VUL? Why not VUA, VUH, VUD?
Paul Weeks
I am looking to buy some VUA(Variable Universal Auto Insurance),
VUH(Variable Universal Health Insurance), and some VUD(Variable Universal
Dental Insurance). I am 37, single, no children, debt-free(not even a
mortgage anymore), with a fair amount of liquid investments(stocks,
options, cash). Since I have no need for life insurance(unless I'm
over-looking something), I would like to be shown how I can get in on the
wonderful tax-advantaged investments that mortgage holders and families
have available to them. I already max out my 401(K) every year(In fact I
almost got that thrown back in my lap for '96, our plan was top-heavy). I
am taking this year off to work on some individual projects at home as well
as manage my investments a little more closely. Could someone show me how
I could better spend my insurance payments so as to increase my net worth,
rather than detract from it. Here are my total insurance expenditures,
everything else goes into one of my brokerage accounts(I don't even have a
"real" bank account):
Insurance Type Monthly Annual
--------------------------------------------
Medical/Dental Insurance $130.72 $1568.64
Auto Insurance(2 Cars) $1021.00
_________________________________________________
Total $2589.64
--
Paul Weeks
R 1 3
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Robert C. Thomas
Surely you jest. In any event, I am unaware of any variable insurance
except life. It might be nice to have the others you speak of, but as I
understand the laws, only life contracts offer the tax breaks that make VUL
so interesting. That being the case, I know of no way to apply your
present insurance costs to a variable.
Your comment about having no need for insurance might leave an opening,
however. Is there any chance that you might EVER marry and have children?
If there is, insuring yourself now, rather than then will not only be
cheaper, it will guarantee your ability to acquire insurance. What if you
have medical problems before you marry and are, then, essentially
uninsurable?? It's a possibility you might wish to consider. Some, in
your position, choose to pick a favorite charity as beneficiary.
Concerning your 401K, I offer the following,
Qualified plans such as 401Ks are predicated on the preposition that "It is
wise to avoid taxes now, because I will be in a low tax bracket in
retirement.". First, the goal of MY financial plan is to have enough money
in retirement that I will be in a high tax bracket, not that I'll be so
poor that I'll be in a low tax bracket. Second, the "low tax bracket"
assumption is based upon two other assumptions: 1) That Bubba Bill and the
Boys on the Hill won't raise taxes, especially on qualified plans, and 2)
That my investments are not successful in building a sizable estate. I'll
leave the value of those assumptions to you.
Are you aware of the confiscatory tax treatment of qualified plans after
your death?? Your tax basis (zero) passes to your heirs, and they are
presented with an imediate capital gains tax bill, and estate taxes if your
qualified plan is large enough. In addition, any income you pull out of
your 401K is taxed as ordinary income.
Given the above, while you might think you have no need for insurance, you
may have the need for the tax treatment of VUL. VUL premiums are not tax
deductable, but the money in the mutual fund subaccounts grows tax
deferred, and loan income is income tax free. The loans are usually zero
net interest, or very close to zero....2% or less. It is even possible to
make up for the matching funds, if any, from your employer. In addition,
your contributions are not limited as they are in a 401K. Oh, BTW, at your
death, your funds, as well as the insurance coverage (usually some 10% of
the fund value assuming cash value exceeds the original death benefit) are
paid to your heir(s) as an income tax free death benefit. No capital
gains. Estate taxes, of course, will come into play, depending, again,
upon the size of the payout.
You poke gentle fund, but perhaps you should check VUL out. It might work
for you.
Paul Weeks <pfw...@worldnet.att.net> wrote in article
<01bc50d6$3cdef780$3031...@136141620worldnet.att.net>...
Paul Weeks
Robert C. Thomas <ski...@swcp.com> wrote in article
<01bc51a3$9bdcf700$a4733bc6@oemcomputer>...
>>> snip pleasantries <<<
>Your comment about having no need for insurance might leave an opening,
>however. Is there any chance that you might EVER marry and have children?
>If there is, insuring yourself now, rather than then will not only be
>cheaper, it will guarantee your ability to acquire insurance. What if you
>have medical problems before you marry and are, then, essentially
>uninsurable?? It's a possibility you might wish to consider. Some, in
>your position, choose to pick a favorite charity as beneficiary.
I would say there is a very high possibility that I will marry and have
children. I'm not just saying that because Elisabeth(my girlfriend for the
last 6 1/2 years) is watching me type this from over my shoulder. That
aside, it goes against my practical and optimistic nature to buy insurance
just to insure that I am insurable. If I was pessimistic I wouldn't buy
unnecessary life insurance either, because then I would think that the
world might end just before I die, compelling me to leave this earth
lamenting wasted premiums.
>
> Concerning your 401K, I offer the following,
>
> Qualified plans such as 401Ks are predicated on the preposition that "It
is
> wise to avoid taxes now, because I will be in a low tax bracket in
> retirement.".
Aren't they also predicated on the preposition that "It is very nice to
have the pre-tax income working for me for many, many years instead of
having the tax portion wacked right off the top right now."
and the additional preposition "It is pretty cool to not only have all this
yet-to-be taxed money working for me, but my employer is going to throw
in(match) with some more mullah(sp?) on top of it all."
Let's do the math with my actual numbers for '96:
Paul's 401(K) contributions for 1996 (what I didn't "take home"):$6500 net
becomes
$9500.00 gross pre-tax contribution
$1159.24 appreciation(contributions split between a Cap Fund and a Growth
Fund)
$1152.65 Employer match
___________________________________
$11,811.89
Could I have put $6500 in any VUL between 1/96 and 6/96(dates of my '96
contributions) and done as well?
>First, the goal of MY financial plan is to have enough money
> in retirement that I will be in a high tax bracket, not that I'll be so
> poor that I'll be in a low tax bracket. Second, the "low tax bracket"
> assumption is based upon two other assumptions: 1) That Bubba Bill and
the
> Boys on the Hill won't raise taxes, especially on qualified plans, and 2)
> That my investments are not successful in building a sizable estate.
I'll
> leave the value of those assumptions to you.
I see, so I should close out my IRAs and 401(K), because there's a good
chance I won't be financially destitute enough to enjoy them anyway.
Couldn't I wait until just before I'm forced to make withdrawals from my
qualified plans and quickly give all the rest of my money away so as to
enjoy the lower tax bracket of my dreams? At least that way I could enjoy
accumulating it(which I do), help others out when I give it away(which I
also enjoy), and fully enjoy the tax benefits of my qualified plans.
>
> Are you aware of the confiscatory tax treatment of qualified plans after
> your death?? Your tax basis (zero) passes to your heirs, and they are
> presented with an imediate capital gains tax bill, and estate taxes if
your
> qualified plan is large enough.
If my heirs are the type who complain about paying taxes on free money, I
shouldn't have left them anything to begin with.
> In addition, any income you pull out of
> your 401K is taxed as ordinary income.
Seems fair to me, it was ordinary income when I put it in, and I haven't
paid any tax on it yet.
>
> Given the above, while you might think you have no need for insurance,
you
> may have the need for the tax treatment of VUL. VUL premiums are not tax
> deductable, but the money in the mutual fund subaccounts grows tax
> deferred, and loan income is income tax free. The loans are usually zero
> net interest, or very close to zero....2% or less.
Does that interest go back into my "investment account" portion of my VUL
like it would if I took a loan from my 401(K)?
> It is even possible to
> make up for the matching funds, if any, from your employer. In addition,
> your contributions are not limited as they are in a 401K.
You saw my math, let's see what I could've done with the same $6500 in a
VUL.
> Oh, BTW, at your
> death, your funds, as well as the insurance coverage (usually some 10% of
> the fund value assuming cash value exceeds the original death benefit)
are
> paid to your heir(s) as an income tax free death benefit. No capital
> gains.
They should get some sort of break considering:
1. I've already paid income tax on the money invested.
2. I've paid an off-the-top service charge on every investment I've made
into a VUL(unless they've changed in the 10 years since I've looked at
one). Robert, could you fill me in on this one? What's the percentage of
every VUL contribution that is chopped right off the top?
>Estate taxes, of course, will come into play, depending, again,
> upon the size of the payout.
Again, my heirs shouldn't look a gift inheritance in it's estate tax mouth.
>
> You poke gentle fund, but perhaps you should check VUL out. It might
work
> for you.
Since they have been around for quite some time(I think I first became
aware of VULs in the mid 80's), I am waiting to meet at least one other
person that they have worked for first. I would like to see the actual 5
and 10 year returns of someone who actually thinks they came out ahead with
a VUL. Show me the money.
Fiscally yours,
Paul Weeks
Robert C. Thomas
Paul Weeks <pfw...@worldnet.att.net> wrote in article
<01bc51b8$9a455a80$de6f...@136141620worldnet.att.net>...
> >
> Robert C. Thomas <ski...@swcp.com> wrote in article
>
> That aside, it goes against my practical and optimistic nature to buy
insurance
> just to insure that I am insurable.
As I said, that's your choice. I merely point out that it is an option.
>
> Aren't they also predicated on the preposition that "It is very nice to
> have the pre-tax income working for me for many, many years instead of
> having the tax portion wacked right off the top right now."
Not necessarily. Tax deferred growth is not the exclusive perview of
qualified plans. You get tax deferred growth in VUL, not to mention UL,
WL, & VL.. You can get very nearly the same thing in an index fund.
You'll pay tax on the, usually, 2% dividend distribution, but without all
the buying and selling you'll have no (or little) capital gains
distribution.
>
> and the additional preposition "It is pretty cool to not only have all
this
> yet-to-be taxed money working for me, but my employer is going to throw
> in(match) with some more mullah(sp?) on top of it all."
That's, of course, a powerful argument. In the case of individuals who
will stay with one employer long enough to become vested in those employer
contributions, and will always pick future employers who match at similar
rates, this may result in greater after tax income at retirement. Whether
it is enough to offset the fact that you may only be able to leave maybe
half of your estate to your heirs, versus all of it in some other
strategies is, again (and of course) your decision. I'm not trying to tell
you that the 401K is not a powerful strategy/instrument. I just want to
make sure you know where the warts are.
>
> Let's do the math with my actual numbers for '96:
>
> Paul's 401(K) contributions for 1996 (what I didn't "take home"):$6500
net
> becomes
>
> $9500.00 gross pre-tax contribution
> $1159.24 appreciation(contributions split between a Cap Fund and a Growth
> Fund)
> $1152.65 Employer match
> ___________________________________
> $11,811.89
>
> Could I have put $6500 in any VUL between 1/96 and 6/96(dates of my '96
> contributions) and done as well?
Probably not. ARE you vested, or are you certain that you will be there
long enough to become vested. After you, almost certainly, do move on,
will your next employer vest at anywhere near the same rate?? I took your
figures, ignored present year appreciation and just figured 12% for the
next 30 years.
Your 401K, with $9500/yr at 12% for 30 years, would grow to approx $2.3
Million.
A VUL would leave some $6000 to go into your fund..could even cost more.
$6K/yr at 12% for 30 years works out to only approx $1.5 Million, LOTS
less., but that isn't all of the picture.
If you take, say 10% per yr to live on, your 401K would give you $230K.
At, what, 30% taxes plus the 15% excess distributions tax Bubba and the
Boys gave us, that's some 45% taxes. This leaves you $126.5K/yr after
taxes.
If you take out 10%/yr from the VUL, you take it income tax free for
$150K/yr after tax income. Based upon what it costs to insure YOU in the
VUL that could, of course, go down. If only $5500 of your $6500 got into
the fund in the VUL, at 12% after 30 yrs, you'd only have approx $1.3
Million. Still, you'd have $130K/yr after tax income in the VUL. Last time
I looked, 130 is still bigger than 126.5.
You are choosing not to pay tax on the little bit going in, so that you can
pay tax on the great deal it grew to, sorta paying tax on the crop. I'd
rather pay it on the seed. Do the figures always work out so well?? Of
course not, ya gotta crunch the numbers for every person.
Now, assuming you DO marry, and tragically die just as you thought to start
enjoying your nest egg.
