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Jim Pellerin:Okay. Hi everyone. Welcome to today's podcast . Today, I have Sarah Abrahim. He's a financial consultant health and life agent. He helps high network retirees, real estate investors, business owners with Tax Favorite Wealth preservation and growth. And these are people looking for financial solutions that protect their assets. He does this through his company, Fin Asset protection, and he has helped large life insurance companies and also has helped people transition to personal Medicare plans. Hi, welcome Sarry.Sarry Ibrahim:Hey Jim. Thanks for having me on.Jim Pellerin:So how are things today? How are you surviving with this whole Covid crisis and things in your area?Sarry Ibrahim:It's good. I'm in Chicago now. I'm so total crazy, but also a lot of work from home.Jim Pellerin:Yeah. A lot of people getting back to work. Are they, or what's happening offices opening up or,Sarry Ibrahim:Yeah, we're looking at a phase four, so everything's pretty much open with limited limited access.Jim Pellerin:Right? I mean, a lot of your work, you deal with clients individually anyway. Right. So I don't know. Do you do a lot of corporate work? Do you do individual work?Sarry Ibrahim:A lot of it is individual work. It's almost like 99% virtual. So over the phone or,Jim Pellerin:Right, right. Okay. So before we get started, maybe you can give us a little bit about your background and how you got into this. And and then we can jump into it. Cause I got a lot of questions, right. As a real estate investor and how I can leverage your product here. So maybe just some background first.Sarry Ibrahim:Yeah, definitely. So I originally started off in Medicare. I was selling Medicare advantage, Medicare supplements, prescription drug plans through a different insurance companies like blue cross Humana Cigna. And I did that for about three years. And one of my clients asked me if I could help him with life insurance and I had my license at the time, but I wasn't really that familiar with the product. So I told him I would get back to them. I would do some more research and I started doing research. And he also emphasized that. He said, there's something with cash value and a life policy that could use again, I wasn't really that familiar. So I started doing more research. I went to Amazon to find a book and I just searched for life insurance. And I came across the book, the bank on yourself, revolution by Pamela Yellen and the book pretty much talks about using the cash value part of a whole life insurance policy for the, of course for the cash part.New Speaker:And of course you can use that for anything you want for your retirement and for real estate investing for fun, becoming your own source of financing and your business. And I really liked the concept, not only as an agent to, to pitch to my clients and to, to help my clients with, but also as myself too. So I bought my own policy and I started using that to kind of fund my own business and I, and I've been helping and I've kind of shifted more from the Medicare side to the retirees, to real estate investors, active real investors and helping them fund these policies, build up the cash value parts of these policies and then become their own source of financing. And also they can experience other other benefits too, like the tax benefits, which we'll get into later and liquidity. And also of course the the safety of the cash value in a, in a whole life policy.Jim Pellerin:Okay. So when you say you can use your life insurance policy for investments, now you talking about the actual cash value, or are you talking about using it as leverage for getting loans or maybe you can explain different ways in which you can do that.Sarry Ibrahim:YeahSarry Ibrahim:Definitely let's say for example, I have a whole life policy and I have a cash value of a hundred thousand dollars. I could borrow from the insurance company leveraging my $100,000 cash value. I can borrow at an interest rate of like 5% from the insurance company.Jim Pellerin:So you actually borrowed the money from the insurance company, or do you use it as collateral to go borrow from another institutionSarry Ibrahim:You could do that? I I've never seen that situation though. I've only gone directly to the insuranceJim Pellerin:And they're more than happy to lend you the money based on your, on your cash value,Sarry Ibrahim:They'll lend you 85 to 90% of your cash value, regardless of any other conditions, regardless of your, if your, of your credit, if you're in bankruptcy, whatever's going on, there's no underwriting for that loan.Jim Pellerin:So there's no qualifying at all. As long as you have the money or as long as you have the cash value of your life insurance policy, they'll write you a check no matter what, because it's basically Germany.Sarry Ibrahim:Correct.Sarry Ibrahim:Okay, So what kind of interest rates, maybe you could walk me through a detail deal. So I'm a real estate investor. I'm looking at buying a property. And I need as a down payment $50,000 and I have a hundred thousand dollars on my policy.Sarry Ibrahim:Yeah, definitely. So you have a hundred thousand dollars in cash value in your policy. You borrow 50,000 from the insurance company. Now, the reason why doing this method is better than traditional methods of financing is because when you go to borrow that 50,000 from the insurance company, and you have your 100,000 on cash value, you're still earning interest in dividends on your $100,000, your cash value as if you've never touched the money. And the reason why is because you're taking the 50,000 from the insurance company's general funds, you're not subtracting from your, from your cash value. So that's, so that's what kind of makes it better than using traditional lending that you can keep growing your money while also using it at the same