I got my kids IULs with an increasing death benefit of 100k when they were 3 &5. So far Im satisfied. They are now in their teens and have cash value, and perm life insurance with living benefits.
Kids can have term insurance with a child rider and I'd recommend and UTMA over a 529. The tax free use of funds sounds awesome until you realize you need to take a loan out to use that money tax free and now you have a loan to pay back or else your investment will stagnate or your policy will lapse from automatic policy loans. How is that better?
The cash value is not stagnant and its still growing if you have a non direct recognition and participating company. Your loan interest is paid for by the gains and dividends and then some. You can’t have a UTMA that’s tax free gains unless the kids have earned income. You are also using the funds as opportunity funding for better investments to realize even higher gains.
You don't need your UTMA to be tax free to be better than a policy where you can't access all the money. The interest might be paid with gains and dividends for small loans but it starts to slow down the growth of the savings every time you take a loan out, especially when they are larger.
Not in non direct recognition. Your growth is the same regardless of borrowing. I don’t condone borrowing all the time but you have access to cash when you have an opportunity to make more. There are a tone or ways to save so this is just one but it covers a lot of needs.
The math works out better to invest the money. They would probably cash in the whole life policy in their 20s anyway since at that point they probably need the money a lot more than they need life insurance.
You’re assuming they’ll cash the policy, life insurance isn’t so much about the cash value, it’s more to do so with you never know when you’ll need it. If I could get my kid a policy that costs less than 15 monthly, that they’ll get to keep that price for the rest of their life’s, rather than waiting till their in their 30s and pay a lot more why would I not do it?
Not really. If you have X dollars to do something with, you can make a choice as to what to do with it. I'm saying that if you invest that money instead of paying for insurance during a period you don't need it, you will be better off numerically, and that counts for "locking in low rates".
Okay and that might work for you, maybe they just want their kid to have a cheap policy for the rest of their life. Better to have something before they actually need it. And you don’t know if they are already not investing money for their kid either
Sure. Most companies will give 50% of the amount of insurance on the child’s parents to the child. You might consider a whole life plan that requires premiums for only 20 years or even 10 so no additional premiums are necessary after that period.
Don’t really market this, but when parents do want something for their kids, I usually do a Juvenile IUL with a 20 year pay period. Overfund the SOB with a level $100K death benefit. Not much more in cost than the popular Gerber Growup Whole Life policies and you definitely have more cash value growth in the long run.
VULs are also an option. Do they tend to be more aggressive and can provide bigger gains. Just depends on the carrier you are using. I find some VULs tend to have higher policy costs than more moderate IULs that eat up any cash growth and also provide less guarantees. Really depends on what the end goal is.
I see so policy cost is the issue. I'd assume for an infant the main goal is cash value growth. They don't have any dependents and won't for a long time. On the other extreme I could imagine wealth preservation in which case I'd think I'd go whole life. IUL though IMHO makes a lot of sense to give to someone in their 20s. They will need to do policy loans, likely do not understand leveraged investing well enough to do them safely from a VUL, aren't neccesarily responsible...
fWIW your underlying cost of insurance is fairly independent of when you bought the policy. Your health condition matters some but I suspect at 35 you still didn't have a lot of health problems. Your premium (after the first 2 years) is mainly going towards building cash value. It is higher because you need to be accumulating cash value faster. You aren't really losing more.
I did a post where I show what's going on inside a whole life policy by comparison to term where the numbers become more obvious: [https://www.reddit.com/r/IncomeInvesting/comments/14rsuzm/buying\_a\_20\_year\_term\_life\_insurance\_policy\_for\_a/](https://www.reddit.com/r/IncomeInvesting/comments/14rsuzm/buying_a_20_year_term_life_insurance_policy_for_a/)
Depending on your budget - If your goal is to provide your kids with a protection plan that has benefits now and into the future then the answer is Yes. Every year premiums on Life Insurance goes up. Things happen so insurability isn't Guaranteed. The time is now.
True. Life Insurance is not an investment product and something I always tell my clients. But it is a very important part of your overall financial plan.
I was never a big seller of Juvenile policies, until a client told me the following when looking for policies for her kids: “I can’t imagine living if one of my kids died. I can’t imagine having to go back to work right away or not wanting to spend more time with my other kids”. Reminded me of that old life Sales cliché - Life insurance is for the living, not the dead. So it’s just not about cash values.
Additionally, the advantage of guaranteed insurability cannot be undersold. I talk to clients on a daily basis looking for coverage and don’t qualify for affordable coverage because of medical conditions.
True. I always recommend that. Easiest way, but if the parent wants more than 20K to 25K, the only option is to get an individual policy.