In the 401K, your heir(s) will pay BOTH capital gains AND estate taxes on
the 2.3Mil.
In the VUL, estate taxes is all they'd have to pay.
> >First, the goal of MY financial plan is to have enough money
> > in retirement that I will be in a high tax bracket, ....
> I see, so I should close out my IRAs and 401(K), because there's a good
> chance I won't be financially destitute enough to enjoy them anyway.
> Couldn't I wait until just before I'm forced to make withdrawals from my
> qualified plans and quickly give all the rest of my money away so as to
> enjoy the lower tax bracket of my dreams? At least that way I could
enjoy
> accumulating it(which I do), help others out when I give it away(which I
> also enjoy), and fully enjoy the tax benefits of my qualified plans.
No, I don't think you should close them out. But you need to be AWARE of
just what you've got, and of the results of the tax treatment you have
chosen. Yes, the qualified plans grow to a greater extent. No, the
qualified plan does not necessarily result in greater income after taxes,
as shown above.
A couple of other points......funds in an insurance policy are protected
against lawsuits and also do not count when your family income/net worth is
being assessed for qualification for college aid (you MIGHT have kids).
Money in a qualified plan has no protection and IS considered in college
aid qualification. Perhaps not big points, but......points for all that.
> >
>
> If my heirs are the type who complain about paying taxes on free money, I
> shouldn't have left them anything to begin with.
That may be, but if you have a choice of whether or not to give a huge
chunk of your estate to Uncle Sam in the form of capital gains, or not to
do so, which would you rather do, given essentially equal after tax income
for yourself???
>
> > In addition, any income you pull out of
> > your 401K is taxed as ordinary income.
>
> Seems fair to me, it was ordinary income when I put it in, and I haven't
> paid any tax on it yet.
OK, that's fair. But, as demonstrated above, I suggest that it might be in
your interest to PAY the tax on what's going into your investments (as well
as some insurance costs) in order NOT to pay taxes on the ultimate income
you derive at retirement. Again, this won't work for everybody, it might
not work for you. Then again, it might.
> >
The loans are usually zero
> > net interest, or very close to zero....2% or less.
>
> Does that interest go back into my "investment account" portion of my VUL
> like it would if I took a loan from my 401(K)?
Wrong question. When you borrow from your 401K, you pay the interest out
of current funds. When you borrow from a VUL, the money is withdrawn from
your cash value account, including some 5% interest, and placed into an
interest bearing escrow account that pays (SURPRISE!!!) the same amount of
interest, say 5%. The loan is then made to you from the company's general
account. The 5% escrow interest is credited back to your cash value
account at the end of the year. You pay NO interest out of pocket.
>
> You saw my math, let's see what I could've done with the same $6500 in a
> VUL.
Done, above.
>
> What's the percentage of
> every VUL contribution that is chopped right off the top?
Front loaded VULs charge, typically, 5 to 6% load. Insurance costs vary
widely, depending upon the insurability of the client. I figured roughly
15% for you at $5500 getting into the fund.
>
I would like to see the actual 5
> and 10 year returns of someone who actually thinks they came out ahead
with
> a VUL. Show me the money.
Well, I can offer you an alternative. Give me a mailing address, and I'll
send you a prospectus showing performance since 1986. BTW, this is not an
offer to sell. I can only sell in 4 states, and the odds are that you are
in none of them....
The bottom line is, LOOK at the bottom line.....after tax income and the
effect on your estate. Qualified plans look good, and in truth they ain't
bad. Matching funds are free money, and everybody likes free money. Tax
deferred growth give awesome results, over time. BUT....what's best for
you in terms of the affect on your retimement and estate???
Oh, by the by, in the VUL you get insurance, whether you want it or not!!
Cheers, Skibum
Paul Weeks
Robert C. Thomas <ski...@swcp.com> wrote in article
<01bc5259$0bf67740$93733bc6@oemcomputer>...
>>>snip<<<
> Your 401K, with $9500/yr at 12% for 30 years, would grow to approx $2.3
> Million.
>
> A VUL would leave some $6000 to go into your fund..could even cost more.
> $6K/yr at 12% for 30 years works out to only approx $1.5 Million, LOTS
> less., but that isn't all of the picture.
>
> If you take, say 10% per yr to live on, your 401K would give you $230K.
> At, what, 30% taxes plus the 15% excess distributions tax Bubba and the
> Boys gave us, that's some 45% taxes. This leaves you $126.5K/yr after
> taxes.
>
> If you take out 10%/yr from the VUL, you take it income tax free for
> $150K/yr after tax income. Based upon what it costs to insure YOU in the
> VUL that could, of course, go down. If only $5500 of your $6500 got into
> the fund in the VUL, at 12% after 30 yrs, you'd only have approx $1.3
> Million. Still, you'd have $130K/yr after tax income in the VUL. Last
time
> I looked, 130 is still bigger than 126.5.
>
$6000/yr goes into my fund, $500 goes towards all the other stuff(mortality
charges, expense charges, COMMISSIONS, etc.). Is that right? That's where
my $6500 after tax money is going instead of $9500 into a 401(K)? I end up
with $1.5 million instead of $2.3 million and am happy about it? If I
didn't know any better, I would think that you are taking the worst case
scenario of one plan and comparing it to the best case scenario of your own
plan. Let's see, I don't get ANY employer matching funds and I will be
taxed at 45%. Very realistic. Tell me this Bob, what if the interest
rates work out to 8% instead of 12% on both plans? I think then the
numbers work out to $1 million for the 401(K) and a big fat 0 for the VUL.
Am I wrong here? Wouldn't the mortality, expense, and COMMISSIONS charges
cannibalize the cash value completely, long before I retire? While we're
on the subject of charges, isn't your "best case" scenario for the VUL also
assuming that these ancillary charges are kept to an unrealistic minimum,
while the policy allows for them to "possibly" go much higher? How about
if I make one year's contribution to my 401(K) and don't make any more and
also receive no employer matching funds. I'm still going to end up with
$285,000 in 30 years(assuming 12%). What about the VUL? I end up with a
lapsed policy if I do nothing, or a fraction of my "investment" if I cancel
the contract(due to "early withdrawal" penalties if you are the consumer,
or the "guaranteed profit" bonus if you are the insurer). The real proof
of the value of a VUL would be seeing ACTUAL PEOPLE who've profited and
retired on these plans. My guess is that you'll find these people the same
place you'll find people who've retired on Whole Life: nowhere.
> You are choosing not to pay tax on the little bit going in, so that you
can
> pay tax on the great deal it grew to, sorta paying tax on the crop. I'd
> rather pay it on the seed. Do the figures always work out so well?? Of
> course not, ya gotta crunch the numbers for every person.
>
> Now, assuming you DO marry, and tragically die just as you thought to
start
> enjoying your nest egg.
>
You guys still back the hearse right up the driveway, huh?
>>>snip<<<
>
> A couple of other points......funds in an insurance policy are protected
> against lawsuits and also do not count when your family income/net worth
is
> being assessed for qualification for college aid (you MIGHT have kids).
> Money in a qualified plan has no protection and IS considered in college
> aid qualification. Perhaps not big points, but......points for all that.
> > >
I know. Great place for embezzlers and criminals to keep their money. You
guys made some whopping commissions during the S&L scandal.
> >
> > If my heirs are the type who complain about paying taxes on free money,
I
> > shouldn't have left them anything to begin with.
>
> That may be, but if you have a choice of whether or not to give a huge
> chunk of your estate to Uncle Sam in the form of capital gains, or not to
> do so, which would you rather do, given essentially equal after tax
income
> for yourself???
> >
Personally, I don't have a problem with paying taxes. As for inheritances,
I personally think there should be a federal cap on how much money you can
leave your heirs. This would keep the progeny of the wealthy from assuming
a lazy lifestyle as well as free up lots of capital for productive use.
> > > In addition, any income you pull out of
> > > your 401K is taxed as ordinary income.
> >
> > Seems fair to me, it was ordinary income when I put it in, and I
haven't
> > paid any tax on it yet.
>
> OK, that's fair. But, as demonstrated above, I suggest that it might be
in
> your interest to PAY the tax on what's going into your investments (as
well
> as some insurance costs)
and some COMMISSIONS costs
and some expense charges
and some policy fees.
> in order NOT to pay taxes on the ultimate income
or possibly in order to not have ANY ultimate income
> you derive at retirement. Again, this won't work for everybody, it might
> not work for you. Then again, it might.
But it will DEFINITELY work for you.
> > >
> The loans are usually zero
> > > net interest, or very close to zero....2% or less.
> >
> > Does that interest go back into my "investment account" portion of my
VUL
> > like it would if I took a loan from my 401(K)?
>
> Wrong question. When you borrow from your 401K, you pay the interest out
> of current funds. When you borrow from a VUL, the money is withdrawn
from
> your cash value account, including some 5% interest, and placed into an
> interest bearing escrow account that pays (SURPRISE!!!) the same amount
of
> interest, say 5%. The loan is then made to you from the company's
general
> account. The 5% escrow interest is credited back to your cash value
> account at the end of the year. You pay NO interest out of pocket.
I understand the 401(K). I borrow from myself, I pay interest to myself.
No one profits from MY ACCESS TO MY MONEY. PERIOD. Let me see if I
understand how I do the same in a VUL. MY MONEY gets moved from A to B,
but I actually get "loaned" the money from C? I pay NO interest out of
pocket? Does the "out of pocket" qualifier mean "Yes you do pay interest,
and we(the insurer) get to keep it"?
> >
> > You saw my math, let's see what I could've done with the same $6500 in
a
> > VUL.
>
> Done, above.
> >
> > What's the percentage of
> > every VUL contribution that is chopped right off the top?
>
> Front loaded VULs charge, typically, 5 to 6% load. Insurance costs vary
> widely, depending upon the insurability of the client. I figured roughly
> 15% for you at $5500 getting into the fund.
Whoa, don't we have to redo the above calculations now? A VUL will leave
me a lot broker, a lot sooner at these rates.
> >
> I would like to see the actual 5
> > and 10 year returns of someone who actually thinks they came out ahead
> with
> > a VUL. Show me the money.
>
> Well, I can offer you an alternative. Give me a mailing address, and
I'll
> send you a prospectus showing performance since 1986. BTW, this is not
an
> offer to sell. I can only sell in 4 states, and the odds are that you
are
> in none of them....
By performance, I assume you are referring to the performance of the
underlying investment options. This is not the point of this discussion.
The point is all the built-in traps that suck up your money both before and
after the money makes it's way to these fabulous investment vehicles. I
want to see the testimonials of the people who were adequately served by
these "investments".
>
> The bottom line is, LOOK at the bottom line.....after tax income and the
> effect on your estate. Qualified plans look good, and in truth they
ain't
> bad. Matching funds are free money, and everybody likes free money. Tax
> deferred growth give awesome results, over time. BUT....what's best for
> you in terms of the affect on your retimement and estate???
>
What's best? How about complete separation of insurance and investments?
How about knowing exactly what your insurance costs and how well your
investments are doing? If they're separate, it's easy. If they're not,
someone could be making a killing with your money:( How about being able to
find new insurance without screwing with your investments and vice-versa?
> Oh, by the by, in the VUL you get insurance, whether you want it or not!!
Don't you mean whether you understand it or not!!
The Real Numbers:
401(K):
($9500+12%Employer Match @12%@interest)x30 years=$2.6 million for YOU
VUL:
($6500@12%Interest)x30 years=$1.6 million for The INSURANCE CO. How much
do they let you keep? That's the gamble. Keep in mind the insurance
industry cuts paychecks for more employees than the US Post Office, so they
might have to keep most(if not all) of it for themselves.
Hey Bob, is your VUL policy your primary retirement investment vehicle? Do
insurance companies offer 401(K) plans for their employees, or just VULs?
If you really have balls, why don't you tell us what your commission
structure is on the VULs you sell. When my brother-in-law's mother died,
their agent sold his father VULs for all his kids with a good chunk of the
proceeds. I imagine his commission must have been pretty good, because he
gave my brother-in-law's father a camcorder for Christmas.
