On 9/6/09, Louis Proyect <[email protected]> wrote: > NY Times, September 6, 2009 > Back to Business > Wall Street Pursues Profit in Bundles of Life Insurance > By JENNY ANDERSON
This takes an old (and disgusting) but profitable scam, and ruins it to generate bubble. Industry has made money by taking out life insurance on low paid workers, keeping it even after they leave the company. It makes a profit because certain types of whole life are in some ways tontines. If someone with this type of whole life policy cashes it in before they die, while some of the profit goes to the insurance company, a bit goes into the investment fund the policy holders have joint rights to. Because most people with whole life do cash it in before they die, someone who hold onto a whole life policy until death, and thus gets the investment plus the payout wins financially or rather their heirs do - getting a better payoff than investing the money themselves. Even though whole life pays a worse return than combined term plus saving the premium difference yourself, if you hang on to it until you did your heirs profit because you can some of the money invested on behalf of other premium holders. Since corporations can afford to hang on the the policies until the insured die, they had a pretty certain profit. But if these firms start a bubble, and people who want to cash out sell to them instead of surrendering policies to insurers, then nobody ends up with any one else's investment. Instead both death benefits and "cash value" for each insured have to be covered from premiums and investments on that insured. And "dead peasant" insurance will start having lower returns than standard investments. A silver lining? _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
