Should I buy cash value life insurance?
Question:
Answer:
Strictly as an investment vehicle, cash value life insurance is not a good deal. If you need some extra insurance and make to much for a Roth, it might make sense.
Since you say that you already have a good term policy, just consider putting the money into stocks: buy and hold is a tax advantaged strategy. Even if you sell after a year, you still get a tax benefit. (I say this based on you saying you make too much for a Roth, which means you are in an over 30% tax bracket) long term capital gains are only taxed at 15%.
It depends on your family situation. You should have only TERM life insurance regardless. Whole life is like throwing your money in a hole. If you are single, I wouldn't even have life insurance at all. If you have a family, then yes you need term insurance in the range of 500k or so or maybe a little more to maintain a standard of living for them.
No. Cash value insurance is more expensive and when you die with cash value, the insurance company keeps the cash value. He is pushing that on you because that benefits him and his company. Not you. He probably gets pretty good commission off of selling cash value insurance. It is a rip off. Only buy term.
Almost certainly, the answer is no.
You can get a tax-advantaged investment by putting it into stock funds that don't distribute much in the way of dividends. The long term growth of these stocks is naturally tax-deferred and the tax rate that you'll eventually pay is independent of your income tax rate. Cash-value life insurance is a great deal for the guy who sells it to you, because he makes a nice commission. Stick with low-expense mutual funds.
Good luck,
Doug
It is not a good choice for most people. However, insurance companies often offer free financial advice which gives them an opportunity to push these plans.
Is your financial advisor compensated for selling insurance? If so, take all of his advice with a grain of salt.
I believe different country have different policy on income tax relief for life insurance. Example, in Singapore, the maximum tax relief for CPF plus life insurance is S$6000. Which meant if your CPF contribution is more than S$6000, there will be NO tax relief in your life insurance.
But in general, life insurance should be treat as a SAVING instead of INVESTMENT. Life insurance also provide you with a lump sum protection once you start to "save". Thus, it's more applicable to be used as an tool for any crisis such as death or total permanent disability. Term insurance does not provide you the "saving" component.
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