Treat insurance like the wealthy!

[New Judgement]

Let’s assume what you are saying is the truth, how many people that have the kind of money to be called a wealthy billionaire? Their percentage among the population of a country will be very few, so their activities with regarding this your insurance as a store of value in order to avoid paying tax might be overlooked by the power that be. But if everyone starts adopting this your approach in order to avoid paying taxes, do you think the government will keep quiet without looking for a way to amend whatever law that prohibits such people from paying taxes?

[OgNasty]

Now that my robotaxi company is registered and I am looking into grants and licenses/permits, I am also exploring legal liabilities.  Given the danger involved with autonomous driving, I will likely get a massive blanket insurance policy to protect against lawsuits that may arise.  Tesla hasn't released information about the liability of their robotaxi network yet, but I have a feeling when they do go live they will appreciate companies that are licensed, permitted, insured, and ready to operate immediately.  Especially in the beginning as the technology improves, I think a large blanket insurance policy will help me sleep better at night.  I can see why rich people spend a few hundred bucks a month to not have to worry about anything crazy happening.

[Die_empty]

Now that my robotaxi company is registered and I am looking into grants and licenses/permits, I am also exploring legal liabilities.  Given the danger involved with autonomous driving, I will likely get a massive blanket insurance policy to protect against lawsuits that may arise.  Tesla hasn't released information about the liability of their robotaxi network yet, but I have a feeling when they do go live they will appreciate companies that are licensed, permitted, insured, and ready to operate immediately.  Especially in the beginning as the technology improves, I think a large blanket insurance policy will help me sleep better at night.  I can see why rich people spend a few hundred bucks a month to not have to worry about anything crazy happening.

Insurance gives individuals the leverage to take risks. There have always been fire outbreaks in a few markets in my location due to power surges. Many traders become bankrupt because they lose everything. This wouldn't have happened if they had considered taking insurance policies. The idea that insurance is only for the rich is a misconception. Some people spend more on unnecessary items, and that money would have been used to cover an insurance policy.

[danherbias07]

Yeah, there's so much you can do when you have the money. Take advantage of loopholes and find yourself paying less tax than those in the middle class. Sadly, I am part of those who cannot afford it. Insurance here in our country is very expensive, and unlike what those wealthy do, the payment for insurance here just goes to the wallets of the companies, and that's it. No loans or other services just for you to die or have an accident. If you won't have one in 40 years, then you may have paid way more than what they will give you when you are dead. You won't know it because you will not be there to see things through.

[Opiate32]

The middle class buys insurance to replace income. The wealthy buy insurance to store wealth.

The difference is not really that the wealthy use insurance to store wealth while middle class use there own to replace income. It is probably how they use the same product. For someone with enough money already invested elsewhere, the cash value can become another pool of capital they can access without immediately selling other assets. That makes the strategy useful in a way it may not be for someone who is mainly buying insurance for protection.

Moreover I wouldn’t look at it as money that is simply growing while you spend it. The policy still has cost and the loan still has interest. The strategy works because of how everything is structured around the policy.

[sunsilk]

Here's a valid scenario; they don't buy it for the death benefit, they buy it for the tax shelter.

The cost of it is also no joke and they have to pay premium for it. It's not only for the health and life insurance but there's a bunch of its types.

From the fire insurance of their homes, to their cars and other stuff, they're spending on it because they know that it's a shield for all expenses that will suck a lot from their wealth.

I myself will purchase it if I know that it's going to benefit me a lot from shielding myself through these taxation and helps me lessen it. It's worth it spending on it depending on the policy.

[Donk1]

The most amazing part of it all is that we might all call it insurance, but how it works for the rich people are different or how the rich sees it best to say. For someone who is new, it's not going to be an easy task if they chose to imitate this kind of insurance scheme the worst case scenario is that it would be too complicated. That said an ordinary investment like, let me say, a real estate can indeed grow your wealth in a more straightforward way that wouldn't get you confused,and sure there are other kinds of investment.Still I like to bring up the fact that everything has their unique value, and to me when comparing an insurance to a real estate investment or any other investment, it's all based on what a person wants though. So that's all...

[hafiztalha]

Insurance is used differently by the wealthy people, but your point makes the strategy sound much easier and also safer than reality. Having life insurance with cash can have high fees and other costs. When you borrow against policy that does not mean the money is completely free. There is the interest amount that needs to be paid and if the policy is being poorly managed or it lapses with no outstanding loans, then there are serious tax consequences.


Those who have substantial wealth, for them, the strategy makes more sense and also long term estate planning is needed. A person having middle class income can not put too much money into an expensive insurance policy that can reduces his cash that is available for retirement, emergencies and productive investments. And also they have to pay the interest amount

[Franklyn-wood]

I wish that is really right because here, people take insurance for the risk but when they want to claim, the insurance companies takes too long to process. They just say it is the procedures and we need to be patient and no explanation more from them, just need to wait. So I don't think we can use insurance like the wealthy and I am prefer to diversify asset to improves our wealth. But when we don't pay the cost of insurance, they will calls or visits us and asking for the insurance payment, very often until we pays.

