Is a Life Insurance Policy part of Portfolio

[street]

Would you use the cash value of a Life Insurance Policy as part of your portfolio total amount?

 

[RunningBum]

Would you use the cash value of a Life Insurance Policy as part of your portfolio total amount?

I don't, because I don't know that I'll cash it out, so it doesn't make sense to base my WR on my portfolio with that included. If you plan to cash it out, I would include it.

Is there another reason for asking?

If it's for bragging rights, I'm not interested enough to have an opinion.

 

[street]

I seen a thread about life insurance and I was wondering if people use that cash in value in there portfolio numbers.

I guess LIP don't fit in at all with a net worth or portfolio.

Thanks

 

[ziggy29]

If I had no intention of ever cashing it out before it went to heirs, I wouldn't include it. If it factored in my future financial planning -- say, cashing it out for retirement once I no longer had need of the death benefit -- then it would be reasonable to do so.

That said, I much prefer the idea of buying term insurance and investing the difference in premium.

 

[CRLLS]

I did include the cash value as part of my Net worth calculations. Last year I annuitized it and now consider it a small fixed pension. It was a very old policy and the cash value was a small part of the overall. The annuitization is my way of getting even with the LI company collecting my premium for all those years. Now they will pay me (or my wife) for at least 10 yrs and hopefully 20 more. It covers a couple of nights' dinners per month.

 

[rk911]

what little whole life we had was not included in our net worth. we have since cashed it all in and now have two very modest term policies issued by our respective retirement systems. with our current net worth and zero debt we have no need for life insurance.

 

[Retiredmajor]

I have a Term Policy through age 70, so in that sense, yes. It's part of my plan in the event I die before she does.

 

[38Chevy454]

What they all said before me. Insurance is to cover what you can't easily cover out of your savings. But once retired, chances are you do not need it for wage replacement. So if you need the money for retirement, cash it in. If you don't, and planning for heirs then leave it. If you think you need a death benefit, cash it in and get a term policy.

 

[pb4uski]

Would you use the cash value of a Life Insurance Policy as part of your portfolio total amount?

Yes, I do. At this point, I view the cash value as a bond-equivalent... negligible credit risk, no interest rate risk and a decent rate of return (3.6% for FY2018).

I doubt that we'll ever cash it out because the tax-free death benefit is about 188% of the cash value.

The CSV is only 1.3% of our nestegg, but I have it set up in Quicken so it comes in automatically.

 

[street]

pb4uski >> thanks, and that is how I would view it also. I don't apply any LIP's in my portfolio now but really why not.

My plan is to change my son as the owner and I will stay the insured.
Thanks again for your insight.

 

[kcowan]

Yes, I do. At this point, I view the cash value as a bond-equivalent... negligible credit risk, no interest rate risk and a decent rate of return (3.6% for FY2018).

I doubt that we'll ever cash it out because the tax-free death benefit is about 188% of the cash value.

The CSV is only 1.3% of our nestegg, but I have it set up in Quicken so it comes in automatically.

Mine is to compensate DW for the loss of the DB pension. If I am the last to go, it will pay the capital gains tax due on unregistered equities/properties for my heirs.

 

[pb4uski]

My pension is 100% joint life so I don't have either of those issues.

 

[CRLLS]

My decision to settle the LI policy with the annuitization was that, since DW and I had together paid the premiums as a couple all these years, then we as a couple should reap the benefit, however small it might be. She will be set when I die without the benefit of the small LI policy. Since she never had LI, that also puts us even if she goes first.

The decision could have gone either way in reality. Much like paying off the mortgage or AA of 60/40 or some other ratio. I don't believe there is one universal answer.

 

[pb4uski]

^^^^ Never would have crossed my mind.

 

[CardsFan]

I track our whole life policies as part of our portfolio, but don't use it in any of the numbers I report here, or when considering asset allocation, as we do not intend to cash them out. In our case, for two policies, the total ratio of death benefit to surrender value is 2.5

But this thread has started me thinking about changing the beneficiaries on both policies to our DS instead of each other. When one us goes, the survivor won't need the money, and when the second one goes, he gets it anyway.

 

[Gumby]

My young wife is not entitled to social security on her own. Due to the Governmental Pension Offset (GPO), she will not be entitled to a survivor benefit when, as is likely, I predecease her. For that reason, I have a paid up whole life policy, which will easily make up for my lost social security income if annuitized. The death benefit can also be used for long term care if I have a terminal illness.

In the interim, I take pb4uski's approach in treating the cash surrender value as a very safe bond equivalent in my portfolio, since I will just surrender the policy and take the cash if my wife is the first to go.

For context, we have no children and so no need to leave money as a bequest.