Overfunded Universal Life Insurance

[Ian Saingarm]

Hi guys, I was at an asset protection conference and one of those guru's who tries to sell you a tablet and a "program" was all about index linked overfunded insurance and I liked some of what I heard.  The idea being you get life insurance (which my wife and I like the idea of) and an investment that grows with the market and has a cash value that you can borrow against tax free for future real estate investments.  If the market has a bad year, you get the guaranteed interest rate which is low but much better than say a year like 07/08. 

State Farm had a plan where you get a guaranteed 2% and a "illustrated" rate of 3 ish percent.  For a $300k policy with a premium of $908/ month or $10,908 per year.  After 10 years of paying the premium I would have a cash value of about $107k.  It grows from there.  From year one there is a death benefit of $300k+.

I went to Farmers and they had a local "expert" who has a certification in securities which he said was unlike other firms and he said I should go with a Mutual fund liked overfunded policy with no guaranteed amount.  He suggested a fund linked to some of the American Growth Funds specifically AGTHX and says they have an average return of 13% per year, and projected we'd have a couple million dollars after "not long at all".  Sounds pretty legit right?  :-) 

American Funds

He proceeded to show me their website and a graph... which to me looked like the S&P outperformed the fund pretty easily over the last 10 years.  His response was, "its hard to see" and "its complicated" and I told him unless I'm reading the graph wrong which is entirely possible, it doesn't seem that complicated, it seems like the mutual fund underperforms the market.  Maybe the dividend reinvestment is much more powerful than I am thinking.

Here's how yahoo finance stacks them up:

Yahoo Finance

So, what are your thoughts on overfunded insurance as a tax advantage investment that has a dual purpose serving as life insurance for a family?  Where should I be looking?  I like the idea but have not found my unicorn yet.

Ian