Is Life Insurance an Asset?
I am very new to using advanced personal finance and budgeting software.
Is life insurance (variable annuity life) considered an asset that I should show in MD? i.e. when I get a statement it shows the benefit at $103,725.25 and the surrender value at $15,148.09. I understand the difference in these two figures.
I also have a term life policy with a considerably larger death benefit. I am aware that the true value of these policies only come into play if you die. And I would guess it is personal preference as to show these or not, I just wanted other opinions and/or method for showing these in MB
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2 Posted by Randy on 16 Jan, 2010 01:53 PM
I don't show mine. My reasoning is that I am interested in my net worth that I control. When I die, my estate will go up by the amount of the policies, but it will be one of my family members controlling it, not me.
I would think if you want to count it, it should be counted as an asset.
Support Staff 3 Posted by Ben Spencer on 16 Jan, 2010 03:48 PM
Hi
Certainly the benefit should not be considered an asset. You do not own this money you rather you are involved in a contract that promises to pay under circumstances.
However you could consider the surrender value as an asset. Here is a quote from the "Dictionary of Accounting Terms":
Cash surrender value is classified on the balance sheet under Investments. As the company pays premiums, part represents an expense and part applies to the cash surrender value. The difference between the premium paid and the increase in cash surrender value represents an expense.
Sincerely
Ben Spencer
4 Posted by FatRaiderFan on 16 Jan, 2010 05:50 PM
The Cash Value of a life insurance policy is a current asset of the policy's owner. I account for the changes in the cash value of my life insurance policies. When the annual statement arrives, I enter a transaction in the asset's register reflecting the amount of the increase. While I do not have any surrender penalties affecting my policies, I think you should reflect the Net Cash Value on the account for a more accurate reflection of its true liquid value.
Under no circumstances would I enter the death benefit amount.
5 Posted by oceanwrazor on 16 Jan, 2010 11:06 PM
Thanks everyone for the timely response and good advice. I know what to do now.
Wray
6 Posted by ronroberts on 31 Jan, 2010 04:03 AM
With regard to insurance, I believe that while categorizing life insurance as an asset may not be totally correct, I believe that setting it up on the home page as an asset only serves to provide yourself, spouse, partner, or interested other in a snapshot of your financial picture that you care to share with. For myself, sharing that information with my wife in the form of a 1 page snapshot of my financial situation with notes (life insurance policy numbers and contact info) benefits everyone. I just wish that on of the account types was "Life Insurance."
Ron Roberts
7 Posted by kevin on 25 Feb, 2010 08:26 PM
You should take a look at perm insurance.
You'll pay the same premium for the rest of your life. (Start young and the premiums will be less expensive.)
Your cash value grows based on a guaranteed rate. As long as you've paid your premiums, you can borrow against the cash value like you're taking out a loan. Then, you can pay it back at the current policy loan interest rate.
Hope this helps
Kevin
Allstate Insurance Advocate
Angie Rauscher closed this discussion on 24 Jul, 2011 07:27 PM.