Fiscally yours,
Paul Weeks
Robert C. Thomas
P.S. In the happy event that you do extremely well and decide to retire
at, say, 50 you can draw money out of the VUL without paying the extra 10%
penalty you'd have to pay in the 401K.
Again, you poke gentle fun, but.........what's YOUR bottom line?? If
setting up your retirement plan so that you can get the "free" money from
your employer (who can change that provision, BTW) results in less after
tax income in retirement, the "free" money isn't really "free", is it??
Enjoying our chat, skibum
Paul Weeks
Robert C. Thomas <ski...@swcp.com> wrote in article
<01bc531f$a67665c0$8f733bc6@oemcomputer>...
>
> P.S. In the happy event that you do extremely well and decide to retire
> at, say, 50 you can draw money out of the VUL without paying the extra
10%
> penalty you'd have to pay in the 401K.
>
Once again, where are the ACTUAL PEOPLE who are doing this? It seems to me
that proponents of VUL are really big on projections and scenarios, but
when the rubber hits the road there's nothing to be seen but skid marks
into the ditch.
Fiscally yours,
Paul Weeks
Sheldon Jolson
In article <01bc542f$96ede360$da6d...@136141620worldnet.att.net>,
pfw...@worldnet.att.net says...
> First Whole Life, then Universal Life, then Variable Universal Life. What
> next, Dynamically Infinitely Variable Universal Life? All of these
> products(except the last one, maybe) have been around long enough to have
> ACTUAL track records, with ACTUAL PEOPLE.
You were talking about VULs. UL and WL is a different story. I
questioned your criticism of VULs, not UL or WL. In any case,
when ULs were first introduced, policyholders did great. Imagine
earning 12%+ interest on money while borrowing at 4% guaranteed.
The net was 8% and nearly killed the entire life industry.
> My contention is that the ACTUAL
> SATISFIED CUSTOMERS DO NO EXIST! For every $1.00 that is put in a bank,
> something like $1.03 is paid out one year later. The bank invests the
> money for themselves, pays some account holders nothing, some account
> holders receive interest, some account holders lose money due to monthly
> charges, bounced checks, other service charges, etc. The final result is
> still that the bank provides a return of 3% on every $1.00 invested with
> them and keeps the balance for itself(often very sizable, 18% credit cards,
> 12% car loans, 8% mortgages, do the math).
I'll make you a wager. Given your simplistic analysis of how banks work,
I would bet that any bank you ran even with the interest rates you state
would fail within 3-5 years. Advanta has been losing money on its credit
card operations. A couple of other writers are near it. Credit card
debt has been repackaged and securitized fast to get it off the banks'
balance sheet because the risk/reward ratio is lousy with increasing
personal bankruptcies and RBC requirements putting banks into a bit of a
pickle. The same with mortgage rates. Fixed rate mortgages in a rising
interest rate environments is a disaster in waiting for under hedged
banks . Just ask the U.S. Treasury who paid out hundreds of billions
because S&Ls couldn't invest safely enough to return the money needed to
offset mortgage losses. Life ain't simple.
> Insurance companies, on the
> other hand, also invest the money for themselves, pay some account holders
> nothing(i.e. a health or dental policy whose annual claims exactly equal
> premiums paid), some account holders receive payments(i.e. any policy where
> benefits ACTUALLY PAID out exceed premiums paid), while the vast majority
> of policyholders suffer a net annual loss(they pay premiums and get
> nothing).
Your implication that the cost of insurance should be 0 is false.
Transfer of risk is worth $, even if it does not materialize. If
you don't believe me, why not tear up those warranty cards you
get on products you buy, such as televisions, computers, etc.
Don't even bother with term insurance since the likelihood of
getting paid off is remote.
> There is nothing wrong with this part, it is the nature of
> insurance; there are those who make deposits, and there are those who make
> withdrawals. The insurance company knows exactly how many withdrawals will
> be made(actuarial tables tell them this), it just doesn't know ahead of
> time what their names will be.
Uh, us actuaries can only guestimate the amount and size of lapses.
We are not nearly as good at it as we are with mortality. The reason
is that while we can safely assume that mortality has little if any
correlation with economic events, while economics have a lot to do
with lapses.
> The part that I find reprehensible is the
> fact that for every $1.00 "invested" with an insurance company, $0.82 is
> paid out. So to run a successful insurance company, all you have to do is
> keep or spend 18% of all funds taken in and put the rest in a mattress to
What, you want us to hire customer service reps at zero salary? Get free
mail? Pay zero taxes to the IRS or to the states? Pay $0 to sales
agents? Have no trained individuals to develop products? Never defend
a frivolous lawsuit? In fact, never get sued? If you expect to pay $0
for service, expect to receive no service. What industry do you work
for? Can you tell me the gross (not net) profit margin in your
industry?
By the way, can you tell me where you got the 82% figure from?
- sbj -
Paul Weeks
Sheldon,
I'll try to simplify it for you. I know and understand and appreciate that
your livelihood depends on your ability to complicate it for me.
Banks take in money(deposits)
Insurance companies take in money(premium payments)
Banks give money back(withdrawals)
Insurance companies(begrudgingly) give money back(paid claims)
Neither industry produces any tangible product other than paper. (Please
don't waste everyone's time arguing this one)
Both industries take the money and invest it.
The Banks end up paying interest on every dollar that's deposited. Their
gross profit is the difference between their rate of return and the return
that's paid to their depositors.
The Insurance Industry only returns to its "depositors" a percentage of the
principle. They keep all of the interest and a nice chunk of principle.
I'll try to answer some of your questions, but some of them I'll have to
answer with more questions.
> > First Whole Life, then Universal Life, then Variable Universal Life.
What
> > next, Dynamically Infinitely Variable Universal Life? All of these
> > products(except the last one, maybe) have been around long enough to
have
> > ACTUAL track records, with ACTUAL PEOPLE.
>
> You were talking about VULs. UL and WL is a different story. I
> questioned your criticism of VULs, not UL or WL. In any case,
> when ULs were first introduced, policyholders did great. Imagine
> earning 12%+ interest on money while borrowing at 4% guaranteed.
> The net was 8% and nearly killed the entire life industry.
>
Is this an admission that there are no ACTUAL PEOPLE who have done well
with WL? How about UL? If these ULs that almost "killed the entire life
industry" were such great deals, I imagine these "lucky" policyholders are
clutching onto them for dear life ;) Can we please see who these ACTUAL
PEOPLE are and what their "industry killing" investment returns have been?
I might take your wager if I understood it. Are you challenging that banks
do return 3 cents annually for every dollar deposited(as I outlined before,
not necessarily to the same depositors)? Or are you challenging the
existence of 18% credit cards, 12% car loans, and 8% mortgages? I of
course realize that an institution's entire credit card portfolio does not
return 18%, due to defaults, etc. Similarly with the other lines. I did
not intend to imply the contrary. So long as each of these lines return in
excess of 3% net(which they do), the bank earns a profit. So exactly what
proposition did I put forward that, if true, would fail a bank within 3-5
years? Are you perhaps saying that banks are like insurance companies, and
must keep all the interest and a portion of the principle to feed their fat
bureaucracy?
>
> > Insurance companies, on the
> > other hand, also invest the money for themselves, pay some account
holders
> > nothing(i.e. a health or dental policy whose annual claims exactly
equal
> > premiums paid), some account holders receive payments(i.e. any policy
where
> > benefits ACTUALLY PAID out exceed premiums paid), while the vast
majority
> > of policyholders suffer a net annual loss(they pay premiums and get
> > nothing).
>
> Your implication that the cost of insurance should be 0 is false.
> Transfer of risk is worth $, even if it does not materialize. If
> you don't believe me, why not tear up those warranty cards you
> get on products you buy, such as televisions, computers, etc.
> Don't even bother with term insurance since the likelihood of
> getting paid off is remote.
>
OK Sheldon, let's try to make it simple again. I'm a banker. I receive
$100 from each of 10,000 investors, 1 million dollars total. I invest it
and make 8% interest for the year, $80,000 total. I pay out 3% to each
investor, $30,000, leaving me with $50,000.
Now I'm an insurance company. I sell 10,000 policies for $100 annual
premium, 1 million dollars total. (Make it term, WL, UL, VUL, it doesn't
matter). The face amounts are dependent on the policy type and insurance
rating of the policy holder. I invest the money at 8% interest for the
year. I also hold up all claims so they aren't paid until 1 year from the
annual premium collection date(just to make it simple, I'm sure you'll
complicate it for me). At the end of the year I pay out $820,000 in claims
leaving me with $180,000 from the original premiums PLUS $80,000 in
interest totaling, WOW!, $260,000 profit! I can even afford to pay the
poor bastards who peddle this stuff a ton of dough!
> > There is nothing wrong with this part, it is the nature of
> > insurance; there are those who make deposits, and there are those who
make
> > withdrawals. The insurance company knows exactly how many withdrawals
will
> > be made(actuarial tables tell them this), it just doesn't know ahead of
> > time what their names will be.
>
> Uh, us actuaries can only guestimate the amount and size of lapses.
> We are not nearly as good at it as we are with mortality. The reason
> is that while we can safely assume that mortality has little if any
> correlation with economic events, while economics have a lot to do
> with lapses.
EXACTLY!!!! The only thing that keeps you guys from taking over the world
is that, even though your clients don't understand it, enough of them
follow their gut instinct to stop paying premiums. The original point of
this now rather long thread is: If the same "investment accounts" that are
in VUL were bundled into all types of insurance, PEOPLE WOULD FIGURE IT
OUT!!!! The only reason it works for life insurance is because people, in
general, just want to put the policy in the safe deposit box and not think
about it. It would never happen that way with Health, Dental, Homeowners,
or Auto.
>
> > The part that I find reprehensible is the
> > fact that for every $1.00 "invested" with an insurance company, $0.82
is
> > paid out. So to run a successful insurance company, all you have to do
is
> > keep or spend 18% of all funds taken in and put the rest in a mattress
to
>
> What, you want us to hire customer service reps at zero salary? Get free
> mail? Pay zero taxes to the IRS or to the states? Pay $0 to sales
> agents? Have no trained individuals to develop products? Never defend
> a frivolous lawsuit? In fact, never get sued? If you expect to pay $0
> for service, expect to receive no service. What industry do you work
> for? Can you tell me the gross (not net) profit margin in your
> industry?
>
> By the way, can you tell me where you got the 82% figure from?
Consider this: My postman gives me great service at a fair price. He
comes to my house six days a week delivering mail from around the globe.
He's also willing to pick up any items I may wish to have transported
across the street or across the country, most for 32 cents an item. Great
Service. Six Days a Week. And not just me, everybody else too. The
insurance industry receives much more of my money than the US Post Office
does. The insurance industry employs more people than the US Post Office.
I just don't feel I get the same level of service. Don't get me wrong, I
don't want to see an insurance salesman 6 days a week. In fact, I'm going
to try to keep it down to 6 times during my lifetime.
The 82% figure comes from Money Magazine's Andrew Tobias in his book on the
insurance industry "The Billion Dollar Bankers".
I openly challenge any agent to divulge either of these information
elements:
1. Commission Structure on the VUL products they market.
2. From your personal book of business:
A. Total premiums and other payments paid by all policy holders.
vs.
B. Total claims, withdrawals, dividends paid out to policy holders.
Fiscally yours,
Paul Weeks
Sheldon Jolson
In article <01bc5462$0537c340$da6d...@136141620worldnet.att.net>,
pfw...@worldnet.att.net says...
> I'll try to simplify it for you. I know and understand and appreciate that
> your livelihood depends on your ability to complicate it for me.
Not really. I am neither a lawyer, agent, underwriter, etc. I am a
financial actuary. In most cases, the simple solution is the the
wrong solution.
> Banks take in money(deposits)
> Insurance companies take in money(premium payments)
>
> Banks give money back(withdrawals)
> Insurance companies(begrudgingly) give money back(paid claims)
Banks and insurers also post liabilities and pay expenses.
