Are There Alternatives to an Indexed Universal Life Policy? Part 1

Smoke and mirrors surround much of the complex life insurance policies and stock derivatives out there today.  My philosophy is if you can't understand it, you probably shouldn't be doing it.  As society becomes more complex, you should probably be asking yourself, "Who benefits from this added complexity?"

The traditional philosophy of "Buy Term and Invest the Difference" is still the same simple concept it was many years ago.  Purchase cheap term insurance to cover a vulnerability for a young family and make diversified investments into solid companies.  Don't get caught up feeling bad when someone says, "Oh you still believe in that age old philosophy" with a disgusted look on their face.  Isn't it true that the best principles for managing your money are actually thousands of years old?

Recently, a small business owner shared this story. From the business owner's recollection, they placed $1,800 per month into a permanent life insurance policy over a ten year period. This is $216,000 total ignoring the fact that the business owner could have been making interest during the ten years. After about ten years, the business owner cancelled the policy and was given $40,000. After telling the story, there were ramblings like "he said I would get interest", "called the company and they told me I had to pay for my entire life", "told me it was my fault for not reading my policy", etc.

Continue reading for Part 2.

This post was reposted from http://finlit.biz/life-insurance/are-there-alternatives-to-an-indexed-universal-life-policy-part-1/, originally written on March 14th, 2013.