Insurance Pro Blog Podcast | Life Insurance and Annuity Insights

 

Today we're keeping with the theme from last week's episode. We're discussing the alternatives that you have to whole life insurance.

So, if you weren't stuffing thousands every year into your whole life policy, what else could you be doing with that money?

Obviously, you could be buying more cars, boats, houses, toys etc. but we're assuming that you (our loyal community) aren't interested in all those things. Instead you are interested in piling up cash to take advantage of other opportunities as they present themselves to you.

Well, maybe not all of you are on that path but our discussion should still be interesting to most of you.

The main question we're dealing with today…

Is Life Insurance a viable alternative to your savings account?

Life insurance cash values accumulate tax deferred so no annoying 1099’s come the end of the year with a tax liability attached.

This also means that you can compound growth of your money more efficiently since you have more money each year you compound (i.e. no removing some of the balance to pay the taxes due).

Since life insurance offers quick liquidity, there’s no real risk in terms of financial crunch due to emergency needs of money – you can access your money at any time and for any reason – processing is generally extremely quick (a day or two) and money can be sent via EFT.

*IMPORTANT NOTE* not all life insurance companies process loan requests as quickly as they should, and this might be a consideration when deciding on where to send your money.

Life insurance cash values can be accessed tax free so accumulating wealth and accessing it can be done without tax liability.  There’s a specific way in which one must go about doing this, but it’s not all that difficult to do. It's something we help clients navigate on a regular basis.

CREDITOR PROTECTION – while some states afford various protections to married couples who title their assets correctly, life insurance is creditor/liability protected in most states (but not all).  This seals life insurance cash values off from claims against you regardless of how the liability came about

States that recognize Tenants by the Entirety usually afford protections against assets titled as such only if the liability is solely due by one spouse. Joint liabilities subject TENT ENT titled assets to be 100% subject to claim.  Life insurance doesn’t care about whose liability generated the claim, it’s untouchable where protected by state law.

There is no need to hold life insurance in trust or LLC to accomplish this protection

RATE OF RETURN is much better than all money equivalent accounts we are aware of and not just by a little, by a lot.

If one placed $1,000 per mo into a MMA paying 0.52% APR (current avg. according to Bank Rate) they’d accumulate $123,200 in 10 years.

If placing the same amount into a WL policy we’d design for this purpose they’d have $145,779in 10 years (assuming 3.75% CAGR).  Simply doing nothing more than storing the cash in a different place they’d create $22,579 more.  That’s an 18% raise for doing nothing.

ESTATE PLANNING with a bank account can take shape in a few ways to avoid probate.

* TOD

* JTWRS

* JTIC

* JTENT

Potential problems with JTWRS and JTIC – you have to actually share the account with someone who might not be a spouse if you are planning an automatic transfer.  Also, this sort of titling creates potential gift tax liabilities when one tenant contributes substantially more to the account.

If the account is owned individually, then the account must be probated to transfer – probate is a public event.

Life insurance has a beneficiary designation and the money transfers immediately to the named beneficiary without need to jointly title or probate anything.

We've been asked to compare whole life insurance vs. the stock market too many times not to make at least one episode about it. It's not a comparison that we're wild about making. First, it makes it seem that it's an us vs. them sort of scenario. That couldn't be further from the truth. We believe ... Keep Reading

We've been asked to compare whole life insurance vs. the stock market too many times not to make at least one episode about it. It's not a comparison that we're wild about making.

First, it makes it seem that it's an us vs. them sort of scenario. That couldn't be further from the truth.

We believe that investing in the market certainly has its place and we've both sold investments in the past.

Secondly, we think that comparing the two just based on the returns doesn't do either any justice. Whole life insurance and the stock market are so different. The risk profiles of each are not even closely related.

I guess the comparison is often made because insurance agents and investment advisors are often fighting over the same money. That's the most logical conclusion that I have for explaining the need to compare.

So…

To give our audience what they want, this entire episode is dedicated to that comparison. Now, there are certainly a lot of numbers that have to accompany this discussion. Rather than reinvent the wheel in that regard, I'm going to reference you to a past blog post.

Back in 2013, Brandon wrote: Blended Whole Life Insurance Versus the Stock Market

Much of the discussion in today's podcast is framed by the research that was done for that post. To be sure, the information is a little outdated, however, this is much more of a philosophical discussion anyway. You'll be able to understand the important points if you refer back to that post.

