Understand that there isn’t anything I like about investor owned life insurance. Now matter how you sugar coat it someone or some institution with a profit margin has a vested interest, not in my life but in my death. That’s just creepy.

My nephew came to me yesterday and laid out the latest twist on the theme that he had just heard. It went something like this. If you’re 57-65 years old and have a convertible term life insurance policy (except with a few companies like AIG), you can sell the policy for all of the premiums that you have paid into it.

The policy ownership is then changed to an irrevocable life insurance trust. I suspect this move is to circumvent any family claims on the life insurance in the future. The policy is then converted by the trust into a permanent policy and becomes part of an investment portfolio.

It all feeds right into the American have your cake and eat it (or sell it) too mentality. “Why not get all that money back since I didn’t kick the bucket?” “After all, one guy said to me, what’s the difference between this kind of deal and return of premium term insurance?”

Well, huge difference! Return of premium term is a pre planned lapse of the term policy where the premiums can be returned because the company overcharged you all those years. When you sell your policy you get all the premiums back in return for giving up ownership and control of a life insurance policy on your life. That bears repeating. IN RETURN FOR GIVING UP OWNERSHIP AND CONTROL OF A LIFE INSURANCE POLICY ON YOUR LIFE.

People get all focused on the “free money” thing and I really don’t think they consider all of the implications of giving up ownership and control of something that could make someone else wealthy if you die. If you live too long it sucks for them. The shorter your life span the happier they are. The quicker you die the more they liked doing business with you. Your death is their nest egg. Your family’s loss is their family’s gain. You know what’s funny about all of those things? Nothing. They’re true and the whole idea of investment returns riding on mortality experience is just stinking sick.

Bottom line. If you want return of premium term insurance, buy it up front and don’t get mixed up in selling your life insurance to someone who may not love you.