> Neither industry produces any tangible product other than paper. (Please
> don't waste everyone's time arguing this one)
Why not? Although you may try to speak for everyone, many people
are better off because of insurance and banking institutions just
as many are better off due to pharmaceuticals, McDonalds, and Boeing.
Do you prefer the barter system? Go and find one brown egg and
2 3-year old goats if you want a package of my personal brand of
beef jerky. That's your basic alternative if you get rid of the
banking system. And if you prefer an expansion of the OSDI program
to take care of unexpected deaths then the core life insurance
industry would be less needed. Why not get rid of accountants
entirely? All they produce is intangible financial statements.
But why stop there - why bother having a stock market? While
we're at it, let's get rid of all the other entire industries who
don't produce "tangible" benefits for Mr. Weeks. By your definition,
this would probably be over 90% of the economy.
> Both industries take the money and invest it.
Every industry takes money and invests it. Few industries, if any,
are able to invest every dollar. Banks are somewhat worse off because
of reserve requirements.
> The Insurance Industry only returns to its "depositors" a percentage of the
> principle. They keep all of the interest and a nice chunk of principle.
Incorrect. Risk transfer is not worthless, despite your implication.
> I'll try to answer some of your questions, but some of them I'll have to
> answer with more questions.
I asked what you did for a living and what industry you were in. Is
that so difficult a question?
> Is this an admission that there are no ACTUAL PEOPLE who have done well
> with WL? How about UL? If these ULs that almost "killed the entire life
> industry" were such great deals, I imagine these "lucky" policyholders are
> clutching onto them for dear life ;) Can we please see who these ACTUAL
> PEOPLE are and what their "industry killing" investment returns have been?
Anyone who buys WL as an investment is an idiot. I personally don't
think it is a good idea for virtually anyone. Today, the same can
probably be said for most UL policies. VUL policies can be good if
the tax deferral over a long period can justify the loads and you
need the insurance. Remember that not everyone is immortal as yourself
so they worry about leaving large mortgages with their heirs.
Regarding industry killer, I'll try and explain briefly. About 15
years ago, UL policies gave much better returns due to the high
interest rate environment. UL policies of that time had guaranteed
loan rates of about 4%. Enormous amounts of loans were made with
money invested in T-bills for _riskless_ profits of policyholders of
up to 10% or more per year. For insurers who typically invest in
long term bonds, cash outflows of this magnitude forced tremendous
amounts of paper losses to become realized losses as long term bonds
had to be sold at large losses to generate the cash to make the loans.
As far as names of people, how would I know? I never sold a policy,
and was in high school at the time (and was in blissful ignorance
of what insurance was).
Today, loan rates are generally wash.
> I might take your wager if I understood it. Are you challenging
> that banks do return 3 cents annually for every dollar deposited
> (as I outlined before, not necessarily to the same depositors)?
If the typical depositor has a demand account with a small amount,
then I would think 3% would overstate the amount banks return. CDs
return anywhere from 4-6.5% on CDs, more for jumbos. Banks collect
anywhere from 25-50 basis points (or even more) to service securitized
loans. Banks are not able to invest about 10% of their assets, less
if you include government securities. Banks have to pay FDIC insurance
and RBC risk premiums. Your one figure of 3% doesn't have much
meaning.
> Or are you challenging the existence of 18% credit cards, 12% car
> loans, and 8% mortgages? I of course realize that an institution's
> entire credit card portfolio does not return 18%, due to defaults,
> etc. Similarly with the other lines. I did not intend to imply the
> contrary. So long as each of these lines return in excess of 3%
> net(which they do), the bank earns a profit.
If you are referring to small regional savings bank, I would tend to
agree. If you are referring to the large commercial banks, where
depositer money is a minor piece of their liabilities, I would
heartily disagree. You also seem to think that banks have no risk.
A point that I want to make is that personal bankruptcies are on the
rise. Also, credit card debt averages about 15.5%, and is about 35%
or so of their personal loan business (source: Federal Reserve Bulletin).
The average interest rate is probably closer to 12.5%-13.5%.
> So exactly what
> proposition did I put forward that, if true, would fail a bank within
> 3-5 years? Are you perhaps saying that banks are like insurance
> companies, and must keep all the interest and a portion of the
> principle to feed their fat bureaucracy?
Not quite...:) Actually, the problem with your viewpoint is that
you don't see who banks have to pay outside of depositers, who
don't have to pay them, and what this totals. Pick up a Fed
Bulleting and review the tables at the back.
> OK Sheldon, let's try to make it simple again. I'm a banker. I receive
> $100 from each of 10,000 investors, 1 million dollars total. I invest
> it and make 8% interest for the year, $80,000 total. I pay out 3% to
> each investor, $30,000, leaving me with $50,000.
What about your expenses? What about the losses you take on your loan
business from rising interest rates while at the same time having to
pay higher interest rates to keep your depositers? I'll keep it simple
and presume you didn't issue any CDs. What kind of investments are you
making? If you are competent, you will keep investments which are very
liquid and marketable because of the potential large cash outflows you
need to make each day. If interest rates rise, you are screwed. Many
banks failed because this simple tenet of asset/liability matching was
ignored.
Now presume you issue CDs. You no longer pay out 3% but more likely
pay out closer to about 5%. Meanwhile you still have a lot of expenses.
They aren't zero, you know.
> Now I'm an insurance company. I sell 10,000 policies for $100 annual
> premium, 1 million dollars total. (Make it term, WL, UL, VUL, it
> doesn't matter). The face amounts are dependent on the policy type
> and insurance rating of the policy holder. I invest the money at
> 8% interest for the year. I also hold up all claims so they aren't
> paid until 1 year from the annual premium collection date(just to make
> it simple, I'm sure you'll complicate it for me). At the end of the
> year I pay out $820,000 in claims leaving me with $180,000 from the
> original premiums PLUS $80,000 in interest totaling, WOW!, $260,000
> profit! I can even afford to pay the poor bastards who peddle this
> stuff a ton of dough!
For one thing, I don't see why I need to accept Andrew Tobias as an
insurance expert. He wrote a book - what an achievement. But for
lack of a better figure, I'll accept it for now. It doesn't really
matter since despite your being bright and well read, you clearly lack
knowledge of how insurance companies work.
You sell 10,000 policies for $100 annual premium. I'll keep it simple
and exclude reinsurance. You collect $1 million. You immediately pay
say $750,000 to agents as commissions. You also pay $100 for medical
examinations for half of the new policies, or $500,000. You need to
borrow $250,000 to stay afloat so you pay 8% to a bank. At the end
of the year you pay out $820,000 in benefits. You pay about 5% of
premium for general expenses (a rough figure) or $50,000. Your net
cash position at the end of the year is 1-.75-.5-.82-.05-.04 (interest
on $250k loan) = $1.16 million in the red. Congratulations! You've
just been taken over and liquididated by your state's friendly
insurance department!
P.S. I kept it simple by allowing you to refuse to pay the $75,000
in policy dividends (or stock holder dividends) that were due.
As a mental excercise, what you read in books may make sense. However,
mental excercises are not the same as real world experience. It has
basically as much use in the real world as the deconstruction of
arguments about the sound of one hand clapping does.
> EXACTLY!!!! The only thing that keeps you guys from taking over
> the world is that, even though your clients don't understand it,
> enough of them follow their gut instinct to stop paying premiums.
What keeps us from taking over the world is the overeager public
relations department of the American Academy of Actuaries trying
to make front page headlines when one of us has lunch with a low
level congressional aide.
> The original point of this now rather long thread is: If the same
> "investment accounts" that are in VUL were bundled into all types
> of insurance, PEOPLE WOULD FIGURE IT OUT!!!!
Now I'm confused. Figure what out exactly?
- sbj -
P.S. If you really think insurance companies and banks are so
profitable, why not just buy heaps of their stock? I avoid
insurance companies like the plague, but I always liked those
small regional banks...
Paul Weeks
Sheldon Jolson <s...@panix.comx> wrote in article
<MPG.dd04045d...@news.panix.com>...
>>>>snip <<<<
> > Neither industry produces any tangible product other than paper.
(Please
> > don't waste everyone's time arguing this one)
>
> Why not? Although you may try to speak for everyone, many people
> are better off because of insurance and banking institutions just
> as many are better off due to pharmaceuticals, McDonalds, and Boeing.
My apologies for poor wording. What I meant is: Financial Service
companies do not buy raw materials, manufacture, warehouse inventories,
etc. I also did not mean to imply that Financial Service companies are
unnecessary and should be stricken from the earth. I did not even mean to
imply that banks are bad. They're not good. They're OK. Insurance
companies are bad. Bad places to invest money, that is. My only point is
that Banks make a return and keep a portion of it, while insurance
companies make a return and keep all of it, as well as a chunk of
principle.
> >>>snip<<<<
> I asked what you did for a living and what industry you were in. Is
> that so difficult a question?
Sorry I missed this question, but I did answer you by email. Just so the
NG knows: "My name is Paul, and I'm a Computer Nerd."
>>>>snip<<<<
> What keeps us from taking over the world is the overeager public
> relations department of the American Academy of Actuaries trying
> to make front page headlines when one of us has lunch with a low
> level congressional aide.
Excellent point. Quiz Time:
TRUE or FALSE
1. The Insurance Industry is the largest industry in the World.(T or F)
2. The Prudential is the 3rd largest holder of Real Estate in the world,
behind the US Government and the Roman Catholic Church. (T or F)
3. The Insurance Industry has more paid lobbyists than any other industry.
(T or F)
4. There is no Federal Regulation of the Insurance Industry. (T or F)
5. Although bigger and more powerful than any state's government, the
Insurance Industry is only regulated at the state level. (T or F)
6. The Insurance Industry's Federal lobbyists are paid handsomely to insure
that #5 is always a true statement.
>
> > The original point of this now rather long thread is: If the same
> > "investment accounts" that are in VUL were bundled into all types
> > of insurance, PEOPLE WOULD FIGURE IT OUT!!!!
>
> Now I'm confused. Figure what out exactly?
That they could do much better saving money in a mattress.
Fiscally Yours,
Paul Weeks
Robert C. Thomas
Paul Weeks <pfw...@worldnet.att.net> wrote in article
<01bc5502$5d8dc940$e9ec...@136141620worldnet.att.net>...
>
............................................................................
................Insurance
> companies are bad. Bad places to invest money, that is. My only point
is
> that Banks make a return and keep a portion of it, while insurance
> companies make a return and keep all of it, as well as a chunk of
> principle.
>
Paul, you don't know what you're talking about. Even whole life companies
pay a return, usually guaranteed to be at least 3 to 4%. Participating
companies have, historically, paid closer to 8%. Companies offering VUL do
NOT invest the client's money. The money is transferred to a separate
financial institution, and invested on the behalf of the client. The
insurance company has no access to the money. They DO assess a management
fee, on the order of 1 to 2%. In addition, they do not "keep" a portion of
the principle. A portion of the principle goes to defray the costs of
providing the insurance protection, a cost for value.
>
> >
> > > The original point of this now rather long thread is: If the same
> > > "investment accounts" that are in VUL were bundled into all types
> > > of insurance, PEOPLE WOULD FIGURE IT OUT!!!!
> >
Damn straight. Someday, YOU might figure it out.
> That they could do much better saving money in a mattress.
Horse shit!!! Paul, your assertations are utterly false, based upon
ignorance. So you read a book, written before VUL came out, and think you
understand VUL. I'm sorry, Paul, you don't. You seem to think VUL works
the same as whole life, which I will freely admit is a really poor
investment. Again, read Ben Baldwin's THE NEW LIFE INSURANCE INVESTMENT
ADVISOR. Baldwin doesn't like whole life any better than you do, and isn't
real fond of UL either. But read what he says about VUL. It might open
your eyes. You seem to have "decided", based upon very little information
and a tangental (at best) grasp of the reality of the situation, that VUL
is BAD, BAD, Bad, because it is connected to the insurance industry which
is BAD, BAD, BAD.