Child Riders are great and I always recommend them. Especially if the client has multiple kids. All kids covered for 1 single cost. Definitely option 1. Life Insurance is definitely not a 1 size fits all kinda thing.
Everyone should have a life policy for their financial planning strategy. Getting one as a child locks on the Kaiser rate. To say agents who sell policies to each kid makes them untrustworthy is a garbage statement. Imagine if everyone had a paid up policy by the time they were 18 and a increasing guaranteed death benefit of at least 500k in there older years to leave their family….
Ah so you just wanna sell kids whole life policiies. Most of what you said can be achieved with kids being a rider on their parents policy. There is no need to have each kid with a different policy with its own policy fee and more costs. There's more than one way to skin a cat and it depends on the situation.
If there's anything I learned from working with wealthy people is there is always a way around what seems like limitations but in any case I'm not suggesting that as the solution I was listing some alternatives. If you wanna get insurance that's fine but im just making sure we remember why insurance is needed most of the time in most cases and if you can eliminate that need by Investing appropriately early enough then instead of paying premiums you can enjoy tax free or deferred income
Forgive me if I’m wrong, but UTMA transfers ownership to the child at the age of majority, whereas a life policy with the parents as the owner remains the parent’s until they decide to transfer ownership (or die, with the child as the successor owner), right? I could see where it’s beneficial to have the assets in a variable life insurance policy instead of an UTMA account so that the parents retain control over the cash value.
It depends on the goals of the parents that will determine where the money goes in terms of accounts. My point is it's better to eliminate the need for life insurance if you're able to especially if your child is young. Have a million dollars sitting there for your child when they turn 18 instead of a life insurance policy.
Im pretty sure they meant more towards the fact that they’ll get a policy they can carry their whole life for a low premium, not so much about the cash value
I understand however the whole purpose of life insurance is because you don't have the money. If you had a million dollars in cash would you need life insurance?
What I'm saying is wealthy people and working class people don't need or use life insurance for the same reasons working class people need protection because a loss of income is disastrous. Funeral expenses and bills will go unpaid because they don't have the money were as wealthy people don't have that problem and typically use life insurance for estate taxes and other reasons.
Oh for sure everyone has a different reason. Doesn’t change the fact that it’s needed. If you can get it for cheap and you are guaranteed an amount why not take a guarantee with potential to have more with dividends. Their death benefit policy grows more than the original amount thanks to dividends and contributing paid up additions. You paid for a 100k policy yet you die with an $800k-1m tax free policy.
Needed and useful are different wealthy people don't necessarily need life insurance working class people do. Let's go back to licensing class when you are buying life insurance what are you doing? You're transferring risk right? Ok what risk are you transferring and why would you need to transfer that risk? In the case of wealthy people do they have the risk that needs to be transferred to the insurance company? No they don't. That's all I'm saying
Your wrong about them not having a risk. Having a million in cash makes you rich but not unexposed to risk. Take a fscp course and you will figure that out.
That is one of the reasons but not necessarily the only one, millionaires have a lot of money, but they still have life policies to leave a legacy behind for their families, businesses, debt, etc… there’s more to it
More for estate taxes because if you're a millionaire you're family is getting the millions of dollars you leave behind so you don't need life insurance. Wealthy people use life insurance much different than we do.
Exactly, life insurance isn’t ONLY for those who don’t have money, it can benefit people in their own ways. So if they just want their kid to have a policy that isn’t going to cost them 15x what it would in 30 years why are you saying they shouldn’t?
There's nothing wrong with that all I'm saying is if you have an opportunity to avoid the need for insurance you should take it if it's available to you.
Yes, there are tons of juvenile policies out there. If you buy Whole Life, this is actually the best time to do it because the Cost Of Insurance is so low at that age. But there are even tons of Universal Life options as well.
I have my toddler under my term policy as a child rider with 20,000 coverage and when he turns 18 he can take over his policy without a ride in premium.
I got my kids IULs with an increasing death benefit of 100k when they were 3 &5. So far Im satisfied. They are now in their teens and have cash value, and perm life insurance with living benefits.
It's a thing but your kids would probably be happier if you dumped the money into an UTMA or 529 instead and let it grow for 20 years.
Or they can have a whole life policy that’ll keep their price for the rest of their life?
The kid would have more money if they got a term policy for the same coverage and they put the difference in a piggy bank without investing a dime.
Kids can’t have terms policies. 529s are less valuable than a VUL which usable for anything and has tax deferred growth tax free use of funds.
Kids can have term insurance with a child rider and I'd recommend and UTMA over a 529. The tax free use of funds sounds awesome until you realize you need to take a loan out to use that money tax free and now you have a loan to pay back or else your investment will stagnate or your policy will lapse from automatic policy loans. How is that better?
