[jIM_Ohio]

I am not an insurance agent. I know what I read and what I have. I am willing to pay for flexibility and pay for a service/product.

Here is my total "picture" as I paint it.

age 34/ wife is 33. We reply on each other's income for the most part... especially because I like to save a huge chunk (close to 20%). One of my wife's two monthly paychecks is invested each month when life is normal...

I contribute 10% to my 401k, which is approaching 6 figures.
Wife contributes 6% to her 401k which is approaching 5 figures. She also has a 5 figure rollover IRA
I have 3k in a rollover IRA from a pension plan from a company which bought us out/sold us off.
I contribute 4k to my Roth each year. That account is low 5 figures.
My wife's Roth gets opened in May of 2007. 4k each year.
That is what I have marked as retirement assets.

We have 300 term policies for my wife and I. This will pay off any debt we have (mortgage, cars) in event either of us dies. The goal is to allow the other spouse to keep working and not have the bills of two people. It is not money to live off of if other dies, it's money to clean up finances and allow one paycheck to sustain what we currently need two paychecks for.

We each have 25k permanent policies. This is for funeral expenses. We know we will die... we know this expense is real. We insure against it for life.

The permanent+term payments for both wife and I is $129/month ($650,000 of total coverage). Most of that is the permanent policy. Money going in is post tax. If we collect insurance premiums, that money is tax free (on death of spouse). If we take a loan, I think the loan is tax free... but my insurance agent would be the one to tell me for sure. If there is more cash value in the account than the payout, then the payout is the cash value (and not policy value). The cash value is indexed to S&P 500. The value goes up by S&P 500's increase (no dividends), capped at 12%/year (I think it's 12%, there is a cap). If S&P goes down, cash value increases a nominal 1% from previous year. Cash value can never decrease year over year.

I trust my agent, and from what others have told me, he made a great commission off the 2 permanent policies. But I received a good product at a fair cost. We are in year 3 of 20 yr 300k term policies. It is possible in 17 years we could not get insurance (if health worsens). This policy is cheap for us now. The same policy 20 years later would have cost us MUCH more... we locked in premiums as younger people. This is the cost which you cannot quantify with "buy term and invest the difference".

The way the permanent policies work, is if my permanent premium was "60/mo" (I don't know the break down of premiums for 4 policies, we have one bill and pay the one bill automatically each month), after 25k of premiums are collected, the cash value would probably be well north of 25k (with S&P increases feature). I think it's around year 15 or year 20 when this happens. Within 30 years, the cash value will be well north of 100k with average S&P returns (7%). No need for 300k term at that time because Mortgage should be paid off.

The cons to this:
cost (there might have been cheaper ways to accomplish this)
funeral expenses today cost 10-20k. No guarantee a funeral for me when I'm 80 or 90 will cost 25k.

This is an emergency cash reserve... it is expensive to cash in... but we could do it if medical bills hit or something like that happens.

We use the same insurance agent for car, life and house insurance. He lives and works in the community and I put some merit into that.