Reply #131: I think your life insurance company has been screwing you . . . [View All]

[NavajoRug]

The situation you describe really only applies to a term life insurance policy.

The next time you talk to an insurance agent, ask him about a universal "flex" life plan with an enhanced death benefit option and. Basically, you pay a pre-determined premium every year for as long as you live, and your premiums are invested in mutual funds, etc. of your choosing. Depending on the performance of your money over your lifetime, it will eventually (as long as you survive for a reasonable length of time) exceed the death benefit. At this point, you can either: 1) stop paying the premiums entirely; or 2) continue to pay the premiums, which means your death benefit will grow as you accumulate more money over time.

"By the time people pay into life insurance in a lifetime, they would have been better off saving the money and accumulating the interest."

This is nonsense. The insurance plan I described above is no different than a personal savings plan, for all intents and purposes. Here's the catch, though -- you are better off with the insurance policy even if your rate of return with the insurance investments is less than what you could get on your own -- BECAUSE THE INSURANCE BENEFIT IS EXEMPT FROM ALL TAXES WHEN IT IS PAID OUT TO YOUR BENEFICIARY.