Finding Value in Cash-Value Insurance: A Guide to Picking the Right Policy
I hate writing about cash-value life insurance. Sure, financial planners are a little touchy. Yes, brokers occasionally go postal. But insurance agents take the prize, forever filling my in-box with angry e-mails.
Still, like a masochist in search of his next fix, I feel compelled to write about these policies. The fact is, cash-value life insurance is a huge business, with individuals forking over more than $90 billion in annual premiums, according to the American Council of Life Insurers in Washington.
Thinking of purchasing one of these products? Here's a buyer's guide to cash-value life insurance.
Should I buy? My initial reaction: Don't. Instead, get low-cost financial protection for your family by purchasing term insurance, which offers a death benefit and nothing more.
In fact, if you want a little fun next time you see your insurance agent, just mutter, "Buy term and invest the difference." Most agents loathe this strategy.
Instead, they will push you to buy cash-value life insurance, which combines the pure insurance of a term policy with a tax-favored investment account. That will mean a fat commission for them -- and much bigger premium payments for you.
Nonetheless, buying a cash-value policy could be a smart move, but only if you are maxing out on your individual retirement account and 401(k) plan, you will need life-insurance coverage for at least 15 or 20 years, and you are confident you can afford the premiums.
Which type of policy makes sense for me? Cash value comes in three flavors.
Whole life offers a steady return comparable to what you can get on high-quality bonds. Universal life earns varying interest rates. Variable life lets you pick from among a host of investment options, everything from money-market funds to risky foreign stocks.
As you try to figure out which type to buy, think about what role the policy will play in your portfolio. For instance, you could count the cash value in a whole-life or universal-life policy as part of your bond holdings.
On the other hand, if you are an aggressive investor who is comfortable owning stocks, variable life may be the way to go. Indeed, Brian Fechtel , a Northwestern Mutual agent in Port Chester, N.Y., reckons that -- to overcome the high ongoing costs of a variable-life policy -- you really need to invest at least 60% of the cash value in stocks.
Should I stick with mutual insurers? The insurance business is split between mutual companies, which are supposed to be run solely for the benefit of policyholders, and stock companies, which serve both policyholders and the shareholders who own the company. Experts often advise sticking with the large well-run mutuals, like Guardian Life, Massachusetts Mutual, New York Life and Northwestern.
"The biggest reason for favoring mutuals is they don't have to share profits with other owners," says David Barkhausen, a fee-only insurance adviser in Lake Bluff, Ill. "Instead, those profits come back to policyholders in the form of dividends, a higher interest crediting rate, or a lower insurance and expense charge."
Sticking with a mutual company may not seem quite so critical with variable life, where your cash value's performance depends not on the insurer's investments, but on the separate accounts you choose. Still, even with variable life, you can benefit if an insurer does a good job of holding down insurance and overhead costs.
Am I getting a good deal? When you buy a cash-value policy, there are two big costs: the initial commission and the ongoing expenses.
You can get a handle on the initial commission by looking at the projected cash surrender value at the end of the first few years. At that point, policies will often have little or no surrender value. You can sidestep this cost by going to a no-load outfit like Ameritas Direct, a unit of Ameritas Acacia, or TIAA-CREF.
Alternatively, if you buy through an agent, you could trim the initial commission by purchasing a blended policy that combines a small cash-value component with a substantial amount of term insurance, and then quickly build up the cash value by taking advantage of the "paid-up additions" rider. "By blending, you can trim the commission by 85%, if not more," Mr. Fechtel says.
While it is relatively easy to gauge the hit from the initial commission, it is far tougher to figure out which policies will have the lowest ongoing costs. Mr. Barkhausen's advice: First look to mutuals like Guardian and Northwestern that have a history of careful underwriting and tightly controlling expenses. But he notes that people with health problems may fare better elsewhere, if they can find an insurer that will give them a more preferable health classification.
Which special features should I buy? Mr. Fechtel says it is often worth paying up for the "waiver of premium" feature, which ensures the policy won't lapse if you become disabled and can't afford the payments.
But he advises skipping other features, like riders that pay extra if you are killed in an accident or one of your kids dies. He says you should also look carefully at the financing charges involved before you opt to pay your annual premium in monthly installments.
