a financially-sound, highly leveraged bank under a panic seige by depositors, I would do as I mentioned. I would call the major depositors and assure them of MAY BANK'S SOLVENCY and thus the safety of their deposits. If need be, I would begin offering a small premium and also offer to convert their deposits to other debt instruments (with out deposit insurance, is there mu difference between deposits and other bank debt?). I would post the balance sheet on the bank's website and perhaps get a third party opinion of the soundness of my bank.

A major problem with deposit insurance is that it insulates the depositors from the need to monitor the condition of the bank. Indeed, as we witnessed in Texas in the late 80s, failing bank (market value insolvent) were able to continue to attract new depositors by offering premium on deposits. When these banks failed and were closed by the FDIC (or FSLIC) the risk-seeking depositors lost nothing.

We cannot say the same about GM & Chrysler bondholders.