Money & Investing - Banks.com

Many insurance sales people will try to sell you life insurance that builds cash value. These policies can be good for some people, and may not be adequate in terms of returns for others (especially right now). In the end, it’s up to you. Back in the day, my husband and I, newly married and completely clueless, bought small universal life insurance policies. They are doing reasonably well, I suppose, and they are so small that we haven’t bothered to change them. Besides, we expect that we’ll cash them in in 25 years and celebrate by going on a nice vacation. But there are other life insurance options out there.

One of them was a “return of premium” life insurance plan that I read about on Bargaineering. This plan allows you to get all or part of your premiums back if you actually outlive your term life policy. (It is much more expensive, though, as you might imagine.) But would it be worth it? Could you make more by investing the difference? Jim offers this math about a particular plan:

While appealing, would I be better served taking the $34 difference in premiums a month ($76 - $42, TransAmerica) and investing it? After 30 years, assuming 8% annual growth and $408 in annual contributions, the investment would yield over $46,200. Cut away 25% for Uncle Sam, subtract the $15,120 in premiums and you end up with $19,530, which puts you behind about $8,000 behind the premium life insurance plan. However, you do retain control of your money. (For those interested, the breakeven point requires an annual appreciation of 9.63%, taxes are such a pain huh?)

So, maybe, it would be worth it to consider a term life plan with a return of premium policy. Of course, you have to make sure you outlive the policy, or the investment is better. Another consideration: You can spend the investment earnings all along the way; you have to wait until the end to take advantage of the return of premium.

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It’s not terribly surprising that the credit card industry is not happy about the new credit card rules passed by the Senate. While the House still has to agree to the Senate version of the bill, compromise is expected, and there are hopes that President Obama can sign the credit card bill by Memorial Day. The stock market doesn’t appear to really care about the news; investors are more focused on signs that the economy is recovering than they are on specific woes afflicting credit card issuing banks.

How you might be affected by the new credit card rules

Consumer protection is what is in mind with the new credit card rules. Unfortunately, credit card companies will have 9 months to act with a certain amount of depravity before the rules take effect. Among the rules that will limit the damage credit card companies can do to you are these:

• 45 days’ notice is required for changes to cardholder terms. This includes rewards programs, interest rates and other terms. 45 days should be sufficient for you to change what needs to be changed.
• Statements must be sent out 21 days before the due date.
• Over the limit fees can no longer be charged unless you give permission to go ahead when you have reached your limit.
• No retro interest rates on existing balances unless you are 60 days overdue on your payments.
• No more early morning deadlines for credit card payments. 5 p.m. is the new deadline.
• Banks must apply payments to higher rate debt first.
• Those under 21 with no proof of income must have a co-signer to get a credit card.

These new rules are expected to make it tougher for many to get credit. But is that such a bad thing? Perhaps it will force us all to think twice before we use credit. It could be a very positive development that provides us with incentive to carefully consider our spending practices and adopt those that are better for us.