time.Jim Pellerin:So your money, the cash value of your policy continues to earn as if the money's still there.Sarry Ibrahim:Yes, exactly.Jim Pellerin:Okay. And then by then you can take the money and reinvest it into your investment, and then it will also earn money in that investment that you've invested in. So if I, if I'm getting, let's say 10% return, I'm blending some buddy money as a second mortgage, and I'm getting 10% return on that money. So I earn 10% on the second mortgage. And then the cash value of the insurance policy continues to earn money. Is that correct?Sarry Ibrahim:Correct. And this is exactly what people do, private money lenders, and even banks do this. They have their cash value. They lend it out. They earn interest on that maybe 10 or 12% on that. And then they're earning interest from the insurance company in two different places. So this way, if the borrowers default, and they need time to recoup those losses, in the meantime, they're still earning interest on their money. So it's a risk mitigation strategy and also a way to capitalize on more opportunities.Jim Pellerin:How did they earn interest on that money within the cash policy? Could you explain how the life insurance side of things work. I mean, I know the real estate side, right? Once the money comes out, I understand that. And I think most of my listeners will understand that. But inside the insurance policy, how do you earn money there? How do you grow, is it compound could you explain a bunch of stuff, a bunch of the rules within the insurance policy?Sarry Ibrahim:Yeah, definitely. So for it to be, so the bank on yourself concept, it's a concept that uses whole life insurance and there's, there's a couple of rules that have to be in place for this whole thing to work.Jim Pellerin:okay.Sarry Ibrahim:It has to be whole life insurance.Jim Pellerin:Right.Sarry Ibrahim:It cannot be term or universal. It has to be whole life.Jim Pellerin:Right.Sarry Ibrahim:Two it has to be issued from mutual insurance company, not a stock owned companies.Jim Pellerin:Okay.Sarry Ibrahim:Companies are the policy owners are the mutual owners of the insurance company.Jim Pellerin:Can you give me, sorry, just, I want to make sure everybody knows what you're talking about as we go through here. When you say certain, these types of companies, give me examples, some brand names of companies that would be able to issue these types of whole life policies that you can use.Sarry Ibrahim:Definitely mass mutual is a big one.Jim Pellerin:Okay.Sarry Ibrahim:Mass Mutual, Foresters Financial, Lafayette Insurance and Security Mutual. Those are kind of our top four that we go to.Jim Pellerin:What was the first one? Mass mutual.Sarry Ibrahim:Mass mutual.Jim Pellerin:Okay.Sarry Ibrahim:And then Lafayette, Foresters Fnancial and Security Mutual. And these are number one. These are all mutual insurance companiesJim Pellerin:And the people and the other companies, you can't go through, you're saying like brokerages or bank owned. Is that, who was that? The one you say?Sarry Ibrahim:Yeah, for example, if Allstate, they have to stock owned insurance companies. SoJim Pellerin:It's a public company.Sarry Ibrahim:Sorry.Jim Pellerin:It's a public company. Is that what you mean?Sarry Ibrahim:Yes.Jim Pellerin:Okay. So these have to be private owned insurance companies, correct?Sarry Ibrahim:Yeah. No, not on the stock market.Jim Pellerin:Gotcha. Okay. Sounds good.Sarry Ibrahim:And because the profits go back in the stock, one company, the profits go back to the shareholders,Jim Pellerin:RightSarry Ibrahim:Whereas in a mutual company, the profits go back to the mutual owners, the policy owners.Jim Pellerin:Oh, Oh, I see. Okay. Right, right.Sarry Ibrahim:Sure. It would get dividends at the end of the year from the insurance company, the insurance company, these insurance companies have been around for over 160 years. And about 60% of their portfolio is mostly investing in the bond market. And the rest is, is invested in private loans. So they're not, there's no market involved. And as far as the stock market and these insurance companies that we represent have been paying dividends for over 160 years, including through the great depression, including through the 2000 crash, 2008 crash. And right now through covert, they they're still paying dividends to their policy owners.Jim Pellerin:Right. So the people who take out policies with the insurance companies actually are the owners of that company. And they reserve, they received the dividends from the profits of the company.Sarry Ibrahim:correct.Jim Pellerin:So that's how you continue to make money because you would continue to receive dividends from the company as a whole, not on your individual policy.Sarry Ibrahim:Exactly. Yes.Jim Pellerin:Okay. Interesting. So it's like being a member of a co op bank, for example, or any type of bank, which, which it sounds like that's how these guys are operating.Sarry Ibrahim:Exactly. Yeah. That's 100% correct. Yes.Jim Pellerin:Okay.Sarry Ibrahim:There's also a third component. And that is, it has to be a non-direct recognition company. So some insurance companies for example, what the example of $100,000 cash value, and then you borrowing 50,000, some insurance companies will reduce the dividends and interest to you when you have that existing loan, because they're recognizing the loan you want to use non-direct recognition. So that way the insurance company won't recognize your loan when paying big dividends and interest. In other words, you want to receive dividends and interest on your cash value as if you've never touched the money, regardless of if you've touched the money.Jim Pellerin:Okay. So what are the three, again, just go through them quickly.Sarry Ibrahim:So it has to be whole life.Jim Pellerin:Yeah.Sarry Ibrahim:To be a mutually own insurance company. And it has to be non