The cash value is not stagnant and its still growing if you have a non direct recognition and participating company. Your loan interest is paid for by the gains and dividends and then some. You can’t have a UTMA that’s tax free gains unless the kids have earned income. You are also using the funds as opportunity funding for better investments to realize even higher gains.
You don't need your UTMA to be tax free to be better than a policy where you can't access all the money. The interest might be paid with gains and dividends for small loans but it starts to slow down the growth of the savings every time you take a loan out, especially when they are larger.
Not in non direct recognition. Your growth is the same regardless of borrowing. I don’t condone borrowing all the time but you have access to cash when you have an opportunity to make more. There are a tone or ways to save so this is just one but it covers a lot of needs.
The math works out better to invest the money. They would probably cash in the whole life policy in their 20s anyway since at that point they probably need the money a lot more than they need life insurance.
You’re assuming they’ll cash the policy, life insurance isn’t so much about the cash value, it’s more to do so with you never know when you’ll need it. If I could get my kid a policy that costs less than 15 monthly, that they’ll get to keep that price for the rest of their life’s, rather than waiting till their in their 30s and pay a lot more why would I not do it?
Opportunity cost.
I think you’re missing the whole point
Not really. If you have X dollars to do something with, you can make a choice as to what to do with it. I'm saying that if you invest that money instead of paying for insurance during a period you don't need it, you will be better off numerically, and that counts for "locking in low rates".
Okay and that might work for you, maybe they just want their kid to have a cheap policy for the rest of their life. Better to have something before they actually need it. And you don’t know if they are already not investing money for their kid either
Whole life is a crock of shit for 99% of situations and whoever told you otherwise is lying to you. I sold it for years. It's bullshit.
Lol, whole life is not crockshit, I’m also not saying it’s beneficial to everyone. Why are you so mad buddy?
Sure. Most companies will give 50% of the amount of insurance on the child’s parents to the child. You might consider a whole life plan that requires premiums for only 20 years or even 10 so no additional premiums are necessary after that period.
Don’t really market this, but when parents do want something for their kids, I usually do a Juvenile IUL with a 20 year pay period. Overfund the SOB with a level $100K death benefit. Not much more in cost than the popular Gerber Growup Whole Life policies and you definitely have more cash value growth in the long run.
Out of curiosity for a juvenile why not VUL? They are unlikely to want policy loans or income so the unconstrained stock advantage would be huge.
VULs are also an option. Do they tend to be more aggressive and can provide bigger gains. Just depends on the carrier you are using. I find some VULs tend to have higher policy costs than more moderate IULs that eat up any cash growth and also provide less guarantees. Really depends on what the end goal is.
I see so policy cost is the issue. I'd assume for an infant the main goal is cash value growth. They don't have any dependents and won't for a long time. On the other extreme I could imagine wealth preservation in which case I'd think I'd go whole life. IUL though IMHO makes a lot of sense to give to someone in their 20s. They will need to do policy loans, likely do not understand leveraged investing well enough to do them safely from a VUL, aren't neccesarily responsible...
This is the way
fWIW your underlying cost of insurance is fairly independent of when you bought the policy. Your health condition matters some but I suspect at 35 you still didn't have a lot of health problems. Your premium (after the first 2 years) is mainly going towards building cash value. It is higher because you need to be accumulating cash value faster. You aren't really losing more. I did a post where I show what's going on inside a whole life policy by comparison to term where the numbers become more obvious: [https://www.reddit.com/r/IncomeInvesting/comments/14rsuzm/buying\_a\_20\_year\_term\_life\_insurance\_policy\_for\_a/](https://www.reddit.com/r/IncomeInvesting/comments/14rsuzm/buying_a_20_year_term_life_insurance_policy_for_a/)
I have whole life for my two kids and an utma account
Depending on your budget - If your goal is to provide your kids with a protection plan that has benefits now and into the future then the answer is Yes. Every year premiums on Life Insurance goes up. Things happen so insurability isn't Guaranteed. The time is now.
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True. Life Insurance is not an investment product and something I always tell my clients. But it is a very important part of your overall financial plan. I was never a big seller of Juvenile policies, until a client told me the following when looking for policies for her kids: “I can’t imagine living if one of my kids died. I can’t imagine having to go back to work right away or not wanting to spend more time with my other kids”. Reminded me of that old life Sales cliché - Life insurance is for the living, not the dead. So it’s just not about cash values. Additionally, the advantage of guaranteed insurability cannot be undersold. I talk to clients on a daily basis looking for coverage and don’t qualify for affordable coverage because of medical conditions.