现金值人寿保险的挑选策略
我真不愿意谈论现金值人寿保险。可不是吗，金融规划师对此颇为不快；经纪人偶尔也会生气。而反应最强烈的当属保险代理人，他们怒气冲冲的电子邮件永远塞满了我的电子信箱。
然而，就像某些“吃饱了没事干”自己找罪受的人那样，我感到非写这种保险产品不可。事实上，现金值人寿保险的规模庞大。根据位于华盛顿的美国人寿保险委员会(American Council of Life Insurers)的统计，该险种的个人年缴保费总额已超过了900亿美元。
想购买此类保险吗？下面为您提供一些购买建议。
--我是否应该购买现金值保险？笔者最初的反应是：不。相反，人们可以购买成本较低的定期人寿保险产品为全家提供财务保障。定期寿险只提供死亡抚恤金。
如果您下次见保险代理人时想逗逗对方，您只要轻声说：“我要购买定期寿险，剩余资金进行投资。”大多数代理人对这一策略十分厌恶。
他们会转而鼓动您购买现金值寿险产品，它不仅具有定期寿险的保险功能，还拥有一个能享受税收优惠的投资帐户。这意味著代理人们能获得一笔丰厚的佣金，而您所需支付的保费则大大上升了。
尽管如此，购买现金值寿险产品也可能是个明智之举，前提是您已充份享用了您个人的退休帐户和401(k)计划。该险种的投保期限至少为15至20年，而且您对负担保费得有充份把握。
--哪种现金值寿险产品适合我？现金值寿险产品有3个品种。
终生人寿保险能提供与优质债券旗鼓相当的稳定投资回报；万能人寿保险则通过利率的变动赚钱；变额人寿保险能让您选择各种投资渠道，从货币市场基金到高风险的外国股票，包罗万象。
当您琢磨著购买哪种产品时，请您考虑这份保单将在您的投资组合中发挥什么作用。例如，您可以把终生寿险产品或是万能寿险产品的现金价值进行债券投资。
另一方面，如果您是一位十分踊跃的投资者，喜欢购买股票，那么变额寿险产品也许对您的胃口。Northwestern Mutual驻纽约州的代理人布莱恩?费什特(Brian Fechtel)推测，为了抵消变额寿险产品居高不下的成本，您至少得把其现金价值的60%投资于股票。
--我是否只应该购买互助保险公司的产品？目前，保险产品是通过互助保险公司和股份保险公司出售的，前者仅限于为保险客户服务，而后者同时为保险客户和股东服务。专家们通常建议投保人考虑大型互助保险公司，如Guardian Life，Massachusetts Mutual，纽约人寿(New York Life)以及Northwestern等。
伊里诺斯州的收费保险顾问戴维?达克哈森(David Barkhausen)说：“选择互助保险公司的最主要原因是它们不必与他人分享利润。”公司获取的利润将以红利、较高的存款利率，或是较低的保险及相关费用的形式返还给保险客户。
对于变额寿险产品，是否局限于互助保险公司就不那么重要了，因为现金价值的投资业绩来自您选择的独立帐户，而非保险公司自身的投资。即便如此，如果互助保险公司能成功地降低保险及管理费用，您自然还是受益的。
--这是笔好买卖吗？当您购买现金值寿险产品时，会产生两大开销：期初佣金和持续支出。
保险单上预测了您在投保后最初几年退保时所获的现金价值，您可据此推测期初佣金。通常情况下，投保这么短的时间是几乎没有现金价值的。您可以通过Ameritas Direct和TIAA-CREF等公司购买免佣保险产品而省去佣金。
如果您是通过代理人购买保险的，您可以通过购买混合型保单来削减期初佣金。这种保单包含了少量的现金值寿险成份，但大部份是定期寿险。购买后，您可以利用购买附加险来迅速提高现金值寿险的比重。“通过购买混合型保险，您至少可以把佣金降低85%，”费什特说。
估算期初佣金相当比较容易，而计算哪种保单的持续成本最低就难多了。达克哈森的建议是：首先考虑Guardian和Northwestern等一向经营慎重，并严格控制费用支出的互助保险公司。但他同时指出，对于健康状况不佳的人而言，也许投保其他公司更有利，如果后者能给予更好的健康状况评级。
--我应该购买哪些特别保险功能？费什特表示，“免缴保费”一般值得考虑。如果您丧失了劳动力，无法缴纳保费，它将确保保单不会失效。
费什特同时建议忽略其他功能，例如能提供额外赔偿的意外死亡附加险及子女死亡附加险等。他指出，投保人应当仔细审查投保险费用，然后再考虑按月分期缴纳年费。