Show us specific examples of VULs that performed worse than saving money in
a mattress (or stop making silly exaggerations) Show us one that did worse
than zero coupon bonds. I am utterly certain that there ARE VULs and
certainly subaccounts in some VULs that did worse, but you're the one with
all the opinions. Show us the money!!! Give us the benefit of your
exhaustive research. What is the size of your sample??? Two? Five??
Someone of undetermined credentials who wrote a book?? A. L. Williams,
maybe????? (You sure sound like him.....hmmmmm, have I broken a code
here????)
For your information, insurance companies who sell VUL ARE regulated by
more than state regulatory agencies. They are regulated by the same
agencies and to the same level as any other seller of
securities...NASD....SEC....
>
Beginning to understand........Bob
Paul Maffia
s...@panix.comx (Sheldon Jolson) writes:
>In most cases, the simple solution is the the wrong solution.
Sheldon, I disagree with this statement. The correct solution is usually
elegantly simple. Now if you had instead said, "In most cases, the
SIMPLISTIC solution is the wrong solution." I would fully agree.
__________
Especially in light of the comments from the person to which you were
responding who displays an understanding of insurance, insurance company
operations as well as banks and their operations so simplistic as to
border on the idiotic. About par for the average American, who doesn't
have a clue.
Enjoyed you comments!
--
Paul M.
Sheldon Jolson
In article <01bc5502$5d8dc940$e9ec...@136141620worldnet.att.net>,
pfw...@worldnet.att.net says...
> My apologies for poor wording. What I meant is: Financial Service
> companies do not buy raw materials, manufacture, warehouse inventories,
> etc. I also did not mean to imply that Financial Service companies are
> unnecessary and should be stricken from the earth. I did not even mean to
> imply that banks are bad. They're not good. They're OK. Insurance
> companies are bad. Bad places to invest money, that is. My only point is
> that Banks make a return and keep a portion of it, while insurance
> companies make a return and keep all of it, as well as a chunk of
> principle.
So let me get this striaght. According to you, insurers keep a chunk
of principal, and that's bad. However, McDonalds, Boeing, and
consultants as yourself keep all of the principal and that's ok,
probably because you claim the services you provide are worth more
than the dollars paid in. That would be debatable. But the risk
transfer is a service as well and apparently one which people consider
to be more valuable than you do.
> 1. The Insurance Industry is the largest industry in the World.(T or F)
Measured how? Insurance industry defined how (e.g., do you count
pensions)? Depending on how you answer, my response is either
T or F...:)
>
> 2. The Prudential is the 3rd largest holder of Real Estate in the world,
> behind the US Government and the Roman Catholic Church. (T or F)
If true before, probably not true anymore after their enomouse real
estate fire sale.
> 3. The Insurance Industry has more paid lobbyists than any other industry.
> (T or F)
False by a large margin.
> 4. There is no Federal Regulation of the Insurance Industry. (T or F)
True and False.
> 5. Although bigger and more powerful than any state's government, the
> Insurance Industry is only regulated at the state level. (T or F)
False.
> 6. The Insurance Industry's Federal lobbyists are paid handsomely to
> insure that #5 is always a true statement.
As your premise in #5 is incorrect (ever hear of ERISA, TAMRA, DEFRA,
TEFRA, OBRA, COBRA, etc., etc.?), this answer is false though I don't
doubt that insurance company lobbyists are paid well.
> That they could do much better saving money in a mattress.
Not if they die.
- sbj -
Paul Weeks
Robert C. Thomas <ski...@swcp.com> wrote in article
<01bc557d$239a02a0$8d733bc6@oemcomputer>...
>
>
> Paul Weeks <pfw...@worldnet.att.net> wrote in article
> <01bc5502$5d8dc940$e9ec...@136141620worldnet.att.net>...
> >
>
............................................................................
> ................Insurance
> > companies are bad. Bad places to invest money, that is. My only point
> is
> > that Banks make a return and keep a portion of it, while insurance
> > companies make a return and keep all of it, as well as a chunk of
> > principle.
> >
>
> Paul, you don't know what you're talking about. Even whole life
companies
> pay a return, usually guaranteed to be at least 3 to 4%. Participating
> companies have, historically, paid closer to 8%. Companies offering VUL
do
> NOT invest the client's money. The money is transferred to a separate
> financial institution, and invested on the behalf of the client. The
> insurance company has no access to the money. They DO assess a
management
> fee, on the order of 1 to 2%. In addition, they do not "keep" a portion
of
> the principle. A portion of the principle goes to defray the costs of
> providing the insurance protection, a cost for value.
1 to 2% off the top for a management fee? And a portion to defray the
costs of insurance?
You mean pay, not defray, don't you. I don't believe that any of the
insurance cost is subsidized. Now how about COMMISSIONS? I was in a
Walden Books this morning and found the answer to the question I've asked
several times, but received no answer to. Specifically, "What is the
COMMISSION paid to the agent on a VUL policy?" A current book titled "Get
a Financial Life" gave me the answer. Apparently COMMISSIONS on a new VUL
policy can be MORE THAN 100% of the Annual Premium **_PLUS_** 5-8% renewal
for each of the following years. Is this about what you get paid? Now
let's just consider the commissions.
Year I pay Agent gets
---------------------------------
1 $6500 $6500
2 $6500 $520
3 $6500 $520
4 $6500 $520
...etc.
Do I have this right? Please feel free to tell me how much you get paid
if this is not an accurate depiction. Now look at it from a percentage
viewpoint.
VUL Policy over a 33 year period(That's long enough for you, I hope)
Initial COMMISSION amortized over policy period: (100% annual premium /33)
= 3 %
PLUS Renewal COMMISSIONS (8% of annual premium) = 8%
PLUS (mis?)management fee (1-2% of annual premium) = 2%
EQUALS 13% of EVERY annual premium. This is BEFORE the cost of the
insurance itself (mortality charges) and policy fees, etc. are also
deducted. Now I'm sure there is no way I could ever earn a decent rate of
return when in EXCESS of 13% of every contribution I make is immediately
paid out to you and your company. In the case of the initial commission it
is paid out LONG BEFORE I pay it in. If these numbers are wrong, please
set us straight, BUT MAKE SURE YOU INCLUDE COMMISSIONS.
> >
> > >
> > > > The original point of this now rather long thread is: If the same
> > > > "investment accounts" that are in VUL were bundled into all types
> > > > of insurance, PEOPLE WOULD FIGURE IT OUT!!!!
> > >
>
> Damn straight. Someday, YOU might figure it out.
>
> > That they could do much better saving money in a mattress.
>
> Horse shit!!! Paul, your assertations are utterly false, based upon
> ignorance. So you read a book, written before VUL came out, and think
you
> understand VUL. I'm sorry, Paul, you don't. You seem to think VUL works
> the same as whole life, which I will freely admit is a really poor
> investment. Again, read Ben Baldwin's THE NEW LIFE INSURANCE INVESTMENT
> ADVISOR. Baldwin doesn't like whole life any better than you do, and
isn't
> real fond of UL either. But read what he says about VUL. It might open
> your eyes. You seem to have "decided", based upon very little
information
> and a tangental (at best) grasp of the reality of the situation, that VUL
> is BAD, BAD, Bad, because it is connected to the insurance industry which
> is BAD, BAD, BAD.
Boy, we're getting a little worked up now, aren't we? I'll look for Ben
Baldwin's book, I'm sorry he stole the title of my upcoming pamphlet. You
see, I too am penning a work titled THE NEW LIFE INSURANCE INVESTMENT
ADVISOR. What the hell, I'll reproduce my entire manuscript here:
DON'T DO IT!
IT'S BAD, BAD, BAD!!
>
> Show us specific examples of VULs that performed worse than saving money
in
> a mattress (or stop making silly exaggerations) Show us one that did
worse
> than zero coupon bonds. I am utterly certain that there ARE VULs and
> certainly subaccounts in some VULs that did worse, but you're the one
with
> all the opinions. Show us the money!!! Give us the benefit of your
> exhaustive research. What is the size of your sample??? Two? Five??
Oh, I see. You cannot produce ONE ACTUAL PERSON with a VUL who is doing
well with his "investment", even though this is what you do for a living,
so Paul the cyber-nerd(that's me, folks) has to get EVERYONE who has these
loser contracts to post their losses or meager gains in a public forum.
That's an excellent idea, BOB. OK Everybody, listen up. If you have a
VUL, tell us how much you've paid into it, and how much you've got now.
Don't go by the BS statements your insurer sends you, unless you know how
to correlate these numbers with the surrender charges outlined in great
detail, in very small print, somewhere in your contract. Just call up your
company, tell them you want to cancel your policy(your agent will be at
your doorstep in milliseconds to defend his commissions) and you want to
know the exact surrender value of it RIGHT NOW.
> Someone of undetermined credentials who wrote a book?? A. L. Williams,
> maybe????? (You sure sound like him.....hmmmmm, have I broken a code
> here????)>
You figured it out, dadgumit. I AM Art Williams! Those recruits I've
amassed over the last couple decades are just really pissing me off lately,
so I'm going to do it all by myself from now on, right here on my dadgum
computer;) Seriously though, I would put my money into one of
those(Williams, Primerica) highly loaded mutual funds before I would ever
"invest" in a VUL. BTW thanks for your email explaining why you don't have
a VUL, because it would be "too costly." I also agree with your choice of
an index fund for a retirement investment vehicle. I don't know about the
Variable Annuities, though. They're sold by insurance companies, and
everybody knows they're BAD, BAD, BAD.
> For your information, insurance companies who sell VUL ARE regulated by
> more than state regulatory agencies. They are regulated by the same
> agencies and to the same level as any other seller of
> securities...NASD....SEC....
Like I've stated before, I don't have a problem with the actual NASD and
SEC regulated securities that are part and parcel to a VUL. I have a
problem with the "toll charges" imposed to get your money both in and out
of them.
> Beginning to understand........Bob
Of course you understand. That's why you don't own a VUL. I understand
too. That's why I don't own one either. See how much we have in common?
BTW do you own ANY Life Insurance? What kind is it? Could it be... TERM?
I expect you don't have any at 60 years of age. You understand that once
you have enough money, you no longer need insurance. Anything your family
could buy with insurance money, they can buy just as easily with regular
money. Let's use Bill Gates as an example. He's a young man, with a wife
and a newborn baby. How much life insurance does he need? Answer: None.
Or do you suppose that he pays hundreds of millions of dollars in VUL
Premiums to insure that the estate taxes will be paid on his tens of
billions of dollars estate?
BTW I'm still waiting to find out what type of retirement investment
vehicles are made available to the EMPLOYEES of insurance companies. Do
they have 401(K)s or VULs?
Fiscally yours,
Paul Weeks
Paul Weeks
Paul Maffia <pau...@eskimo.com> wrote in article
<E9GK9...@eskimo.com>...
Hey, Watchew usin' all them big wurds fer, anyway? This ain't no scrabble
game. Guess some folks just like to take the long way goin' nowhere.
Thanks fer yer contrabyushun.
Paul W.
Paul Weeks
Sheldon Jolson <s...@panix.comx> wrote in article
<MPG.dd17f5db...@news.panix.com>...
>>>snip<<<
> So let me get this striaght. According to you, insurers keep a chunk
> of principal, and that's bad. However, McDonalds, Boeing, and
> consultants as yourself keep all of the principal and that's ok,
> probably because you claim the services you provide are worth more
> than the dollars paid in. That would be debatable. But the risk
> transfer is a service as well and apparently one which people consider
> to be more valuable than you do.
I claim that the services I provide will cost exactly what they cost. As
does McDonalds and Boeing with their products. I also understand that the
Term Insurance part of a VUL, like any insurance contract, involves a
transfer of risk that has a financial value that should be directly
proportional to the amount of risk assumed. I don't consider a return
should be due the premium payer on that portion of his premium. My analogy
between banking and insurance was supposed to be this: In a bank I have
customers making deposits and I have customers making withdrawals. In an
insurance company I have exactly the same thing. In fact I know(in the
case of life conatracts, particularly), exactly how many withdrawals will
be made(from the mortality tables). There is actually less risk and more
predictablility with the insurer. The insurance company is doing little
more than running a lottery.