Yes the insurance companies effectiveness depends on the country and and how they treat there client mostly those who are not wealthy knowing they don't have any financial support anywhere to back up there claims of there right to the company. Some insurance company will even make life very difficult for people asking for proves that is hard for the client can't provide to deprive them of access to the paid back the things they insured in the policy agreement.
Insurance can only be treated like the wealthy if they treat everyone equally the rich and poor with same approach and right to receive rewards for the plan subscribed for.

[Findingnemo]

The middle class needs insurance which I am not denying but it is not for tax purpose but to safeguard the financial state of our loved ones for a while in case of an unfortunate event, it is not an investment but insurance in case if needed.

The rich do that, but we can't simply apply the same tactic that the rich do to every different financial class.

Take life insurance and health insurance that give more coverage to every kind of hospitalization.

[EarnOnVictor]

Maybe the middle class can take a sleeve from how the wealthy mechanize and use the insurance scheme.

If I had my way, I would not insure anything personal, but business. Insurance is just a business created by those centralised people to reap people. This is why they make billions of dollars in returns yearly, and the government will even force you to do it. All I would do is work hard, be financially independent (capable) and prioritise investment, having planned my emergency funds adequately.

And note: The fact that you participate in insurance is not a guarantee that they will cover you during a crisis. We've seen thousands of cases where insurance failed people. Many cases are in court too. How many people can afford court? As for the rich, they have all the reasons and all it takes to participate in insurance.

[KiaKia]

I wish that is really right because here, people take insurance for the risk but when they want to claim, the insurance companies takes too long to process. They just say it is the procedures and we need to be patient and no explanation more from them, just need to wait. So I don't think we can use insurance like the wealthy and I am prefer to diversify asset to improves our wealth. But when we don't pay the cost of insurance, they will calls or visits us and asking for the insurance payment, very often until we pays.

Insurance companies in America operates differently from insurance companies in my country, you said insurance companies takes too long to process, that's in your country right? In my country insurance companies are avoiding their responsibility.

I think insurance is only for wealthy and famous people, it's not for the poor and average people atleast in my own country, it might be different in western countries.

Insurance that works here can disappoint when you don't expect them to, they always dodge their responsibility, don't expect them to always come to the rescue, this is coming from what I have seen happening in my own country.

[Leahized]

Those who have substantial wealth, for them, the strategy makes more sense and also long term estate planning is needed. A person having middle class income can not put too much money into an expensive insurance policy that can reduces his cash that is available for retirement, emergencies and productive investments. And also they have to pay the interest amount

Insurance can be a reasonable and reliable institution in the present time. Because the wealth of the rich is not only limited to insurance, but is also involved with other organizations. But for the middle class, insurance is used for saving money along with a one-time large profit. When I was child, my family was taking small loans from the loan company while also insuring and making weekly payments. But even though the amount of interest had to be paid with the loan, the insurance did not provide any associated profit.

I think, insurance is quite significantly profitable for the middle class. It provides a security system along with profit from saving money. I heard about this from one of my aunts about 15 days ago. She has been saving money for a year and receives a large sum of profit at the end of the year.

[atookz]

Agreed, the concept is valid. This is what's known in the US as "Infinite Banking" or "Bank on Yourself." It's best due to the tax loophole in U.S. life insurance, though; other countries might have different laws. The main thing is "overfunding," paying premiums higher than the minimum required, which lets the cash value build up more efficiently. But if structured improperly, it can result in MEC status and void the tax incentives. The loan is still charged interest, while the cash value keeps growing on paper as if untouched, even though the money has already been used; that gap is the spread, so it's not really free money. If the loan isn't paid off by the time of death, it's automatically deducted from the death benefit first.

This only makes sense if you have a substantial amount of cash that is not going to be required in the near future. If you invest a small amount of capital, you're at a disadvantage due to whole life fees, compared to other more liquid instruments.

[Royal Cap]

The middle class buys insurance to replace income. The wealthy buy insurance to store wealth.

For the middle class, life insurance can serve not only to replace income, but also for the purpose of repaying debt, planning for the future of the offspring or estate planning. The main difference is perhaps the fact that the strategy is different due to the size of the capital.

They then borrow against the policy when they need cash. The loan is not taxable, the policy keeps growing as if nothing was taken out.

Though the loan from the policy is not taxable income, the interest on it grows and the death benefit decreases unless it is paid back. And in case the policy expires, there may also be tax implications. So it would be wrong to view it as free money.

Maybe the middle class can take a sleeve from how the wealthy mechanize and use the insurance scheme.

I would say it is much more essential to have a clear objective before imitating the strategy. As far as the large assets subject to taxes are concerned, tax planning is similar. But when it comes to the common man, investment or term insurance might turn out to be more useful.