directly.Jim Pellerin:Okay. So the non-Darcy rec drugs and nation is so that you don't get penalized. If you take the money out and invest it in something else.New Speaker:Exactly. Yeah. Yeah. One of the strategies of this or the purposes of this is to be very liquid with the whole life policy. So that way your money is not tied up anywhere, but at the same time, it's still working for you kind of at the same time.Jim Pellerin:What happens if so you say very liquid happened, what happens if you go out and you invest in a, let's say a second mortgage, and that mortgage goes bad and you lose the money that you've invested in, what happens to your, on the whole life policy side now to that point.New Speaker:So let's say that you had a hundred thousand in cash value. You lent out, you took it, you took out a loan for $50,000, and then you use that as your investment. You loaned that to somebody else, and then they lost that money now. So now what you could do is you would have, of course your, your, your way, your method of recouping that investment, whatever it is. But in the meantime, you can finance that loss now. So you can split up that $50,000 loss over the, over the course of five years, you could pay it back on your own terms. You can miss payments if needed. So you can kind of stretch that out as long as possible until you're able to get your funds back together and make like monthly payments back to that, to the insurance company, back to the loan, instead of completely losing that $50,000 forever, you can, you can finance that loss over a period of time.Jim Pellerin:If you wanted to, could just walk away from the whole thing and lose the entire policyNew Speaker:You could. Yeah. Yeah. You could. But of course, that wouldn't really make sense because you would spend a lot of time, like building up the policy and yeah.Jim Pellerin:Yeah. Okay. No, I've just wanted to make sure. So you could walk away, but then you've lost all the policy benefits that you would have that you would have gotten up to that point,Sarry Ibrahim:right.Jim Pellerin:What are the limitations like? What type of investments are you able to invest in with, with the money inside your firm, your policy.Sarry Ibrahim:You could use it for whatever you want. There are no government restrictions or intervention on what you could use that money for. You could use it for whatever you want. Since it's a loan from the insurance company, it's pretty much a personal loan that you could use for whatever you want.Jim Pellerin:You don't even have to use it for investments. You could use it to go out and buy a new car. For example, if you want it toSarry Ibrahim:Exactly a new car, you could use it for college tuition for kids. You could use it for forever, whatever you want.Jim Pellerin:You said, you could pay it back to the policy. Let's say if you took it out for a loan like just as a loan to buy a, like you said, tuition or whatever now, and you want to continue to hold that policy and you want, so you have a period of time where you could pay it back. What kind of terms, what kind of interest would you be getting from the company to be able to pay it back?Sarry Ibrahim:Okay. so it would be around 5% interest that you would be pink and insurance company, simple interest. And while you're doing that, the insurance company is going to be paying you a about three to 5% compound interest on your money every year. So eventually what happens is over time, the cash value of the policy begins to outpace the growth, begins to outpace what you're paying an interest to the insurance.Jim Pellerin:So it's an, it's a break-even.Sarry Ibrahim:It actually, it actually I'll paces. It, it becomes like an arbitrage where you're gaining more in your policy.Sarry Ibrahim:Then you were paying to the company,Jim Pellerin:Right? So initially it's, it's like you said, about a 5% loan, which is less than most banks would give you on a, let's say on a personal loan for two, for any kind of tuition, or to buy a car, buy maybe cars, or you can go directly to the dealer and get one or zero and 1% loans on cars. But if you go to the bank, they're still going to charge about 7%, I think. And then on student loans or any kind of personal loan to fund student, you're, you know, you're going to pay seven, eight, 9%. So at 5%, it's a good deal. But because you continuing to get the premium paid to you from the policy that will out pace the actual loan payments you're making. So it'll actually become a negative interest rate at some point. Is that what you're saying?Sarry Ibrahim:100% correct? Yes.Jim Pellerin:Okay. One of the things you talk about too, is the tax advantages. So these are all era, or what does IRA re option or whatever it's you can use them to invest in your RSP, or like, can you hold our IRAs inside your, your investments? Like how does work? YeahSarry Ibrahim:We've had clients do that. You can, you can, so an IRA is a qualified plan.Jim Pellerin:right.Sarry Ibrahim:And when you go to use that money out, take that money at all. You tend to have to pay taxes on that. So what we do is they roll their IRA money into the cash value, whole life policy. And then,Jim Pellerin:And when you say roll it in, how did, how did they do that? Sorry, I just want to make sure everyone's clear.Sarry Ibrahim:Yeah, yeah, definitely. So let's say that you were funding a policy and you want to put a thousand dollars a month. So that's $12,000 annually a year paid. You could either a thousand dollars a month, or you can pay $12,000 a year.Jim Pellerin:rightSarry Ibrahim:And then when you, when you do that policy, this is another component of the bank on yourself. Concept is that traditional whole life insurance is mainly 100%, whole life insurance. Meaning that every dollar you put into the policy, it's going directly towards the death benefit and the cost of insurance. This is why like, people