If you find our podcast useful and you have a particular topic you'd like us to cover, please write to us and let us know. We'll do our best to make sure it gets into our calendar.

Today's episode is all about universal life insurance policy loans. Yeah, not the most exciting topic…we know. However, it's important to have at least a high level of understanding on the subject if you are looking to use the cash value from your policy. Particularly if you plan to draw an income from your policy ... Keep Reading

Today's episode is all about universal life insurance policy loans. Yeah, not the most exciting topic…we know. However, it's important to have at least a high level of understanding on the subject if you are looking to use the cash value from your policy.

Particularly if you plan to draw an income from your policy at some point the future. Loans from a universal life insurance policy don't function in quite the same way as they do for whole life insurance. Which of course leads you to the next logical question…

Which one is better? Is it better to plan to take large loans from a universal life insurance policy or a whole life policy? Well…that's a question you'll have to answer for yourself. And of course our answer is that–it depends.

Their are some definite advantages to understanding and making use of policy loans from universal life insurance. Here's a partial list of the topics we cover in episode 11:

* Wash Loans vs. Zero Net Cost Loans–what's the difference

* How loan interest accrues and why that matters

* Why loans for UL policies are not as much of a strain on life insurance companies

* Why it may be more beneficial to take loans from an universal life policy than to take withdrawals from the cash

Listen to here the discussion of all these points in depth.

And we promise next week we'll move on to something more exciting. We're just trying to make sure that build out this resource for you in the most logical way that we can.

Let us know if you have any suggestions.

 

Today we're backing up a bit before we move forward. As it turns out we already have the next couple of months episodes already mapped out…which you'll know is very unusual for us if you've been following us for any length of time. But with this newest podcast we're really making an effort to be ... Keep Reading

 

Today we're backing up a bit before we move forward. As it turns out we already have the next couple of months episodes already mapped out…which you'll know is very unusual for us if you've been following us for any length of time.

But with this newest podcast we're really making an effort to be more organized with providing information in a more logical order. It's hard to say what that means when you're talking about life insurance, however, we are making an effort.

So far, we've spent a good deal of time discussing whole life insurance and all that entails. We're gonna dive off into the weeds with universal life insurance now.

But I don't want you to think that the two are not related. That's a mistake far too many people  (including agents) make. The underlying arithmetic of dying doesn't change.

I mean a person doesn't magically live longer because they buy a whole life insurance policy instead of an indexed universal life insurance policy. Mortality assumptions are the same regardless.

Listen to the full episode for more commentary and if you want more in depth reading, check out these posts that discuss universal life insurance:

What is Indexed Universal Life Insurance?

The Myth of the Rising Cost of Universal Life Insurance

An Indexed Universal Life Insurance Success Story

Sequence of Returns Risk and Indexed Universal Life Insurance

If you have ideas for topics you'd like us to cover, please let us know. We're more than happy to weave those in to our calendar for future episodes.

The debate over dividend recognition with participating whole life insurance policies has been raging for about three decades. For most of that time, it's a debate that existed only in the annals of the life insurance industry. At least until just a few years ago. What happened a few years ago to bring it to the ... Keep Reading

 

The debate over dividend recognition with participating whole life insurance policies has been raging for about three decades. For most of that time, it's a debate that existed only in the annals of the life insurance industry. At least until just a few years ago.

What happened a few years ago to bring it to the forefront? Well, a savvy marketer from New Mexico (who shall remain nameless because she doesn't need our help with promotion) decided that using the debate as a marketing weapon was a good idea.

Thus spawned the countless conversations we now have with people who've read certain books, blog posts etc. proclaiming that policies from companies that use non-direct recognition of dividends are always superior to those policies from companies that use direct recognition.

We'd be okay with that sort of characterization if it were actually true.

But as is usually the case with whole life insurance, it's just not that simple. There are few scenarios that fit into an always category. 

And the debate over dividend recognition (direct vs. non-direct) is no exception.

In fact, we sell policies that use non-direct recognition and we also sell plenty of policies that use direct recognition.

As usual, our answer on which is better…it depends. Listen the episode to get a more detailed explanation and of course more of our commentary.

 

In episode 8 of the Insurance Pro Blog Podcast we're talking about whole life insurance policy blending. Sounds exciting right? It might be to those of you who've been listening to and/or reading our stuff for a while and have heard us bring up the term “blending” but never really understood what we actually meant. Being ... Keep Reading