A Perfidious Question
I’m a Crony at the Ministry of Minor Perfidy! The Perfidious Ministers are actually all darling sweethearts who dress in pink and wear flowers in their hair. They like playing with babies, getting nice thoughtful presents for friends, shooting at things, and destroying stuff with giant robots. It’s entertaining. (I’ve seen two of these four things with my own eyes in the past week!) If you want to see me get political, go visit over there. I try to keep it off this blog because the Ministers let me poop all over their playground, allowing me to stay on topic. And yet still, I digress.
Minister GeekLethal asks:
On the NetworthIQ profile, where would I put my life insurance policy? Ought that not count as an asset?
If you don’t know, please click through on my NetWorth IQ graph to see what he means. It’s not an easy question because you’re trying to fit into the categories listed by NetWorthIQ, but there is a woeful lack of onsite help in trying to classify things. (That would be my first criticism of site. I don’t have too many complaints about it at all.)
Actually, I am not sure that life insurance counts as an asset for you since you aren’t going to be the beneficiary of it. You’re going to be dead after the zombies get you! Since I know there is a Mrs. GeekLethal, I assume she’s the beneficiary of the policy and it would probably be an asset of hers or any other heirs you might have.
Looking at the categories listed at NetWorthIQ, I can understand your confusion. It’s very hard to say. I’ve been told that a lot of life insurance is held in cash instruments, but it’s not cash and I am uncomfortable describing it as a cash equivalent. Because I know that life insurance annuities are classed as investment assets, I think regular life insurance probably does as well. But I would not call lump-sum payout life insurance an annuity. I think right now, I’d dump it in ‘Other’.
I can’t find a true definition of life insurance as an asset for calculating net worth, but I suspect it’s an investment since it’s not readily liquidable and it will lose some of its full value to inheritance taxes. But that still doesn’t help you, unless you class it as ‘Other’.
If there is anyone out there who knows the actual answer, we’d love to hear it!
Thank you for visiting me and the Ministers! Please feel free to use the Haloscan commenting system instead of the Blogger one. (Because I am a dork!)
enoughwealth@yahoo.com wrote:
It would depend on the type of insurance. If it’s term insurance it only has value for the year you pay the premium, then goes to zero. Next year’s premium buys another year of coverage.
If the annual premium increases with age you may not bother renewing when you’re over 80 - so it would then have no asset value.
Similarly, some policies are only renewable up to a certain age, so you may not be covered when you die if you live long enough.
Short answer - unless it is one of those ridiculously uneconomic “whole of life” investment-type policies, that have a “surrender” value, don’t bother counting them in your net worth.
For example, I have $400,000 death and TPD cover but it makes no sense to add it into my “net worth” as the amount is arbitrary - I increased it from $150,000 cover last year - that didn’t mean my “net worth” suddenly increased by a quarter mil.
http://enoughwealth.blogspot.com
Posted on 13-Oct-06 at 5:42 am | Permalink