Robert C. Thomas
Paul Weeks <pfw...@worldnet.att.net> wrote in article
<01bc55ec$07616f00$e9ec...@136141620worldnet.att.net>...
>
>
> Robert C. Thomas <ski...@swcp.com> wrote in article
> <01bc557d$239a02a0$8d733bc6@oemcomputer>...
>
> 1 to 2% off the top for a management fee? And a portion to defray the
> costs of insurance?
> You mean pay, not defray, don't you.
According to Webster, defray means, "bear, pay, or settle (the costs or
expense). Defray is what I meant.
> I don't believe that any of the
> insurance cost is subsidized.
Never said it was. This is, however, a good example of how you read into
things.
Now how about COMMISSIONS?
> I was in a
> Walden Books this morning and found the answer to the question I've asked
> several times, but received no answer to. Specifically, "What is the
> COMMISSION paid to the agent on a VUL policy?" A current book titled
"Get
> a Financial Life" gave me the answer. Apparently COMMISSIONS on a new
VUL
> policy can be MORE THAN 100% of the Annual Premium **_PLUS_** 5-8%
renewal
> for each of the following years.
I'll have to get a copy of that book and find out what idiot wrote it. I
have NEVER heard of anybody who gets that kind of commissions on a VUL.
Term, yes, and a few on whole life....but VUL? I don't believe it. You
sure that didn't come from RDS (Rectal Data Storage).
Is this about what you get paid?
No, that is not what I get paid. I CAN make as much as 75%, with 2%
renewals, and .075% of the money under management, yearly.
Now
> let's just consider the commissions.
>
> Year I pay Agent gets
> ---------------------------------
> 1 $6500 $6500
> 2 $6500 $520
> 3 $6500 $520
> 4 $6500 $520
> ...etc.
>
> Do I have this right? Please feel free to tell me how much you get paid
> if this is not an accurate depiction. Now look at it from a percentage
> viewpoint.
Assuming your reported renewal figures (which I doubt you really read....I
suspect you confused whole life figures with VUL..again), it is.
>
> VUL Policy over a 33 year period(That's long enough for you, I hope)
>
> Initial COMMISSION amortized over policy period: (100% annual premium
/33)
> = 3 %
> PLUS Renewal COMMISSIONS (8% of annual premium) = 8%
> PLUS (mis?)management fee (1-2% of annual premium) = 2%
> EQUALS 13% of EVERY annual premium. This is BEFORE the cost of the
> insurance itself (mortality charges) and policy fees, etc. are also
> deducted. Now I'm sure there is no way I could ever earn a decent rate
of
> return when in EXCESS of 13% of every contribution I make is immediately
> paid out to you and your company. In the case of the initial commission
it
> is paid out LONG BEFORE I pay it in. If these numbers are wrong, please
> set us straight, BUT MAKE SURE YOU INCLUDE COMMISSIONS.
> > >
I've already told you, in a prior post what gets into a VUL, as well as the
results of the tax treatment, AND in comparison to your 401K. You have,
typically, ignored that post in order to continue your campaign of
misinformation and and your misunderstanding.
Those (closer to 60%) first year commissions are NOT taken out of your
first year premiums. Those premiums are a result of the insurance
company's expectation that you will keep the VUL over the course of many
years. Approximately the same amount is taken each year. Your 13% is
fairly accurate. Again, in the projection I provided in a prior post, the
VUL does not grow as quickly as in investment in which all your money got
into the fund(s). However, when you take the money out, income tax free,
as opposed to normal income tax rates as in a qualified plan, you get more
after tax income. You give up the 13% on the relatively small amount going
in, in order to NOT pay, 30%, or 40%, on the very large amount it grew
to. You don't seem to understand (or wish to avoid discussing) the simple
fact that if the cost of the VUL is less than the value of the tax
treatment (meaning you get more after tax money compared to for instance a
qualified plan) VUL is a good deal. If the costs, and the VUL, do not
result in greater after tax income, VUL is a bad deal for you, even if the
costs were under a dollar. It's a very simple input/output equation.
Obsessing over the internal workings of the "black box" is just another
form of mental masturbation.
> Boy, we're getting a little worked up now, aren't we? I'll look for Ben
> Baldwin's book, I'm sorry he stole the title of my upcoming pamphlet.
You
> see, I too am penning a work titled THE NEW LIFE INSURANCE INVESTMENT
> ADVISOR. What the hell, I'll reproduce my entire manuscript here:
>
> DON'T DO IT!
> IT'S BAD, BAD, BAD!!
>
It should be more on the order of, ANY UNINFORMED, OPINIONATED, BUT
POSSIBLY WELL INTENDED PERSON WORKING OUTSIDE THE VERY NARROW AREA OF HIS
EXPERTISE CAN WRITE A BOOK....HERE'S MINE!
> >
> > Show us specific examples of VULs that performed worse......... Give us
the benefit of your
> > exhaustive research. What is the size of your sample??? Two? Five??
>
> Oh, I see. You cannot produce ONE ACTUAL PERSON with a VUL who is doing
> well with his "investment", even though this is what you do for a living,
> so Paul the cyber-nerd(that's me, folks) has to get EVERYONE who has
these
> loser contracts to post their losses or meager gains in a public forum.
Once again, you avoid my questions. YOU are the one claiming that you can
do better hiding your money in a mattress. Give us examples. What IS the
size of your sample??? Don't you wish to discuss this?? Is it possible
that even you realize that your statements are silly, given the meager
amount of background data??
It is not that I CANNOT produce one person....I refuse to. I can show you
some without names. I have offered to provide you with prospectuses. If
you can find lies or misdirection in a prospectus you can put that evil
insurance company is deep ka ka. You aren't interested in that because you
know you can't do it. You just want me to violate client confidentiality.
> That's an excellent idea, BOB. OK Everybody, listen up. If you have a
> VUL, tell us how much you've paid into it, and how much you've got now.
Again, you miss the point. It isn't how much you make, its how much you
can keep. I refer you to the figures I provided several posts ago in
response to your request, using YOUR investment in your 401K. Funny you
haven't mentioned that. Haven't figured out how i "lied" yet???
> Don't go by the BS statements your insurer sends you, unless you know how
> to correlate these numbers with the surrender charges outlined in great
> detail, in very small print, somewhere in your contract.
Surrender charges (which go away in a few years) are VERY CLEARLY shown on
the projections, in a column marked SURRENDER VALUE. It's becoming
obvious that you have NEVER actually seen one. Again, I'm beginning to
believe a lot of your "information" comes straight out of RDS.
> You figured it out, dadgumit. I AM Art Williams!
Well, probably not. But you sure sound like him, or one of his cult
members, er, agents.
Those recruits I've
>Seriously though, I would put my money into one of
> those(Williams, Primerica) highly loaded mutual funds before I would ever
> "invest" in a VUL.
That isn't too surprising, judging from the quality of understanding so far
evidenced by your posts.
BTW thanks for your email explaining why you don't have
> a VUL, because it would be "too costly."
Yes, at age 60, an individual VUL doesn't work out for me. A 2nd to die
VUL would work great, but I am happily unmarried.
>I also agree with your choice of
> an index fund for a retirement investment vehicle. I don't know about
the
> Variable Annuities, though. They're sold by insurance companies, and
> everybody knows they're BAD, BAD, BAD.
Well, they're not great, because of the extra mortality costs. They have
other virtues....for me.
>
>
> > For your information, insurance companies who sell VUL ARE regulated by
> > more than state regulatory agencies. They are regulated by the same
> > agencies and to the same level as any other seller of
> > securities...NASD....SEC....
>
> Like I've stated before, I don't have a problem with the actual NASD and
> SEC regulated securities that are part and parcel to a VUL. I have a
> problem with the "toll charges" imposed to get your money both in and out
> of them.
Only because you don't understand them, AND the results of the tax
treatment. Again, it's a simple input/output equation. Does the money you
put into a VUL result in greater after tax income? If so, go for it. If
not, don't. At age 60, and the fact that I'm a pipe smoker, the costs of
insurance made the VUL marginally less attractive than the index fund.
And, single (again) at 60 I didn't need the insurance, no dependents, and
my estate will not qualify for estate taxation....unless Bubba Bill and the
Boys on the Hill succeed in lowering the benchmark.
>
> > Beginning to understand........Bob
> Of course you understand. That's why you don't own a VUL. I understand
> too. That's why I don't own one either. See how much we have in common?
> BTW do you own ANY Life Insurance? What kind is it? Could it be...
TERM?
Yes, about $100K, and of course it's TERM!!!! That's another think about
Primerica agents. They think they invented term and that they are the only
(moral) people who sell it. Most of us sell more term than anything else.
It's the cheapest way to buy temporary insurance. I don't own a VUL
because it didn't work for ME. It might work for you, but you'll never
find that out because you already "KNOW" that it's BAD, BAD, BAD. Too bad,
how sad.
> I expect you don't have any at 60 years of age. You understand that once
> you have enough money, you no longer need insurance.
Actually, I don't need much because I don't have enough money. I have some
because there are some people in this world that I'd like to leave a little
extra to.
Anything your family
> could buy with insurance money, they can buy just as easily with regular
> money. Let's use Bill Gates as an example. He's a young man, with a
wife
> and a newborn baby. How much life insurance does he need? Answer: None.
> Or do you suppose that he pays hundreds of millions of dollars in VUL
> Premiums to insure that the estate taxes will be paid on his tens of
> billions of dollars estate?
No, he probably plows a lot into different trust instruments and a
foundation or two. Again, you show your lack of understanding. Having
money to pay estate taxes is not one of the reasons people buy VUL. Where
the hell do you get the unwarrented assumption that any of us, especially
me, thinks that VUL is the only game in town and that we recommend it for
all purposes??? You seem to think it significant that I would use term,
and that it proved some kind of point. You assume that I would recommend
that Bill Gates pour megabucks into one. VUL is one, among many, way to
DCA yourself into an estate, and an after tax income that for some people
works better than other strategies. In addition, it provides insurance, a
factor that is viewed as valuable by many. But VUL is NOT the answer to
every maiden's prayer, not even close.
>
> BTW I'm still waiting to find out what type of retirement investment
> vehicles are made available to the EMPLOYEES of insurance companies. Do
> they have 401(K)s or VULs?
Oh, I would assume 401Ks, of course. For one thing, of some 3000 insurance
companies, only about 100 offer VUL. I suspect this is because, among
other reasons, that VUL does NOT allow the company to invest client money
and keep a large part of the return. In addition, 401K provides tax
deductable contributions, and tax deferred growth for every employee. VUL
doesn't work for everyone.
In conclusion, a VUL will take 10 to 20% off the money going into the
subaccounts. The owner of a qualified plan will pay some unknown future
tax on the money he takes out of his plan. The greater his investment
success, the higher the percentage of tax he'll pay on that qualified plan
income. The question that must be answered for each individual is, "Which
tax treatment, given essentially equal investment risk/return, works best
for the client?". It can go either way.
Cheers, Bob
Robert C. Thomas
Paul Weeks <pfw...@worldnet.att.net> wrote in article
<01bc55f8$fecc8d40$e9ec...@136141620worldnet.att.net>...
>
>
>
> Agreed. Don't own it. Won't own it. Same as you.
Actually, if I ever marry again, I WILL own it. I will own a 2nd to die
VUL, which lowers insurance cost drastrically.
>
> Does understand that the commissions for selling these products are
> extremely high and everlasting. Also understands that it would be the
> downfall of anyone selling these products to reveal their commission
> structure. Then anyone with a pocket calculator could figure out "This
is
> what I pay MINUS This is what my agent gets paid MINUS This is what the
> insurance company charges me to "manage" my money EQUALS... Holy Shit!!!)
Does NOT understand a simple input/output relationship, and that first year
commissions do NOT come out of first year premiums. Your pocket calculator
example is based upon your basic misconceptions, as usual. You Sir, do not
understand VUL, or any other permanent life instrument. You sure sound
like a PFS agent to me.