like Dave Ramsey and Susie Orman kind of talk bad about whole life insurance is because they're talking about old whole life insurance. That's 100% full life insurance. And that type of insurance won't really make sense for real estate investors and people that want to have liquidity.Jim Pellerin:right.Sarry Ibrahim:In other words, what you have to do is the PR the policy has to be properly structured. Every dollar you put into the policy, a portion of debt has to go towards the death benefit to make it a whole life policy. And another portion of that has to go towards the cash value, like rider it's called the paid up additions writer, the cash value rider, and it's about 50 50 split. So every dollar you put in 50 cents goes to the death benefit, and then 50 cents goes towards the cash value partJim Pellerin:Cash value of a hundred thousand. I've pretty much contributed about 200,000 roughly to get it to a cash value of a hundred.Sarry Ibrahim:Well, excluding time and interests. You can roughly say that, but to get to 100,000 would probably be less time than that considering interests. Cause you're getting interested in insurance. So probably costs you less than 200,000 to get to a hundred thousand dollars of cash value.Jim Pellerin:Right.Sarry Ibrahim:To make it simple. Yeah. That's what you could pretty much see in the first year, if you put in a thousand dollars a month, on average, depending on the Tibet, depending on your age and which company it is, you could see about half your money in the first year, which is in the whole life insurance world. That's a huge number. Usually takes like three or four years just to see a small amount of cash value. But the bank on yourself way would be about half. So if you put in a thousand dollars a month, about half of that would be cash value. And what you could do is back to the IRA. Let's say you had $10,000 in IRA money. You can use that $10,000 in IRA money to in the first year that goes directly towards the paid up additions writer. So that means in the first year, you can have your cash value of 6,000 from putting a thousand dollars a month, 10,000 in the first year, that goes directly into the policy, into the cash value part of the policy. R.Jim Pellerin:right.Jim Pellerin:But what I'm, I guess what I don't understand is how can you use your whole life policy to fund your IRA investments?Sarry Ibrahim:So It would be the other way around, you would use the IRA money of roll, pretty much to the IRA, use those funds to fund the whole life policy now you've and the reason why you would do that is because, I mean, it depends on the situation of course, but you would be, you would be shifting over from the taxable side to the tax free side, but you would have to pay taxes of course, on that IRA money to shift it into the whole,Jim Pellerin:Well, this is the reason I'm asking this question, right? Because one of the things you like about your IRA when you invest within the IRA is you get the the benefits of, of tax-free accumulation, right? So you can, you don't have to pay cause it's all tax deferred until you pull money out of your IRA. But if you keep it in the IRA and you invest in it, it it'll compound without paying any taxes until you pull it out. How does that translate in to something similar into the whole life model?Sarry Ibrahim:You could do the same thing. You can do the same thing with the whole life policy borrow the cash value. Part of the life policy grows tax deferred. So you don't have to pay taxes on that growth. And in a lot of situations you use after tax dollars, for example, in the $1,000 a month example, if I use a thousand dollars a month that's after tax money. So I already pay tax on the money, then use a thousand dollars a month. When I go to use that money, the loans and withdrawals from there are going to be tax free because I've already paid taxes on the money. And I can kind of recycle that money over and over without having to pay taxes on it because I've already paid taxes on it. That's not the situation with all whole life policies. Sometimes. Like for example, a corporations might use a single premium policy where it's just like a one payment of $500,000. Those policies are typically taxable because it's a single premium it's been funded for less than seven years, which is what the IRS uses as measurement to determine if it's a taxable vehicle or not. And in that situation, it's still the cash value still grows tax deferred. But when they go to use that money, it's going to be taxableJim Pellerin:When you're taking that a hundred thousand dollars life or a cash value, let's say I took the $50,000 and invested into this this second mortgage, that money that is earning is taxable or is not taxable?Sarry Ibrahim:The money in the whole life policy, the a hundred thousand dollar cash value part that Rose texts.Jim Pellerin:Right. But the 50,000 that I've invested in that second mortgage.Sarry Ibrahim:Yeah. The 50, 50,000 you've invested. If there's gains on that, then you have to pay the taxes based on those gains. But the whole life policy continues to grow tax deferred.Jim Pellerin:Yeah. But which is a little different, right? If you, if you use funds within your IRA to fund a second mortgage, for example, you don't have to pay any taxes on that. If it's within the IRA, right. Forgetting about, so that's how it's a little different. But what you're saying is the though, as you continue to earn the money on the whole life policy and that's that's tax deferred.Sarry Ibrahim:Yeah, yeah, exactly. If we were comparing the self directed IRAs with whole life, I would like the self directed IRAs because of what you mentioned because of the tax benefits. But there's also other restrictions such as what you could use the money for, right? When you use self directed IRAs, you have to fund in a separate entity, you have to hire a custodian