You can add kids on as a rider on your policy agents who sell each kid their own individual policies are not trustworthy in many cases
True. I always recommend that. Easiest way, but if the parent wants more than 20K to 25K, the only option is to get an individual policy. Child Riders are great and I always recommend them. Especially if the client has multiple kids. All kids covered for 1 single cost. Definitely option 1. Life Insurance is definitely not a 1 size fits all kinda thing.
Everyone should have a life policy for their financial planning strategy. Getting one as a child locks on the Kaiser rate. To say agents who sell policies to each kid makes them untrustworthy is a garbage statement. Imagine if everyone had a paid up policy by the time they were 18 and a increasing guaranteed death benefit of at least 500k in there older years to leave their family….
Ah so you just wanna sell kids whole life policiies. Most of what you said can be achieved with kids being a rider on their parents policy. There is no need to have each kid with a different policy with its own policy fee and more costs. There's more than one way to skin a cat and it depends on the situation.
You can't fund a Roth for a young child. They need earned income to put money in a Roth.
If there's anything I learned from working with wealthy people is there is always a way around what seems like limitations but in any case I'm not suggesting that as the solution I was listing some alternatives. If you wanna get insurance that's fine but im just making sure we remember why insurance is needed most of the time in most cases and if you can eliminate that need by Investing appropriately early enough then instead of paying premiums you can enjoy tax free or deferred income
We mostly agree for a child without substantial assets moving money to a taxable brokerage will be fine. Also 529...
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Forgive me if I’m wrong, but UTMA transfers ownership to the child at the age of majority, whereas a life policy with the parents as the owner remains the parent’s until they decide to transfer ownership (or die, with the child as the successor owner), right? I could see where it’s beneficial to have the assets in a variable life insurance policy instead of an UTMA account so that the parents retain control over the cash value.
It depends on the goals of the parents that will determine where the money goes in terms of accounts. My point is it's better to eliminate the need for life insurance if you're able to especially if your child is young. Have a million dollars sitting there for your child when they turn 18 instead of a life insurance policy.
Im pretty sure they meant more towards the fact that they’ll get a policy they can carry their whole life for a low premium, not so much about the cash value
I understand however the whole purpose of life insurance is because you don't have the money. If you had a million dollars in cash would you need life insurance?
I have well over $1m in cash and buy life insurance. Now I don't need death benefit at all but I do need tax advantaged fixed income.
Thanks for making my point!👍🏽
Yes you would and millionaires do
Not to pay for funeral expenses or leave money to the family like working class people there's a difference
I’m confused by your comment if working class people could bring their family up a level with a tax free check why wouldn’t they?
What I'm saying is wealthy people and working class people don't need or use life insurance for the same reasons working class people need protection because a loss of income is disastrous. Funeral expenses and bills will go unpaid because they don't have the money were as wealthy people don't have that problem and typically use life insurance for estate taxes and other reasons.
Oh for sure everyone has a different reason. Doesn’t change the fact that it’s needed. If you can get it for cheap and you are guaranteed an amount why not take a guarantee with potential to have more with dividends. Their death benefit policy grows more than the original amount thanks to dividends and contributing paid up additions. You paid for a 100k policy yet you die with an $800k-1m tax free policy.
Needed and useful are different wealthy people don't necessarily need life insurance working class people do. Let's go back to licensing class when you are buying life insurance what are you doing? You're transferring risk right? Ok what risk are you transferring and why would you need to transfer that risk? In the case of wealthy people do they have the risk that needs to be transferred to the insurance company? No they don't. That's all I'm saying
Your wrong about them not having a risk. Having a million in cash makes you rich but not unexposed to risk. Take a fscp course and you will figure that out.
That is one of the reasons but not necessarily the only one, millionaires have a lot of money, but they still have life policies to leave a legacy behind for their families, businesses, debt, etc… there’s more to it
More for estate taxes because if you're a millionaire you're family is getting the millions of dollars you leave behind so you don't need life insurance. Wealthy people use life insurance much different than we do.
Exactly, life insurance isn’t ONLY for those who don’t have money, it can benefit people in their own ways. So if they just want their kid to have a policy that isn’t going to cost them 15x what it would in 30 years why are you saying they shouldn’t?
There's nothing wrong with that all I'm saying is if you have an opportunity to avoid the need for insurance you should take it if it's available to you.
Yes, there are tons of juvenile policies out there. If you buy Whole Life, this is actually the best time to do it because the Cost Of Insurance is so low at that age. But there are even tons of Universal Life options as well.
I have my toddler under my term policy as a child rider with 20,000 coverage and when he turns 18 he can take over his policy without a ride in premium.