What time of whole life insurance can you use as an investment vehical and how?

Technically, the money you put into a whole life policy isn't yours. If you wanted to use it, you have to borrow it and pay interest on it. If you took money out of savings account, do you have to pay monthly interest on it or fees? In whole life insurance, you do.

When you die, you may lose all the cash value. Isn't that sucky?

If you want to invest, you are better off opening a Roth IRA and invest into mutual funds. If you want life insurance, get term insurance instead. That way you are renting wealth for your family while building wealth for the future. Down the road, you may or may not need life insurance anymore.

I believe there are really only two types of permanent life insurance policies that can be used for what you suggest. Neither Whole Life nor basic Universal Life provide for much growth at all. Most only pay about 4% or so, and that almost doesn't even keep up with inflation.

However, Variable Universal Life and Equity indexed Universal Life are different animals.

The first has within it sub-accounts that go out into the market. Here you accept the market risk, though some of the VUL's out there now also have a fixed or conservative asset allocation model within them for you to choose if you prefer. That means that you can get full market potential (both up and down); but historically it's averaged 12% over time. (You have to look at your own time line to see what your risk would be). Also, some companies are now beginning to allow you to have the money within your subaccounts professionally money managed = depending on base amounts in there = for a nominal fee.

Equity Indexed Universal Life products usually have a guarantee of a floor of somewhere about 1-2% with a possible cap of 12% or more. Some of the newer products coming out have are being mentioned as having no cap at all. That means if the market goes down and tanks, you still get your 1-2%; while if it goes up, you can get your 12% or more if they allow it (to whatever their cap is). Equity indexed products look at some "index" over a year to determine what the percent is -- often, but not always, this index is the S & P 500.

One of the things you often hear people screaming about, usually those who have no real idea how a VUL works or who don't have the required licenses to sell them so they have to badmouth them in order to sell you what they do have, is that there are fees involved. Yup, there absolutely are. Almost invariably those fees are MUCH less than the other fees -(taxes) - that you would pay to the government if your money was outside of the tax advantage shelter of the insurance product. If your VUL is structured correctly, you can also access the cash value without taxes.

What you absolutely have to do is to sit down with a professional - one who is licensed to sell variable products. Have him/her explain the pros and cons of each type of product for you in your own situation.

BTW: you may also hear some folks, even some here, scream just buy term and invest the difference. Good idea. That's EXACTLY what happens inside a VUL with some extra tax benefits as well. They just don't realize that is what's going on in there.

(Addendum) One of the folks above says that: 401k's are the "enemy of insurance companies" . Hardly! Remember that when you pull money out of your 401k, you will be taxed on it at regular income rates. Let's assume, just for fun, that you want to pull out $90,000 per year from your 401k. Let's also assume you're in about the 30% tax bracket. That means about $30,000 would go in taxes, and you'd get to live on about $60,000 for the year. If you had that growth within a VUL, Equity Indexed Universal Life, or other Tax-advantage product, you could pull out the $90,000 and live on the $90,000 since it wouldn't be taxed.) 401k's were initially set up as a supplemental retirement vehicle for folks to add to their pensions. However, pensions are pretty much a thing of the past now, so lots of folks are being left to fend for themselves and lots of them are in for some nasty surprises in a few years because they're not really sure just how those 401k's work. It is so very sad when I hear the surprise in people's voices when they find out that they WILL be taxed on the money coming out of their 401k's. A lot seem to believe that there will be no tax on that money.)

there are 2 schools of thought here.
1. Variable Universal Life. It is a combination Life Insurance and mutual fund investment. Part of your premium goes to the life insurance, part goes to your investments in the policy. This allows the "Cash Value" of your policy to grow, allowing you to take tax free "Loans" down the road while still keeping the life insurance. Your money grows tax free or tax deferred in this. However the fees assessed on your mutual funds are high and this will slow growth some.
2. Buy term insurance, and invest the rest in mutual funds. Term insurance is far cheaper, so you would take the money you save and put it in mutual funds outside of your insurance policy. The growth on your mutual funds is taxable, but the fees are far lower, and it is much easier and more flexible if you want to use your funds. No rules.

There is no "perfect" answer. It depends on your age, what your goals for this investment are and other factors. Find a good prfessional, who can do either program (Not just one or the other) and pencil it out.
Great question and best of luck!!!

LIFE INSURANCE, it's JUST not an investment. Not any kind, not no way, not no how. You might as well stick the cash in a mayo jar - then if you need to "cash out" in the first five years, you're AHEAD of the game. No surrender charges, penalties, fees, etc.

People SELL life insurance as an investment, because it sounds neat. They mainly sell it to people who are dumb about money. When these people educate themselves, they usually let the policy lapse - no use throwing good money after bad.

DO THE MATH. You're not going to come out anywhere NEARLY ahead as the insurance company. If you're bound and determined to use insurance companies as an investment vehicle - buy their stock. You'll do better.

Most people need life insurance when they are young and have a family, mortgage and other debt. They use life insurance to protect their families by providing money to take care of all the above, and/or to replace their income.

As you get older, the amount of insurance you need should get smaller. You have paid debts, mortgage and even saved a few bucks. The kids grow up and college bills are behind you now. You have assets and little or no debt.

For these reasons, by term insurance when you are young. It is cheapest and 15 years down the road, you won't have too much into it to give it up when you no longer need it. Whole Life, Universal Life could have tax consequences and you have so many years and money into them that you won't want to quit, even though you may not need the insurance. Not only that, but if you were to buy a Whole life or U life policy, you couldn't afford to pay the price for the actual amount of coverage you need when you are young. You can get the coverage you need at a much better price when you buy term insurance.

Make sure the term policy is renewable and watch the premium increase. How long are the premiums locked in for? Will you have to qualify for the policy a few years down the road (health wise)? How many years do you need the coverage?

Today the 401k is the big enemy of insurance companies. People who have worked long enough putting money into a 401k, in effect have become self insured. Keep that in mind when you are deciding on how much coverage is enough.

If you are young and have a young family, please protect them, but be wise about it. Like others have said, don't use your life insurance as an investment, use it to proctect your loved ones. You can do much better with investing, a whole life or u life policy may not be the best place to invest your money.

Good luck!

That sounds like a question from an old text book.
Be very careful when you use the words life ins and investment together like that. Many companies have been fined millions for selling life insurance as an investment vehicle.

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