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Self insuring thru S&P index fund and term vs Whole Life (WL).

Updated: Dec 29, 2020

Some people say you can self insure and WL is useless.

I ran a comparison using the current difference in premiums between WL and 20 yr term policy with a 750k death benefit, for a healthy 39 yr old male.

If you go back to 1990 & invested all the extra 10,288 which is 857.33 a month (see the charts below), at the time the 20 yr term expired in June 2010, the investment account would be approximately 360K, while the WL has a non guaranteed cash value of 284k and a death benefit of 990K. (the dividends are used for the additional paid up insurance)

Maybe 2010 is a bad year for cumulative stock returns, but that is the point, how do you know the stock market will preform good or average when you need it to.

A few other point to consider.

The life insurance illustration uses the latest dividend interest rate of 6.2%, the average rate over the last 30 years has been an average of 1.64% higher, this is the gross dividend interest before expenses, the net dividend may be even higher.

The death benefit is tax free.

Dividends and draws up to cumulative amount paid are tax free.

Loans are tax free as long as policy remains in effect.

After 20 years most of the policy premiums can likely be covered thru dividends.

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