Allstate mispriced WL for Girls up to age 53 months (4 years 5 months)

[ChasunaFund]

This deal was previously posted as a policy for Newborns, it is actually good up to a little past 4th birthday (though numbers are not as great).

I've run the numbers and am posting here ACTUAL GUARANTEED premiums and cash values, along with a Year Over Year rate of return (how much will I be making if I keep this for the next year), as well as Equivalent Compound Rate of return (how much would I have to average on an investment on an ongoing annual basis in order to match the cash value).

A lot of people are asking when can they or should they pull out. The attached tables should make that decision easy. At any point you can see how this will perform IN THE FUTURE (this is guaranteed, doesn't depend on interest rates or stock market returns). If I know that I can do better, it might be time to move the money into something else, if in doubt or certain that I can't do better (and I don't need the money now) leave it where it is!

IMHO, if Allstate is smart, they will come out with an alternative policy in 15-20 years from today. It will be such a policy that one could roll over the existing cash value into, get more favorable access to it, and end up keeping the funds will Allstate. I really don't think Allstate will end up losing money on this (except if they're really stupid or forget about this block of policies in 15 years). I think this will end up being a great investment for those able to take advantage, and good business for Allstate and the agents.

[ChasunaFund]

Ages 30-52 months

[coralsnake]

Being discussed here:

http://forums.dansdeals.com/index.php?topic=58495.0

[David Smith]

You forgot to calculate the total effective earnings rate averaged over 30 years (which i got about 8% for with the <18 month olds).

[lunatic]

I think the assumption is that most plan to cash out around 20

[David Smith]

I think the assumption is that most plan to cash out around 20

So then put in the effective earnings rate over that time period.

[shie123]

Is the money taxed when taken out?

[ChasunaFund]

You forgot to calculate the total effective earnings rate averaged over 30 years (which i got about 8% for with the <18 month olds).

Didn't forget. Just posted what fits easily.
Also, don't forget that in order to get 8% average over 30 years, you got a few double digit returns in certain years. The year over year returns go down after year 14, but are still extremely attractive.

The beauty here is that everything is 100% guaranteed, so at any given point you know what it will do the next (couple of) year(s).

[ChasunaFund]

Is the money taxed when taken out?

Short answer: yes.
Long answer: If rolled over into a more flexible policy, can be accessed on a tax free basis.

[David Smith]

Didn't forget. Just posted what fits easily.
Also, don't forget that in order to get 8% average over 30 years, you got a few double digit returns in certain years. The year over year returns go down after year 14, but are still extremely attractive.

The beauty here is that everything is 100% guaranteed, so at any given point you know what it will do the next (couple of) year(s).

Don't get me wrong. I think this is an incredible return. Being as everybody should divide their investments into higher and lower risk investments, this is a great place to channel some of the low risk designated money. Add to that the cost of insurance (R'L you shouldn't need it), and you've got yourself a winner. 8% is pretty competitive with most people's standard portfolios, and the no risk factor pushes it's value over the top.

[lunatic]

The insurance itself is useless to anyone planning to cash out after 20 years

[David Smith]

The insurance itself is useless to anyone planning to cash out after 20 years

IY'H

[AsherO]

The insurance itself is useless to anyone planning to cash out after 20 years

If you're taking the 8% investment anyway, the insurance is a nice bonus/freebie.

[lunatic]

If you're taking the 8% investment anyway, the insurance is a nice bonus/freebie.

Correct,  but is not part of the calculation in doing.  I think I am going to do this

[ChasunaFund]

If you're taking the 8% investment anyway, the insurance is a nice bonus/freebie.

I personally believe in the importance of life insurance, even on kids. I know kids that have become uninsurable at different ages. I also had a nephew killed in a car accident r"l.

I don't know of ANYONE that buys life insurance on kids for the death benefit.

The Allstate policy is all about the cash value.

If I were to own one of these Allstate policies, I would roll it over into a better policy once the child grows, assuming she is insurable at that time.

[David Smith]

I personally believe in the importance of life insurance, even on kids. I know kids that have become uninsurable at different ages. I also had a nephew killed in a car accident r"l.

I don't know of ANYONE that buys life insurance on kids for the death benefit.

The Allstate policy is all about the cash value.

If I were to own one of these Allstate policies, I would roll it over into a better policy once the child grows, assuming she is insurable at that time.

+1. The policy's are dirt cheap at this age, have a great earnings return, and are a way to get your foot in the door to covert to a standard plan, should anything happen,  ch'v.

[dovy2]

Why only for girls?

[David Smith]

Why only for girls?

Are you asking allstate why they made a mistake on their mistake? If you want to know why they are surveyed for life insurance differently, females have a higher life expectancy than males.

[ChasunaFund]

+1. The policy's are dirt cheap at this age, have a great earnings return, and are a way to get your foot in the door to covert to a standard plan, should anything happen,  ch'v.

-1
Most juvenile life insurance policies DO NOT have great rates of return.
If cash value is your only objective, a healthy parent would have a better rate of return than a juvenile!

[David Smith]

-1
Most juvenile life insurance policies DO NOT have great rates of return.
If cash value is your only objective, a healthy parent would have a better rate of return than a juvenile!

I'm not talking in general, I'm talking in this instance.