With four kids to raise, I have always maintained a good amount of life insurance coverage. Over the years, I have made changes from time to time to take advantage of lower costs and newer plan designs. I like having permanent coverage with high cash values as extra protection. The cash values are protected from creditors and can be accessed on a tax-advantaged basis if needed.
Most recently, I moved my policies to a no-load insurance carrier. No-load life insurance hardly exists, but I found one and decided to try it out. The medical approval process was long and arduous, as it always seems to be (and I’m pretty healthy). Policy service is also lacking, but I’m not paying an agent so I guess it’s a fair trade-off.
There are no commission loads on the policy so there are no surrender charges on any money accumulated in the cash value of the policy. Most of the cash value is invested in very low cost mutual funds (called sub-accounts in life insurance policies) at a fraction of the cost associated with investments within a normal loaded policy.
If I want to pull money out, they charge me a $20 fee and it has to be at least a $1,000 withdrawal (called a partial surrender). I am starting to use the additional money paid in as a separate savings account. My policy pays over 4% in interest and is protected from creditors in Texas.
I have to be careful and keep my contributions in line with the tax laws that govern life insurance. However; if I fund my policy below the limits allowed by the IRS, I can specify withdrawals as a partial surrender of basis and pay zero tax.
Even with mediocre service, the benefits of low cost and high flexibility have made this a good move. If I wanted to, I could just pay the minimum premium required and the policy would not accrue any cash values, just like term insurance. However; unlike term, it would never expire.
I believe no-load life insurance policies are the future of what life insurance will look like over the coming years. Traditional distribution channels through dedicated life insurance agents continue to dry up as agents move more towards mutual fund and annuity sales. More and more registered investment advisors, like my firm, are looking for a transparent product to help their clients with their life insurance needs. A few creative, forward-thinking insurance companies are starting to answer the call.
If you have questions or further interest, contact me by clicking here: http://schulzwealth.com/contact-us and I will be happy to assist you.
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