Cash-value life insurance

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DaDaDan
Posts: 2
Joined: Mon May 19, 2014 8:36 am

Cash-value life insurance

Post by DaDaDan »

(Second post today...hopefully I'm not wearing out my welcome! But, I love this tool. I built something similar but much simpler in Excel VBA for my father several years ago.)

My question is if anyone has any advice on how to account for cash-value life insurance in this thing -- both paying in and taking loans/withdrawals.

AllenAndrew
Posts: 4
Joined: Sat Aug 30, 2014 11:27 am

Re: Cash-value life insurance

Post by AllenAndrew »

I have one way to do it. Right or wrong-someone else can pile on.
Whole life policies have fixed premiums, and many policies are designed to allow 'superfunding" - that's my term. Basically it means adding additional $$ to annual premium. Whether you pay only premium or you are superfunding, add the annual amount separate from your annual budget as Additional Expenses (input-no COLA)for as long as you plan to pay premiums. How long is that?

At some point your policy will have enough cash value to pay the premium. If you simply want to know when that occurs ask your agent for an Inforce Illustration on your policy. This is the simple way to account for the expense and then an end to that expense. It gets more complicated if you want to pull out cash values to fund retirement expenses. In that case you will need to decide how long you want to pay premiums, ,how long you are able to superfund, and how long you want to derive income- first money comes out as tax free income, when the cash basis is exhausted you then can take out dividend income as a tax free loan. Again, your agent can help you with this. IMHO: This is what makes the case for whole life policies, especially for young people who don't have discipline to save and invest.

Does this help?

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