>
> You mean like : I have never been shown even one ACTUAL PERSON who has
> held a VUL and shown a substantial return on his investment.
Probably more to the effect that you've never seen a VUL, period. If you
had, you'd make few of the very silly statements you keep making.
Not a single
> time since VULs inception 11 years ago has the industry had a poster boy
to
> hold up and say "Look! Here's Joe Schmo who has been investing X dollars
a
> month with us since 1986 and now he has THIS much money!"
No more than JANUS will do similar things. And even if a VUL providing
company did that sort of thing, people with your very willing obtuseness
would still be unable to grasp the point that it is the tax treatment that
makes the difference....where, of course, it makes a difference. In actual
fact, such a projection of a generic 35 year old, non smoking male, IS in
every prospectus I hand out. I still stand willing to provide you one.
>
> COMMISSIONS on a new VUL
> policy can be MORE THAN 100% of the Annual Premium **_PLUS_** 5-8%
renewal
> for each of the following years. Cited from "Get a Financial Life".
Who wrote it? What are his credentials? I don't know anybody who gets
that kind of commission. Pru pays 60%, Equitable less than that, and
neither IDS, nor WRL pay commissions anywhere near 100% of first year
premium, or even target premium for that matter. (Don't know about that
either, do you?? Commissions a NOT paid on annual premium, they're paid on
annual TARGET premium, and most VULs are not sold at target, but at
something less. It has to do with TAMRA, I won't get deeper into this
beyond saying that my 75% is on significantly less that the annual premium
in almost every case). I WILL go check it out and get back to you. I
suspect that you, as usual misunderstood. If not, then I'd like to know
what else he had to say.
>
> Unfamiliar with this technique, but it doesn't surprise me that you
aren't.
Funny, you use it so well......... Nice comeback though.
>
> No connection.
Barely possible. Past AND present???
> Not evil, just BAD, BAD, BAD.
Whatever. Thank you for making my point so succinctly.
>
>
> Hey, I'll have you know that I'm 3/5ths of a Moron, but I'm going to pass
> those last two exams and get my certification.
While continuing to avoid the issue, your comment does lighten up the
exchange. I like it.
>
> > C'mon Paul, 'fess up!! You are a PFS agent.
> OK I'm really Rufus Williams, Art Williams addled cousin.
Well, it seemed to me............ Touche..
> PS Hey Bob, do you really ski? Elisabeth and I were up at
Sugarloaf(Maine)
> the first week of April and it was awesome. Is there a skiing NG you
> frequent?
>
Not only do I ski, I'm a National Ski Patroller. "You trash it, we haul
it!" Naaaww, I'd rather do it than talk about it. Which means, I better
get off this laptop and onto the phone. There's a world full of people for
me to victimize......
Cheers, Bob
Robert C. Thomas
Paul Weeks <pfw...@worldnet.att.net> wrote in article
<01bc55ff$20a16200$e9ec...@136141620worldnet.att.net>...
\> I claim that the services I provide will cost exactly what they cost.
As
> does McDonalds and Boeing with their products.
Aside from cost over runs, I suppose.
I also understand that the
> Term Insurance part of a VUL, like any insurance contract, involves a
> transfer of risk that has a financial value that should be directly
> proportional to the amount of risk assumed. I don't consider a return
> should be due the premium payer on that portion of his premium.
Again, I must assume because you are so unclear, you are referring to the
"return of excess premium" on participating whole life policys. Again you
flaunt your ignorance, this has absolutely nothing to do with VUL. The
return on a VUL is due to the perfomance of the mutual fund subaccount(s).
The more you try to set yourself up as an "expert" the more you destroy
your credibility.
>
> My analogy
> between banking and insurance was supposed to be this: In a bank I have
> customers making deposits and I have customers making withdrawals. In an
> insurance company I have exactly the same thing. In fact I know(in the
> case of life conatracts, particularly), exactly how many withdrawals will
> be made(from the mortality tables).
No you do NOT know that. You know an average of past "withdrawals"
(claims), for the general population, and you INFER that future events will
mirror past experience, especially hoping that will be so for the small
portion of the total population that you insure. If you "knew" less, you'd
stand a better chance to learn more. Having made up your mind, based upon
nothing that I have been able to discern in your posts, you are impervious
to further input.
There is actually less risk and more
> predictablility with the insurer.
I guess you didn't take any probability theory or statistics in your EE
program. An actuarial table just tells you the death rate of the whole
population over time in the past. You try like hell with your underwriters
to at least match that figure WITH YOUR INSUREDS. Natural and man made
disasters, desease (whoda thunk gays were high risk 10 years ago?), poor
underwriting practices et. al. can skew your figures. This is one of the
main reasons for the reinsurance industry. Poor investments can mess up an
insurance company's plans as well, witness Executive Life.
The insurance company is doing little
> more than running a lottery.
Yeah, well..........I wonder.......do you know any more about lotteries
than you do about insurance?? Personally, I think that they are a tax on
people who do not understand math. Term insurance is a way to bet that
you're going to die. In VUL, you bet that you're going to live.
>
>
Cheers, skibum
Robert C. Thomas
I was in a
> Walden Books this morning and found the answer to the question I've asked
> several times, but received no answer to. Specifically, "What is the
> COMMISSION paid to the agent on a VUL policy?" A current book titled
"Get
> a Financial Life" gave me the answer. Apparently COMMISSIONS on a new
VUL
> policy can be MORE THAN 100% of the Annual Premium **_PLUS_** 5-8%
renewal
> for each of the following years.
I also went to the bookstore to check out the book you quote, Beth
Kobliner's GET A FINANCIAL LIFE. As would any serious researcher, I first
want to know who's talking, i.e. does this person have any credentials or
qualifications to be expounding upon this subject? Ms Kobliner, aside from
being very good looking, appears to have no credentials. Her BIO admits of
no degrees, licenses, or other training in the field. She has been a
writer for MONEY magazine (grin) and has appeared on OPRA (HAR!) as a
"Financial Expert". She is a Journalist, appearantly a damn good one and
specializes in the financial area. She is not, by. any stretch of
imagination, authoritative in the field. A pretty good read, simplistic,
and overlooking a hell of a lot. She devotes a total of 37 pages to all
forms of insurance.
She does NOT say that commissions on a new VUL policy can be more than 100%
of the annual premium. She says that about "most cash value" . That is
close to the truth, commissions on WL and UL can be that high. They damn
seldom are, but they can be. It is NOT true for VUL. In addition, you
only assume, because she didn't address it, that first year commissions
come out of your first year premium, leaving you with nothing, or even a
negative balance in cash value in the first year. Every VUL I ever saw had
positive cash value even in the first year. In her defense, altho she
doesn't differentiate between forms of cash value insurance in this matter,
being aware of how "most" cash value works in this respect is useful and an
area a relatively uninformed prospective client needs to ask about/check
out.
Ms Koblinger does state, "Because of a quirk in the tax law, the money in
the savings account of a cash value life insurance policy grows
tax-deferred." First, it isn't a "quirk", it was planned that way by the
writers of insurance law many years ago. Tax breaks are how the government
"encourages" industry/business to do certain things. In those days the
government thought it would be a good idea to have somebody else setting up
programs to keep widows and orphans off the streets and out of the poor
houses. Second, her statement is true, but doesn't go far enough. She is,
evidently, unaware that cash value insurance also pays out income tax free.
For (what?) 100 years there've been two ways to get income tax free money
out of life insurance. The first is die. (I don't really recommend this
one). The second is in the form of loans. In VUL the loans are "wash" (no
net interest) and you are not expected to pay it back. You do want to make
sure the policy never lapses.
Even Ms Koblinger admits to one set of circumstances under which cash value
life insurance may make sense. That is, according to her, when one is
already putting the maximum allowable amount (into qualified plans) and
needs insurance. She likes low-load variables. All else being equal, so
do I.
In her discussions of qualified plans, Ms Koblinger evidences NO awareness
of tax treatment at the death of the owner of the plan.
Ms Koblinger has written a pretty good little primer for people who know
nothing, or very little about finances. She even covers debt, banking,
housing, etc. I think, by and large, Aunt MInni and Uncle Joe would
benefit from reading this book. As a source to be used to support your
efforts to set yourself up as an "expert", however..............NOT!!
Paul, I remain unimpressed with the quality of your research and the depth
of your knowledge in this field. Your 401K may, indeed, work out best for
you. Do not assume, however, that your case covers all possible cases, nor
that you are any kind of an expert.
Next? Skibum
Sheldon Jolson
In article <E9GK9...@eskimo.com>, pau...@eskimo.com says...
> Sheldon, I disagree with this statement. The correct solution is usually
> elegantly simple. Now if you had instead said, "In most cases, the
> SIMPLISTIC solution is the wrong solution." I would fully agree.
Thanks. You are right about the difference between ssimplistic and
simple solutions, but let me put my comment about "simple" in
perspective. Relativity is elegantly simple. Solving the field
equations is an incredibly daunting task that not too many people
understand (myself included of course). Being able to say how a
solution can be found and actually finding it are very different
matters.
Think of it like this. The concept of various insurance products is
quite simple, but require complex contracts to execute. If insurance
were so simple, it wouldn't require more than a few sentences to make
a contract. A simplistic contract like this, however, is bound to be
a disaster for the issuer.
- sbj -
Paul Weeks
Bob,
I have to applaud your quick work in finding that book, and also commend
you for more accurately conveying its contents than I. I notice that while
your synopsis is exhaustive(as are most things you hear from agents), you
did not comment on Ms. Koblinger's review of the various "pitches" commonly
used by peddlers of "permanent" insurance(did you learn any new ones?). I
also question your motivations. I suspect you were hoping to find out
which company you could Fed-Ex your resumé to, in hopes of garnering the
commissions I quoted. You also failed to mention the low-load VUL
companies that Ms. Koblinger suggested you try if you must shop for a VUL.
Since low-load = low commissions, I suspect you don't market any of these
policies.
Riddle me this Bobman: If you agree that the commissions under discussion
exist( over 100% of 1st year premium PLUS 5-8% annual renewals) at least
for WL and UL,
1. Why is this? Could it be that the clients receive less, so the agents
receive more?
2. Have you, or do you sell these products as well?
Paul Weeks
Robert C. Thomas <ski...@swcp.com> wrote in article
<01bc5640$0cca2000$90733bc6@oemcomputer>...
> Who wrote it? What are his credentials? I don't know anybody who gets
> that kind of commission. Pru pays 60%, Equitable less than that, and
> neither IDS, nor WRL pay commissions anywhere near 100% of first year
> premium, or even target premium for that matter. (Don't know about that
> either, do you?? Commissions a NOT paid on annual premium, they're paid
on
> annual TARGET premium, and most VULs are not sold at target, but at
> something less. It has to do with TAMRA, I won't get deeper into this
> beyond saying that my 75% is on significantly less that the annual
premium
> in almost every case). I WILL go check it out and get back to you. I
> suspect that you, as usual misunderstood. If not, then I'd like to know
> what else he had to say.
So educate us Bob, as long as you're being forthright. What is TARGET
premium? What is TAMRA?
Yearning for all you can teach me, oh commissioned one,
Fiscally Yours,
Paul Weeks
Sheldon Jolson
In article
<01bc55ff$20a16200$e9ec...@136141620worldnet.att.net>,
pfw...@worldnet.att.net says...
> I claim that the services I provide will cost exactly what they cost. As
> does McDonalds and Boeing with their products. I also understand that the
> Term Insurance part of a VUL, like any insurance contract, involves a
> transfer of risk that has a financial value that should be directly
> proportional to the amount of risk assumed.
Insurers claim that the risk transfer is worth what people pay.
You disagree. Why should anyone believe your services are worth
what you charge? THere are (I hope) many people who agree with
your self assessment, but there are many people who agree with
the insurer's assessment (of which I'm not necessarily one).
US state and federal regulations keep that last part from being
true for many insurance products.
> I don't consider a return
> should be due the premium payer on that portion of his premium.