and you can't manage, you can't personally manage those investments yet.Sarry Ibrahim:You have to have it. A property has to be separate from everything pretty much,Jim Pellerin:right. You can't invest in your own investments. Whereas with a with this policy, you can invest in your, you could go out and buy your own property with, with this money.Sarry Ibrahim:Exactly. Yes.Jim Pellerin:Okay. I was just going to say, and well, banks recognize, so it's just like a loan to you, but well, banks recognize this as a loan or would they, would you be able to use it as a down payment, like purchasing your own property, right? Like, have you had any experience with investors doing that?Sarry Ibrahim:Yeah. Yeah. You could use it as a down payment in connection with other loans and you can even use it as proof of your network. So if a bank wanted to see proof of your net worth, you could use the cash value as, as proof of that. And it's a yeah, you could definitely use the, you can use it as proof of it,Jim Pellerin:Your net worth.Jim Pellerin:Right. But what I'm asking is banks do that because banks don't want properties to be a hundred percent, right? Like, especially if it's an investment, most banks will only give like 70 to 75% loan to value. If you're putting down the 25% and it's coming from your whole life policy, do the banks consider that a loan from your whole life policy? Or did they consider that as cash that you are injecting into the investment?Sarry Ibrahim:cash, they consider cash.Jim Pellerin:so they won't so they will give you a, and you've had experience with other investors doing it. So they will actually give you a mortgage of 75% of the purchase value using the 25% from your whole life policy as a down payment.Sarry Ibrahim:Yes. Because once you, once you receive that loan from the insurance company, now it's cash in your hand,Jim Pellerin:But you still have a bunch of, you've still taken out a loan. Right. Which is what they don't like from their perspective. Then it's a hundred percent loan to value because you, now you have board the funds for the down payment and you've also borne the funds for the second mortgage.Sarry Ibrahim:Right. Right. Exactly. And they tend to favor, they tend to favor a whole life insurance and the cash value in a whole life insurance policy because they know that the death benefit attached to it. And they know that when the insurance company gives you that loan, it's essentially another way of taking your money out of the policy.Jim Pellerin:So they, so you have had investors do this, I guess. Yes, definitely. Okay. Yeah. It's just because as I say, you know, banks, don't like to see a hundred percent loan to value, which is in fact what this is, because now you have a loan that you pay. So you're lending the money to yourself. Do you have to make payments back to the whole life policy in this case, like for this 25% down payment?Sarry Ibrahim:You do on on your own terms. So you can, you can pay it back. So for example, if you if it was a six month investment and you were able to profit in six months, you can, you can use that money to pay down the loan right away in six months. Or if it's a longer term investment, you can spread it out into monthly payments. That's another function of the bank on yourself concept is that you have the ability to make your own payments, to become your own source of financing eventually to become your own source of financing and to kind of control the frequency of your payments.Jim Pellerin (24:23):You called it the bank on yourself. Is that what you said? Yeah. Yeah. That's a concept. Okay. So bank on yourself, meaning your banking, you're lending me that you're the bank and you're also the person you're lending money to now. Can you lend yourself money from this whole life policy interest free?Sarry Ibrahim:No, because that's one of the sources of income for the insurance company is policy loans. That 5% simple interest that's one of the ways the insurance company earns their income log with other sources.Jim Pellerin:Because you're actually boring it from the bank. You're not boring. It, it's not like an IRA where you're boring it from your own funds. You're boring it from the policy value. So the, so the company charges you 5% interest on that.Sarry Ibrahim:Correct.Jim Pellerin:Okay. And, but you said you could set up your own terms. So theoretically you could have a balloon payment, like if you're doing a fix and flip or, or what these brr strategies that they have, you could say over three years, you're going to pay back the whole thing and not pay any interest up until then. Like what's the minimum payment back requirements that are required on a loan from your whole life policy.Sarry Ibrahim:Good, good, good question. So there is no specific outline, as long as the loan balance that you have does not exceed the cash value part of the whole life policy. Then you could pay it back as long as you want, but of course you don't want, if the whole, if the loan balance keeps growing and kind of grows greater than your cash value, then the policy can lapse and you don't want that.Jim Pellerin:So if you have a, sorry, as an example. So if you had a hundred thousand dollar cash value, you took out 50,000 and the interest on this is 5% annual is what you said.Sarry Ibrahim:yes.Jim Pellerin:So 5% on that, let's say roughly $2,500, right? So over five years, that's only whatever that is. That's what a 12,500 on top of your 50,000. So now it's 62 five. And let's say you were able to refinance and pay that loan back. You're still okay there.Sarry Ibrahim:Yes. Correct.Jim Pellerin:And you've, you've given the bank or you've given your insurance company, the 12,500, which is 5,000 or 5%, right?New Speaker:Correct. And while you were doing that, actually, while you were paying the loan interest, you were earning the interest in dividends on that $100,000 cash value. So give or take, you might like 170,000 in 5 years, for example, let's just say you was five years later with the interest in dividends and how the, however, the policy was set up. You might be at $170,000 in cash value, and you've paid the insurance company back 62, five with interest. So now there's a spread of 7,500.Jim Pellerin:Okay. So the reason you continue to get dividends from the whole life policy, even though your money, money's not there is because they look at it as money being invested, just like they would invest your money. And rather than it being invested in, in things they are investing, they've allowed you to invest it in something that you want it to be invested in. Is that right?Sarry Ibrahim:Correct. Yep.Jim Pellerin:And what kind of investments do these insurance companies invest in and what kind of interest is your policy? Does your policy pro at like how the actual cash value of your policy?Sarry Ibrahim:Yeah, so it pretty much, depending on the company, depending on the structure of it, it can grow three to 5% compound every year. Okay. And the insurance companies, again, they're not, they're not invested in the stock market. They're invested mostly in the bond market and they, the insurance companies give out private loans. Like, for example, when, when if they're building a high rise building and it's a hundred million dollar project, half of them might come directly from a bank and the other half might come from a life insurance company.Jim Pellerin:Okay.Sarry Ibrahim:A partner on that, on that venture.Jim Pellerin:Okay. So they're getting you're saying, they're getting about what, what are they making on those investments?Sarry Ibrahim:I have no idea what they, what they make, but I can,Jim Pellerin:But they're paying, they're paying you 3 to 5%. So I'm assuming they're making three to four, then three to 5% plus all of their handling costs. Right. So there, I would think seven, six, 7% or something in that range. I have no idea, but they have to make a profit. Right?Sarry Ibrahim:Yeah, definitely. Yeah. They have to. Yeah, because they also have to guarantee the death benefits to not only the cash value, but also the death benefits. They have to be financially capable of solving all of those.Jim Pellerin:Right. For that. But that's more the principle anyway. So assuming that they, they retain the principal and they're not making any losing any of the principal, then that money is always there as their that's their base. And then they're just growing it based on the interest and right. So I mean a normal bank, what do they do? They, you know, they'll, they pay you what, a half a percent interest on the money and your savings account. And then they go out and lend it out at their mortgages three, four or 5% and in their personal loans at seven, 8%. So I'm assuming an insurance company works the same way just different, different numbers and less of a spread because they don't have as much, I guess, overhead that they have to maintain. Does that make sense?Sarry Ibrahim:Yeah, that makes sense. Yeah. I agree with you. So how, so you have these fourJim Pellerin:Companies and you have a lot of these people that are investing. Like a lot of people are doing this. I mean, it would make sense if I'm buying an a property and I have $50,000 in my bank account, and I want to, you know, put that down as a down payment to this property I'm buying, it would make, it would not make sense for me to do that directly, this investing in a whole life policy to start with, and then using that money to invest would make more sense. Right?Sarry Ibrahim:Yeah, definitely. I would make, it would make more sense because you wouldn't interrupt the growth of your money. If for example, I took $50,000 in cash from a checking account and I invested it in a business. I can no longer earn interest on their money. I mean, I'm not probably earning interest in a checking account, but let's say I was, I have to interrupt that growth and exchange that money for whatever I'm investing in. So it's an either or mentality either I have it invested or I have, or I'm earning intrasite, it's self concept addresses. Both of those. I can keep earning interest in dividends on my money while also investigating other things at the same time.Jim Pellerin:Yeah. The only difference would be that if you have a hundred thousand dollars and you want to invest 50 of it, you need that a hundred thousand dollars to go into your whole life policy of which we can only take 50 out to invest. So you've got to maintain or whatever portion which you say up to 75%, 85 to 90%. Okay. So you would only, if you needed to invest 50,000, then you'd only need really about 60,000 in your policy for you to pull out that 50,000. But when you pull that 50,000, it's still working for you at three or 4% and you decide your policy, but it's also working for you on whatever the money you're going to get on the return that you're investing outside of the policy, correct?Sarry Ibrahim:yes.Jim Pellerin:Okay. Interesting. So it doesn't make sense for you to ever invest directly without opening up one of these policies.Sarry Ibrahim:Yeah, definitely. Yeah. And I would say just to put it out there with a dominant downside of the bank on yourself policy, so that way it's not too good to be true. The downside is you have to fund the policy. You have, there's a capitalization period. Whereas, you know, traditional financing is you're going out and getting money that you don't have access to with the bank on yourself, concept or method, you would have to fund the policy with actual money to begin. And then after capitalizing, it, it takes about, they work best around one to two years of capitalization. After that, at that point, then you can kind of build and grow and it's kind of a process. It's not just like a transaction where you just do it