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No Load Insurance

What's the answer? "Buy more life insurance!"

What's the question? "Doesn't matter...the answer is always the same"

This standard joke among insurance salesmen exemplifies what I hate about the insurance industry with its high commission products and overly aggressive sales people. Most people would be well advised to keep things simple when it comes to life insurance. Start by determining whether you really need life insurance, and if so, buy a low cost term policy from a reputable company. A term policy is pure life insurance. It provides coverage for a specified period of time, typically ranging from one to 30 years, ideally coinciding with the years that your family is most financially vulnerable. If you save diligently, you should reach a stage when your children are no longer financially dependent and there is enough money for your spouse to live comfortably if you die first. At this point, you are essentially self­ insured and may no longer need life insurance.

The alternative to a term policy is permanent life insurance, which includes whole life and universal life. These policies remain in effect throughout your life. They cost significantly more than comparable term life policies and mix insurance coverage together with investing by accumulating cash value over time. We generally advise people to avoid these policies due to a virtual minefield of hidden fees, rising premiums, illiquidity, exorbitant surrender charges, and lack of transparency. It is generally simpler and less costly to keep your life insurance and investing activities separate.

Ah, but there's another side to this story. If you eliminate all the drawbacks associated with permanent life products, they offer some attractive tax and estate planning benefits. Fortunately, there is a company that has taken this approach. TIAA is best known for providing retirement plans for teachers and college professors, but they also sell insurance products without all the commissions, hidden fees or surrender charges.

At Shearwater Capital, we focus on investment management; however, we also strive to help our clients make good decisions in all aspects of their financial lives. To that end, we have partnered with Mr. Casey Abbott of TIAA. Casey has a wealth of insurance knowledge, and since he's not paid on commission, he has no incentive to strap you with costly insurance products you may not need. If you are thinking of buying life insurance or an annuity, Casey is a great resource and we would be happy to put you in touch with him. We get no compensation for this, although TIAA does offer variable insurance and annuity products that can invest in Dimensional funds. If you opt to have us manage the investments within these vehicles, our standard investment management fees would apply.

The most compelling advantages of a variable universal life policy are the tax benefits, which include tax-free growth, tax-free loans, and tax-free death benefits. Another version of this product can be used as a substitute for the fixed income component of your investment portfolio providing higher interest rates than a typical investment grade bond portfolio.

Casey has a team of experts supporting him at TIAA who provide analysis and advice about the use of life insurance for implementing sophisticated business succession and estate planning strategies, such as establishing an irrevocable life insurance trust (or ILIT). If you currently have a life insurance policy or annuity, Casey and his team can review your policy, at no cost, to see if it might be worth switching into a more attractive policy from TIAA, which can often be done with a 1035 exchange. Casey is completely honest and forthcoming in these reviews and will not recommend a change unless it is in your best interest. His recommendations are purely fact-based and range from advising individuals to stick with their current annuity or insurance policy to switching into a policy with comparable or better benefits and substantial cost savings.

Please contact me at or 314-497-6809 if you would like more information or have any questions.

Jeffrey J. Brown, MD CFA

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