Mutual insurers and stock insurers offering participating
policies would disagree with you, and so would the policy-
holders expecting tax-free dividends (the fallacy of which
I will leave alone).
> My analogy
> between banking and insurance was supposed to be this: In a bank I have
> customers making deposits and I have customers making withdrawals. In an
> insurance company I have exactly the same thing.
I already showed you how you bankrupted your company on issuing
your policies as you paid out more in costs than you received in
premiums. You haven't responded how to avoid this. The answer,
by the way, is not to raise premiums as it wouldn't help. Show
me how much you know about running a profitable insurer.
> In fact I know(in the
> case of life conatracts, particularly), exactly how many withdrawals will
> be made(from the mortality tables). There is actually less risk and more
> predictablility with the insurer. The insurance company is doing little
> more than running a lottery.
This is just a friendly plug for the Psychic Friend's network,
right? If you could do what you said, any insurer or consultant
firm would pay you huge amounts of money to tell them things
they don't know until _after_ lapses and mortality occurs.
The last statement is even more bizarre as it basically implies
that the laws of probaility are wrong (ever hear of ruin
theory?).
- sbj -
Sheldon Jolson
In article
<01bc55ec$07616f00$e9ec...@136141620worldnet.att.net>,
pfw...@worldnet.att.net says...
> Boy, we're getting a little worked up now, aren't we? I'll look for Ben
> Baldwin's book, I'm sorry he stole the title of my upcoming pamphlet. You
> see, I too am penning a work titled THE NEW LIFE INSURANCE INVESTMENT
> ADVISOR. What the hell, I'll reproduce my entire manuscript here:
>
> DON'T DO IT!
> IT'S BAD, BAD, BAD!!
I suppose if any putz who goes and reads books like "Computer
Consulting for Dummies," and "Barney the Dinosaur Loves
Electrical Enginnering," that makes them as qualified as any
computer consultant or electrical engineer?
High School guide to Physics = Lucasian Chair?
- sbj -
Robert C. Thomas
Paul Weeks <pfw...@worldnet.att.net> wrote in article
<01bc5736$45c01d00$6c1b...@136141620worldnet.att.net>...
>
> Bob,
>
> I have to applaud your quick work in finding that book, and also commend
> you for more accurately conveying its contents than I.
As always, speed, accuracy, brilliance.
I notice that while
> your synopsis is exhaustive(as are most things you hear from agents),
This is great. On the one hand, we get dinged because we, reportedly,
DON'T inform the clients, and you make quick side slams about exhaustive
replys.
you
> did not comment on Ms. Koblinger's review of the various "pitches"
commonly
> used by peddlers of "permanent" insurance(did you learn any new ones?).
No, I didn't comment. Would you like me to? I saw no reason to comment.
They're pretty accurate, as far as they go.
I
> also question your motivations. I suspect you were hoping to find out
> which company you could Fed-Ex your resumé to, in hopes of garnering the
> commissions I quoted.
Naaa, I just wanted to know if she'd said what you reported that she said
(she didn't) and just who the hell she was (nobody with any real
credentials). For all that, she didn't do too bad a job for a popularizor.
You also failed to mention the low-load VUL
> companies that Ms. Koblinger suggested you try if you must shop for a
VUL.
> Since low-load = low commissions, I suspect you don't market any of these
> policies.
In actual fact I DID mention them. I said I liked 'em too, all other
things being equal.
>
> Riddle me this Bobman: If you agree that the commissions under
discussion
> exist( over 100% of 1st year premium PLUS 5-8% annual renewals) at least
> for WL and UL,
I DON'T agree. No regular agent I ever heard of gets much more than half
that, many less than half that. Some general and supervisory agents,
higher in the food chain can get closer to those figures, but agents???
Naaa. I did agree that it COULD happen. Those "high" commissions are just
an advance to the agent, of commissions on future premiums.
>
> 1. Why is this? Could it be that the clients receive less, so the agents
> receive more?
If so, it's been going on as long as insurance has been around. Contracts
with various insurance companies vary a lot, but I don't think that much
affects what the client gets. I agree with you that whole life is a poor
investment. I've never even implied that it was. That's not it's purpose.
>
> 2. Have you, or do you sell these products as well?
>
>
I've never sold a whole life policy. There are times that they are
appropriate, but I've not run across one yet. I will, I'm sure. But not
as an investment. I have sold overfunded ULs that after a time require no
more premiums. For a specified time this can be cheaper than term for a
specified period.
Cheers
>
>
Sheldon Jolson
In article
<01bc573a$87ccd900$6c1b...@136141620worldnet.att.net>,
pfw...@worldnet.att.net says...
> C'mon Bob! What insurance company has suffered losses due to higher than
> expected mortality? None.
Care to make a small wager?
> Losses from poor marketing? Sure. Not
> correctly anticipating effects of economic events? Absolutely.
> Mismanagement? Definitely. Excessive Mortality? Don't think so. The
> average lifespan is always moving higher, and insurance companies are
> always using last decade's(at best) mortality statistics.
This is incorrect. Virtually all premium rates used by life
insurers use current mortality rates with assumptions for
improving mortality. The mortality rates you refer to are
for reserving purposes only. The only exception is for
certain guarantees where they are used as a Treasury Dept.
safe harbor.
> Once again, WHICH insurance company suffered unanticipated losses from
> excessive mortality?
Here's a hint. Premiums are typically chosen such that the risk
margins inherent are sufficient to cover all losses with a 90%
confidence level. That means one time in ten, the margins are
insufficient.
- sbj -
Paul Weeks
Robert C. Thomas <ski...@swcp.com> wrote in article
<01bc5673$e4c56220$aa733bc6@oemcomputer>...
>
>
> Paul Weeks <pfw...@worldnet.att.net> wrote in article
> <01bc55ff$20a16200$e9ec...@136141620worldnet.att.net>...
> \> I claim that the services I provide will cost exactly what they cost.
> As
> > does McDonalds and Boeing with their products.
>
> Aside from cost over runs, I suppose.
>
> I also understand that the
> > Term Insurance part of a VUL, like any insurance contract, involves a
> > transfer of risk that has a financial value that should be directly
> > proportional to the amount of risk assumed. I don't consider a return
> > should be due the premium payer on that portion of his premium.
>
> Again, I must assume because you are so unclear, you are referring to
the
> "return of excess premium" on participating whole life policys. Again
you
> flaunt your ignorance, this has absolutely nothing to do with VUL. The
> return on a VUL is due to the perfomance of the mutual fund
subaccount(s).
> The more you try to set yourself up as an "expert" the more you destroy
> your credibility.
No, that's not what I meant. I'll trim it down for you:
I understand that insurance costs money. The more insurance coverage you
want, the more you have to pay. You don't(and shouldn't) receive a return
on the money spent for insurance.
...OK?
> >
> > My analogy
> > between banking and insurance was supposed to be this: In a bank I
have
> > customers making deposits and I have customers making withdrawals. In
an
> > insurance company I have exactly the same thing. In fact I know(in the
> > case of life conatracts, particularly), exactly how many withdrawals
will
> > be made(from the mortality tables).
>
> No you do NOT know that. You know an average of past "withdrawals"
> (claims), for the general population, and you INFER that future events
will
> mirror past experience, especially hoping that will be so for the small
> portion of the total population that you insure. If you "knew" less,
you'd
> stand a better chance to learn more. Having made up your mind, based
upon
> nothing that I have been able to discern in your posts, you are
impervious
> to further input.
C'mon Bob! What insurance company has suffered losses due to higher than
expected mortality? None. Losses from poor marketing? Sure. Not
correctly anticipating effects of economic events? Absolutely.
Mismanagement? Definitely. Excessive Mortality? Don't think so. The
average lifespan is always moving higher, and insurance companies are
always using last decade's(at best) mortality statistics.
>
> There is actually less risk and more
> > predictablility with the insurer.
>
> I guess you didn't take any probability theory or statistics in your EE
> program. An actuarial table just tells you the death rate of the whole
> population over time in the past. You try like hell with your
underwriters
> to at least match that figure WITH YOUR INSUREDS. Natural and man made
> disasters, desease (whoda thunk gays were high risk 10 years ago?), poor
> underwriting practices et. al. can skew your figures. This is one of the
> main reasons for the reinsurance industry. Poor investments can mess up
an
> insurance company's plans as well, witness Executive Life.
Once again, WHICH insurance company suffered unanticipated losses from
excessive mortality?
>
> The insurance company is doing little
> > more than running a lottery.
>
> Yeah, well..........I wonder.......do you know any more about lotteries
> than you do about insurance?? Personally, I think that they are a tax on
> people who do not understand math. Term insurance is a way to bet that
> you're going to die. In VUL, you bet that you're going to live.
No Term insurance is a way to INSURE that your dependents will have the
benefit of your equivalent income if you're not there to earn it.
In VUL, you bet you're agent is telling you the truth(sucker bet). Even if
your agent thinks he is telling you the truth, you are betting RETURNS
will be HIGH and EXPENSES will be LOW. See new thread "THE VUL SLOT
MACHINE".
Fiscally Yours,
Paul Weeks
Paul Maffia
Sheldon, your points are well taken. We are of one mind on the matter.
s...@panix.comx (Sheldon Jolson) writes:
> - sbj -
--
Paul M.
Sheldon Jolson
In article <01bc59b3$9be18f00$99733bc6@oemcomputer>,
ski...@swcp.com says...
> You have, indeed, missed much of the prior discussion. The commissions are
> advances by the insurance company to the agent, based upon the expectation
> that the client will keep the instrument for many years. Those commissions
> DO NOT come out of your money up front.
Suppose the policyholder surrenders after two years. The agent
keeps his money. Where did it come from?
If it is an "advance" on hopeful profitability, why not take
the agents share of profits as they come?
- sbj -
Irwin Sabath
"Paul Weeks" <pfw...@worldnet.att.net> wrote:
<Balance of posts and counter posts snipped>
>Let's use Bill Gates as an example.<
No let's use the late Malcolm Forbes as an example:
(Surely you admit his business acumen as the former publisher of
Forbes magazine?)
Prior to his death, Mr. Forbes bought as much Whole Life insurance as
he could get. And with his life style and age, he paid an elevated
premium.
His reasoning: there was not a more cost effective way to pass his
estate to the next generation. It's called "discounted dollars."
Even the esteemed Bill Gates might learn.
He's a young man, with a wife
>and a newborn baby. How much life insurance does he need? Answer: None. <
Absurd. How would you know without determining what plans Gates has
for his holdings?
>Or do you suppose that he pays hundreds of millions of dollars in VUL
>Premiums to insure that the estate taxes will be paid on his tens of
>billions of dollars estate?<
"hundreds of millions."
Geez!
Not one for glittering generalities and exaggerations are you?
>
>BTW I'm still waiting to find out what type of retirement investment
>vehicles are made available to the EMPLOYEES of insurance companies. Do
>they have 401(K)s or VULs?
>
>Fiscally yours,
>Paul Weeks
--
Irwin
t.i.n.s.t.a.a.f.l.
(Helping victims of conventional wisdom)
Audit Department
In article
<35BE760F39E282C2.7F31C05D48AA1D2D.76DAC30C356FEC55@library-
proxy.airnews.net>, ins...@airmail.net says...
> No let's use the late Malcolm Forbes as an example:
>
> (Surely you admit his business acumen as the former publisher of
> Forbes magazine?)
I thought of using Malcolm Forbes as an example (since he in fact
did it), but he is dead and didn't quite have enough bucks to
make my point (I needed a several billion dollar policy).
- sbj -
Irwin Sabath
s...@panix.com (Audit Department) wrote:
Haven't heard of any that large.
As for using Forbes, my point was that here is (was) a universally
recognized successful business man with a stable of advisors who, at
crunch time, acknowledged that whole life insurance was the best way
to fund his estate's potential liabilities.
Incidentally, I also recall reading that Gerald Tsai, who headed the
company that owned A.L.Williams in a previous incarnation also owned
large amounts of permanent life insurance.
>
>
> - sbj -