one time. It's, it's like a learning where you're funding your policy, borrowing, paying back, buying more into the paid up additions, part of the policy, the cash value policy and kind of scaling with the insurance.Jim Pellerin:Okay. So you can't invest right away. You sorta have to let your money sit there for a year or more. You saidSarry Ibrahim:Typically. Yeah. in some situations you could invest in month one. And again, if you did that, if you, if you did, you did borrow in month one, it's not gonna interfere with the growth of your policy, but for a lot of people, like how much can they actually accumulate in month one? You know, if the, if you print a thousand dollars in month, one, your cash value might be 400 to $500. And, you know, you can borrow that 400, $500 right away and use it for everyday expenses and kind of start paying it.Jim Pellerin:So, when you're taking out a policy, you're basically paying premiums on that policy. You can't, you can't throw in like a hundred thousand dollars right away. Can you,Sarry Ibrahim:You could, depending on the way it's structured, there are single premium policies versus one payment, monthly policies. And there's a combination of kind of in between both. So you could do, for example, a thousand dollars a month and then put in an extra $10,000 just for that year. Only if you came across an extra, you know, when fall or an extra investment, and you had an extra $10,000, you can roll that into the policy just for that year. So there's a lot of different strategies we use,Jim Pellerin:Right? So example in an IRA, right? You can roll in money up to the maximum allowable IRA, you know, that you, that you have room to do with this, like if I wanted to invest in a real estate and I, and I let's say I need $80,000 to do it. If I put a hundred, what I be allowed to put a hundred thousand dollars into my whole life policy and pulled out 80 the next week kind of thing to invest in this real estate purchase. I'm trying to do.Sarry Ibrahim:Yeah, definitely. You could do that. There are no contribution limits with the whole life insurance.Jim Pellerin:Oh, there isn't. Oh, okay. Can you, so you can over contribute.Sarry Ibrahim:You can also, you can contribute. There is no government restriction on how much you can contribute, but there is a, like a taxable restriction. So for example, if I had a thousand dollars a month policy and I wanted to add a hundred thousand in there that wouldn't be feasible, I would have to probably get a separate policy and do a separate policy where I fund the other policy with a hundred thousand dollars. But because every policy you have has a taxable limit of how much you can put into the policy before it becomes a taxable vehicle. What I want, one of the strategies of course, is that for you to be on the tax free side, but you could do it up to us. It's usually about, you can add about 110% of the premium in addition to that, in addition. So if it's a thousand dollars a month, that's $12,000 a year, right. You can add about 12,000 plus 1,200 that's 13 too. You could add up a 13,000, $200 in a day on top of that policy. Anything more, you probably have to get a separate policy for that.Jim Pellerin:When you say you're trying to avoid taxes is because your policy is maybe explain that rather than me try to guess here.Sarry Ibrahim:Yeah. So the IRS says that you can have a certain amount of whole life insurance for it to, to grow tax deferred and ha and be tax-free. And it's usually about 110% of the premium. Anything more than that. In addition, it's gonna become a modified endowment contract, a Mac. And when it does that, then the, which was a loans can be taxable.Jim Pellerin:Okay. But then you said you could have any type of policies, so you could have whatever, I don't know, a $10 million policy where you put in a hundred thousand dollars right up front, and that would not be subject to tax as well. Right. You just have to set up a different policy with the right restrictions to be able to limit the taxation on it. Correct. Okay. And these are, these are the things you help people with, right. As part of sitting down with somebody and figuring out what they want to do.Sarry Ibrahim:Correct? Yes, definitely.Jim Pellerin:Now, do you have a lot of you work with a lot of real estate investor and she said predominantly now, or, or come business owners or who's your clientele?Sarry Ibrahim:Yeah. Yeah. Business owners, real estate investors. Yup. I still work with some retirees, but mostly now businesses and business owners and real estate investors.Jim Pellerin:So, so in your, in your blurb, on your, on your sites, you talk about being a financial consultant, health and life agents. So what's, what's the flavor there, health and life. Are you just talking about being able to give people access to more money so they can enjoy their life better? Is that the, or what is it?Sarry Ibrahim:The life and health part mostly refers to my licenses. So I have I'm licensed of life and health. I should actually get that change on my LinkedIn because it's kind of misleading, but yeah. It means life and health licensed, so I can help with life and health products.Jim Pellerin:So what are health products? You mean different than life insurance or like mat Oh, medical insurance, for example.Sarry Ibrahim:Yeah, exactly.Jim Pellerin:Okay. There's no tax benefits there, right. That's pretty much like the pay your dental bills. Y.Sarry Ibrahim:yeah, yeah, yeah.Jim Pellerin:so what, what haven't we covered here? Are there some things, other aspects to this that you want to highlight?Sarry Ibrahim:Yeah. We talked about the tax benefits, contribution limits safety of the money the money being liquid. And okay.Jim Pellerin:How liquid is it? You say it's like, so, so the ability to take money out and invest in a real estate transaction, what's the timeframe to be able to