Life Insurance, how we are different

Read a recent article about the need for life insurance and what types are best for people. There was a quote in the article as follows:

The cash component of a whole life policy can be valuable, especially since any money contributed by the insured can be taken out tax-free, but Policygenius notes that the interest rate is often much lower than what you could earn if the money were invested in another investment account, like an IRA.

For those that understand the Infinite Banking Concept they will get the idea that "Your need for finance is greater than your need for death benefit, solve the finance need and you will have more death benefit than the life insurance companies will get you. You will have to insure everyone you have an insurable interest in just to hold all the money" ~R. Nelson Nash, creator of the Infinite Banking Concept and author of Becoming Your Own Banker.

While yes we are in the life insurance business and are licensed financial professionals, we approach the idea differently than 90% or more typical life insurance agents (Probably more like 99%)

As you can see in the snippet above, this article and many others compare Dividend Paying Whole Life to "other investments" such as stocks and mutual funds. which we feel is the wrong way to look at it.

Because of the guarantees and the track record of financial strength of the companies that we work with, a Whole Life policy should be best compared to cash. Meaning, cash in the bank like savings, CD's, money markets, etc.

Whole Life insurance offers guaranteed access to your Cash Value either through withdrawals or through policy loans. Policy loans are a collateralized loan against the cash value directly from the Life Insurance company. The beauty of a policy loan (with a mutual company) is that your values continue to grow uninterrupted. While yes you will have to pay interest to the insurance company in many instances your policy will grow faster (this is not guaranteed but it has been customary in the past) than the interest that the insurance company charges. Also a policy loan from a life insurance company has no structured pay back terms. You can pay as much or as little. *Note that interest will accumulate on unpaid balances each policy year.

Nelson Nash has often talked about how things are classified, as he was educated as a forester he had many classes on classification. He often said when you look at a Participating Whole Life Policy it compares more to a banking system than "pure insurance."

Pure insurance would be just paying for the risk of the insured. This would be term insurance just like home owners, auto P&C etc. You pay for a certain time period based on the risk. Because Whole Life has so many living benefits, you can extract more value from each dollar you put into it. Meaning, each dollar does many jobs. With pure insurance each dollar only does one job and if you don't use it you lose all the money you put into it.

With properly structure whole life after a certain number of years the value of your policy will be great than the amount you have paid. This is guaranteed to grow each and every year. Imagine making a premium payment and your cash value grows by more than the premium and the death benefit grows as well by a factor based on your age, gender and risk classification. Make a $5,000 premium your cash value goes up by $6,000 and your death benefit goes up by $10,000 (these numbers are for illustration purposes as each policy will be different) you get the idea.

Again, we are different because we show you how to use your policy to finance things during your lifetime to keep more control over your money, to allow your to get back all the interest that would go away to financial companies as well as protect your life with insurance.

Back to the Term Insurance. You would think since we regard Cash Value Whole Life so highly we wouldn't recommend term insurance. This is 100% false. As licensed life insurance agents we have a duty to help clients understand and protect their future earnings to provide for their family. This means that most people cannot afford a large enough whole life policy to accomplish this. This is where term insurance comes in, specifically convertible term insurance. By purchasing up to you your human life value in convertible term insurance you are now "covered" in case the unthinkable happens.

In almost all cases we recommend a combination of whole life and term insurance. Sometimes we use a term rider when designing policy specifically for infinite banking and sometimes we recommend a stand alone term policy or policies to be used for future convertibility.

When implemented correctly many people will be able to convert some or all of their term to infinite banking. The reason for this is because when we design the policy we allow for more cash value upfront, the means over time the amount of cash the policy will accept without breaking IRS tax treatment rules aka MEC rules goes down. Also as most people progress in their careers their incomes will rise and will need a place to store that wealth that earns better than a savings account and allows each dollar to do multiple jobs which brings us to a properly designed whole life. Many people will have multiple whole life policies on themselves, their spouses, their children, grand children etc. Nelson Nash at one time had 49 policies that he owned.

In close, learn to classify things like Nelson talks about. Learn that a properly designed whole life policy is more akin to a savings plan than it is to any investment. Learn that while whole life may cost more upfront, over time it will cost dramatically less.

To learn more about the Infinite Banking concept check out our website, dynastywealthpartners.com