Announcement

Collapse
No announcement yet.

The "I" in FIRE

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • The "I" in FIRE

    Thus far there has been virtually no discussion about the impact on insurance companies. EJ mentioned in passing on his hyper inflation thread the possibility of tearing up insurance policies for they end up worthless in hyper inflation.

    I would like to hear everyone's thoughts on life insurance policies. Specifically, whole life. My family holds some policies with relatively high cash values. I never liked the idea of whole life and have been getting increasingly nervous about it lately. The particular company we are with is a mutual insurer and was actually upgraded in 2008 and has been awarded AA+ ratings from S&P, Fitch, Moody's, etc. Of course, we saw that those ratings are pretty much meaningless. Our provider is 80% invested in bonds, the rest in real estate.

    I think I may know the answer but wanted to hear the community's thoughts on the issue.
    Last edited by BiscayneSunrise; 02-20-09, 05:59 AM.
    Greg

  • #2
    Re: The "I" in FIRE

    Greg,

    As always, consider not just where you're thinking about leaving from, but where you'd go to.

    Non-inflation indexed fiat currency money contracts are a major risk.

    Even a mere high inflation would largely render them useless; a devaluation or hyperinflation would destroy all benefit.

    But unless your plan is to cash in and buy gold - ultimately what you are paying for is peace of mind as opposed to income/capital.

    So the questions would be:

    1) What would new term insurance coverage for the next 5 years cost?
    2) If 'it' doesn't happen, what is the penalty you would pay for cashing out? vs. a new term insurance for say 10 or 20 years
    3) Is this cash balance a major part of your net worth?
    4) How do new term insurance terms vs. your existing terms compare?

    Not a complete list, but a starting point.

    Comment


    • #3
      Re: The "I" in FIRE

      Thanks for the good insight. These policies are just a relatively small part of our total net worth so their disposition isn't really urgent.

      They are just one leg of a larger program.

      Academically, though. What is your view of the insurance industry, given they invest heavily in bonds and real estate?
      Greg

      Comment


      • #4
        Re: The "I" in FIRE

        Biscayne,

        The term '10 foot pole' comes to mind.

        After all, what is an insurance company but literally millions of small CDS' or similar types of derivatives collected together?

        Multiplied by investment/management risk?

        I already posted a thread on 2 insurance companies who are becoming banks...

        Comment


        • #5
          Re: The "I" in FIRE

          a whole life policy can be viewed as the sum of a term policy and an enforced savings program. in general, if you are an itulip reader, you will yourself invest more conservatively, be more aware of systemic risks, and be less subject to the conventional wisdom, than your insurer.

          Comment


          • #6
            Re: The "I" in FIRE

            thanks gentlemen,

            c1ue, could you direct me to your posts on insurance companies transiting to banks?
            Greg

            Comment


            • #7
              Re: The "I" in FIRE

              http://www.itulip.com/forums/showthread.php?t=8302

              Lincoln and Hartford converting to 'thrift holding corporations' i.e. banks. Thus eligible for Fed alphabet soup.

              Maybe this was talked about previously, but I did not recall it so posted in 'News'

              Comment

              Working...
              X