Insurance Pro Blog Podcast | Life Insurance and Annuity Insights

I know, when you see a title that includes “income planning” you begin to wonder… “Isn't this a podcast about life insurance?”

Yes, it is.

And we are talking about life insurance, annuities, etc. in the episode as we wrap up this discussion about income planning. But we felt like it was really important to give some context for that conclusion first.

So many times in our industry, people trot out solutions before they've accurately described the problem. 

In fact, that's something we see far too often…

People reach a certain age, have been earning a decent income for a couple or a few decades and they come to us with a “collection” of financial products. They're not entirely clear on what they have or why they have what they have.

And we are certainly not making light of this. Heck, I have more shoes than any grown man should ever possess and I can only wear one pair at a time.

I digress…

And we are certainly not making light of this. Turns out that actually putting money away (even if you didn't have any sort of cohesive strategy) is a whole lot better than doing nothing at all.

But what if you planned with the end in mind?

See, we (Brandon and Brantley) believe that the most prudent way to plan is to know where you are headed.

There's so much buzz today surrounding the phrase “passive income” and it's usually discussed in the context of business ventures that spit out money without the owner being actively involved in the day-to-day operation. I gotta say…that's a fantastic dream but that's a tough thing to come by.

What we mean by passive income is having assets that generate income with zero effort on your part. And the most stable assets that we've ever come across for that purpose are life insurance and annuities.

Now, I'm not suggesting that insurance products have the potential to provide you with the highest income possible, however, I am telling you that insurance products can provide a stable passive income for you. Insurance solutions are not meant for all of your money, but if you've done a good job of planning with the end in mind, they can help you provide a stable foundation for your retirement…whatever that may look like.

Hope you enjoy this episode as much as we enjoyed recording it. And as always, if you have any questions, please reach out to us.

 

In this week's episode, we dip into the mailbag to answer a question submitted by someone in our audience. Olivia writes, “Would you discuss the differences for some specialty whole life insurance products and when they might be appropriate for someone?…7 year pay premium, 10 year pay premium, interest sensitive” So, we're answering that question. If you ... Keep Reading

In this week's episode, we dip into the mailbag to answer a question submitted by someone in our audience.

Olivia writes, “Would you discuss the differences for some specialty whole life insurance products and when they might be appropriate for someone?…7 year pay premium, 10 year pay premium, interest sensitive”

So, we're answering that question.

If you have questions for us that you'd like to hear us answer on a podcast, please let us know. You can shoot us an email by using this form. We'd love to hear from you.

There's a lot in the news recently about negative interest rates. It's surreal to think that central bankers have gone to such extremes in attempt to stimulate economic growth. If you don't know what I'm referring to…here's a screenshot taken just a few minutes ago after running a search for “negative interest rates” on google ... Keep Reading

There's a lot in the news recently about negative interest rates. It's surreal to think that central bankers have gone to such extremes in attempt to stimulate economic growth.

If you don't know what I'm referring to…here's a screenshot taken just a few minutes ago after running a search for “negative interest rates” on google news.

Getting into a conversation of why this policy is being adopted around the world is beyond the scope of our site. Not to mention, that discussion quickly devolves into people screaming at each other.

It's almost as divisive as discussing the 2016 presidential campaign.

So, in this week's episode we're not discussing the policy itself in terms of its sanity. We're more concerned with how life insurance companies are effected if a negative interest rate policy is adopted by the Fed.

To better understand some of the numbers we discuss, check out this article that was posted by the National Association of Insurance Commissioners (NAIC) just a couple months back.

Listen to find out more.

 

In the world of evaluating life insurance policies (something we do daily), it's possible to get bogged down in a discussion of fees. And sadly, it won't do much good. If you're looking at fees associated with whole life insurance, good luck. The product is not transparent (nor is it required to be) regarding what ... Keep Reading

In the world of evaluating life insurance policies (something we do daily), it's possible to get bogged down in a discussion of fees. And sadly, it won't do much good.

If you're looking at fees associated with whole life insurance, good luck. The product is not transparent (nor is it required to be) regarding what fees and/or expenses are charged.

But we've got good news for you…

it doesn't matter.

Okay, it does kinda matter but not the way most people think of it. It's not like comparing the expense ratios on mutual funds.

I'm going to alleviate the concern regarding fees entirely but telling you that it's just not something that you should be concerned with.

Instead, a better measure is to look at your net return. Because at the end of the day, how much money you actually have is the only measure that matters. You can't spend averages.

Listen to the full episode for more detail.

 

There’s no doubt a number of people have made arguments against the ownership of cash value life insurance. You don’t have to spend a lot much time surfing ye olde’ interwebs to find such evidence. Too many of these arguments are propped up on misinterpretations of the various products that exist–heck even the agents ... Keep Reading

 

There’s no doubt a number of people have made arguments against the ownership of cash value life insurance. You don’t have to spend a lot much time surfing ye olde’ interwebs to find such evidence.

Too many of these arguments are propped up on misinterpretations of the various products that exist–heck even the agents themselves can’t come to a consensus on how things work.

But one of my favorite literal interpretations about cash value life insurance that’s used to substantiate the opposition is the fact that life insurance companies keep the cash in your life insurance policy when you die. “You don’t get the cash when you die, the insurance company keeps it!”

They exclaim with sharp disapproval. And most of you who don’t know any better fall for it.

You can’t take it with you

The old argument goes something like this:

“When you buy permanent life insurance, the cash that accumulates inside your policy is not paid to your beneficiaries when you die. Instead the life insurer keeps the cash and pays you the death benefit.”

Oh the horror…

I’m here to confirm this statement. It’s true. Functionally speaking, no life insurer pays the cash value out of a life insurance policy to a named beneficiary. The cash stays with the insurer; the beneficiary gets the death benefit.

That’s Nice, but we like Proof

Alright, so I’m sure that you’d like to see evidence to back up this whole notion that “the product is worth more than the sum of its parts”…right?

Let’s do that.

Here’s a blended policy designed to optimize cash and remain compliant with modified endowment contract restrictions. We have a hypothetical 30 year old who is placing $30,000 into the policy each year.

This individual will then take income from the policy from age 66 to age 80.

So we start with a $2.7 million death benefit and come age 60 that death benefit has increased to $5.6 million. To get there, our premium hasn’t changed at all. For those interested in the math, that’s an 8.04% return on death benefit.

But much more noteworthy (at least to our topic at hand) is the fact that the difference between the cash value and the death benefit is $3.5 million. So even after the insurance company “steals” our cash value we’ll have increased the death benefit by $800,000.

But why stop there? Let’s take a look at our income scenario.

The policy projects income of $210,000 per year.

That’s almost $3.2 million over the 15 year period. And at age 80 we have a death benefit of just a hair under $3.4 million. Let’s do the math on that, we’d need an equivalent investment account that yields a consistent 6.03% each and every single year in order to rival this plan.

That’s one hell of a yield in today’s market for a low risk asset.

When it comes to cash value life insurance, those who get it tend to love it, and those who don’t look elsewhere. But those who do get it enjoy the benefits of a truly unique and remarkable asset.

If you’d like to learn more about how you can make cash value life insurance work for you, contact us, we welcome the opportunity.

If you've missed part 1 and part 2 of this five-part series, it would be worth your time to go back and listen to both of those episodes. It's not a pre-requisite, but it will help give you a little context for what I'm about to say… This third argument against owning cash value life ... Keep Reading