The Principled Way to Buy + Sell Life Insurance

Think about the nature of life insurance for a moment.

Total cost of purchase is often one of the largest capital commitments that a person can make.

Most other significant assets acquired can be readily sold and replaced if desired.

Not life insurance.

Initial product purchase decisions will make or break the success of their decisions about their estate plans. Life insurance can be difficult to change. Quitting can result in significant financial losses. Most people assume you can simply get a non taxable refund of your investment like is typically available with traditional investments.  Even the cost base that determines the taxable amount of the cash surrender has an element of taxation. Once known, even most accountants are surprised that a taxable gain is NOT a capital gain and there is an element of double taxation because the cost base is less than the amount deposited.

We generally don’t think about life insurance in that way.

When one wishes to consider the effectiveness of their life insurance, flexibility and options are always the critical policy contract design considerations.

To win you need to diversify a life insurance portfolio. Otherwise you're simply guessing about an unknown future. The house (the insurance company) always wins. People can win as well.

We may choose to rationalize the reason to buy life insurance is for peace of mind.