do that.Sarry Ibrahim:So it takes about three to five business days to access 85 to 90% of your cash value.Jim Pellerin:Wait, you say 85 to 90. What are the restrictions? The differences. Why?Sarry Ibrahim:Yeah. Between the four companies we mentioned.Jim Pellerin:Oh, okay. Each one has a different limit. Ye.Sarry Ibrahim:yeah. yeah. Okay.Jim Pellerin:It's not based on, and you could be like, you could have lost your job and you need the money and you'll, they'll still let you pull out the money.Sarry Ibrahim:Exactly. Yeah. Which, and I think in this sense, this is what, what makes it better than using lenders monies London's money is because of this, this actual problem right here, like in 2008, for example, a lot of real estate investors had,Jim Pellerin:I lost a ton in 2008, nine, 10, right. I'm probably about a million bucks.Sarry Ibrahim:Oh wow.Jim Pellerin:I was over leveraged. I had and I was doing a lot in negotiations. I was doing a lot of lease options in those days. And I have a lot of, a lot of my properties were a lot of my profits were based on appreciation. Right. So my properties actually lost all 30% everything I had about 80 properties at the time.Sarry Ibrahim:The wall. And did you have an issue with liquidity, like being able to borrow against those properties during that time?Jim Pellerin:Well, I didn't own them. Right. There were all these options. I was doing sandwich lease options.Sarry Ibrahim:Okay. Okay. Right.Jim Pellerin:So I just basically had to let go a lot of my holdings. Yeah. So, so liquidity is fairly, fairly quick. What about cancellation of the policy? Would you ever want to do that? Like what's the, is there a term as a point out some time where you're locked in, you can't, you can't cancel or what are some of the restrictions on the policy itself?Sarry Ibrahim:So you can pretty much, there are no restrictions. You can cancel any time, but of course, canceling the policy would, that would interfere with the growth of everything. And of course the death benefit and how the entire policy is structured. So I've never, I've never seen a client intentionally canceled their policy. I've seen some that couldn't afford it anymore.Jim Pellerin:Well, that was going to say if their premiums lapse, right?Sarry Ibrahim:Yeah, yeah, exactly.Jim Pellerin:Now the difference between a whole life policy and a term policy is just that right. Term policies. You just paying to get insurance for that term without an, it doesn't accumulate any, any value. Right? So the premiums are a lot cheaper, but then you don't have any, it's not an investment,Sarry Ibrahim:There's no cash value. And it's a, for a finite period of time, like 10, 20, or 30 years. And then when that period ends, you have to go through the underwriting process all over again. So a lot of times, only 1% of all term life insurance policies actually pay out a death benefit 1%. And the reason why is the 99% either cancel or get converted into a whole life policy.Jim Pellerin:Okay. Do you have to qualify for these whole life policies? Like, you know, if I, if I'm going to die with, with cancer in the next year or something, but if I have a, an illness that's, you know, that are they, are they like, what are those directions on being able to get on one of these policies from a health perspective,Sarry Ibrahim:There is medical underwriting involved and pretty much depending on the age, they do look specifically for preexisting conditions.Jim Pellerin:Right.Sarry Ibrahim:Look you've mentioned. So that's one of their factors and I there's different ratings. There's like preferred, which is like the best pricing based on health, down to nonstandard. And then you could actually get denied if, if the health is just not what the insurance company wants to deal with, you can get denied for that.Jim Pellerin:And the other thing I would think is a big consideration his age. I would think the younger you are the higher your score would be,Sarry Ibrahim:yeah, the younger you are, the more insurance you can get for less costs.Jim Pellerin:Sure.Sarry Ibrahim:Yeah. And then, and then, and then vice versa, the older, the less.Jim Pellerin:right. Cause, so when you take out a whole life policy it has a, there's a value that you're looking at as payout, right? So you want a million dollars worth of insurance, let's say. So for when you die, you want this payout to be a million dollars based on your age and based on your situation, then that will determine the amount of payment you make. Is that correct?Sarry Ibrahim:Correct. Yes.Jim Pellerin:And then that payment will stay there for as long as you're you're in the policy and a portion of that goes towards the cash value?Sarry Ibrahim:correct, yes.Jim Pellerin:Okay. And this is so you're a registered insurance provider, I guess, or whatever it's called licensed insurance provider.Sarry Ibrahim:Correct.Jim Pellerin:And you can help people get involved, get invest in these types of policies. And with these, I guess your recommendation is one of these four companies you represent.Sarry Ibrahim:Yeah. And I, and I'm licensed in like 16 States in the U S and if you're in Canada, I can refer you to a bank on yourself, professional in.Jim Pellerin:Okay. Okay. Interesting. So did I, did we cover everything?Sarry ibrahim:Yeah. We covered everything. Yeah. And if listeners want more information, they can go to a fin asset protection.com.Jim Pellerin:Okay. Sounds good. Well, that was very interesting. Thanks Sarry.Sarry Ibrahim:Thank you, Jim. Thanks for having me on.Jim Pellerin:Yeah. And you have a good day and hopefully I think listeners will, should get a lot of value from this. And it's certainly a different way to look at things now when they start looking at you know, their, their real estate investments.Sarry Ibrahim:Yeah, definitely.Jim pellerin:Okay. Thanks very much. Thank you. Talk to you later. Bye.