I was wrong about Whole Life Insurance...
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- เผยแพร่เมื่อ 14 มี.ค. 2023
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For years I've talked about Whole Life Insurance on this channel. It's time to review that. How does Whole Life Insurance really compare to Indexed Universal Life Insurance?
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Thank you very much for your time. This is a very valuable video! I, too, received a call from my bank based off a deposit. I love having options. You provided me options.
dude became the agent himself and started scamming
Totally agree with you.I view Whole life policy as a savings alternative..the rents I receive from my tenants go into a WL policy so I can shield the money from any lawsuits and it grows safely..I try to grow my money outside the policy by taking policy loans and buying more rentals or do Private money lending.
Do you know that if you pass away your beneficiary does not get the money in your cash value? Why pay for 2 products and only get 1? Why do you have to borrow if it was yours?
@@ivanrowe8329 Cash value and death benefit are not two separate pots of money, cash value is part of death benefit. It is the part of your death benefit that you can access now while alive. As CV grows, the death benefit grows (at least if from top mutual insurers). It's a non-issue.
@@linnyh8242 Back to why I say it's trash value policy....you pay extra for less protection that builds cash value that you can access as a living benefit to borrow and pay back with interest but you can't have both it's one or the other .Make it make sense.
@@ivanrowe8329 make sense? If you look at illustrations from today's 15+ years of near zero interest rate environment until recently, you will see that the rate of return is around 5% for death benefit for someone who live past life expectancy. That plenty makes sense considering mutual insurers are bond investors. To get both death benefit and cash value, they would have to earn nearly 10% rate of return. How does that make sense?
@@ivanrowe8329 Also, the loan interest in WL from top mutual insurer is a nonissue since the money still continues to get dividends from the insurer, which should more or less wash off the loan interest over life of policy.
Nice video. I appreciate it when people can admit they may have been wrong about something. I'd like to see an update on premium finance some time. I'm wondering about the very aggressive premium finance strategies for both IULs and WL policies now that interest rates have surged in the last year. It seems like they were based on almost always getting a nice spread between policy returns and loans. I wonder how long that spread can go negative before they face problems.
My policy monthly payment total
100$,
70 go IUL
5 IUL index fee
If IUL and fee Keep increase, the policy cash not safe !!!!
I had both whole life (which has a cash value feature as well as term life with more than one insurance company, which is probably why they tried to kill us. Multiple Policies.
If you really have that much insurance I have an ocean front cottage to sell you in North Dakota. You have insurance for your insurance....a salesman's wet dream
You and I have the exact same mindset for IUL and Whole life.
Why didn't you discuss the fees for IUL's? They are usually higher and go up each year unlike many WL policies that are fixed fees.
He made a video on IUL fees February 8 2023 on this channel
The fees on IUL policies are front loaded so fees start high and go down each year.
Edit: when option A level death benefit is chosen.
Thanks. But whole life insuranc needs a 10-30 years commitment, right? Bank CD is a place for parking money for short term. Can you elaborate on Tax Vs Fees for a short term?
WL, in Canada, will allow you to have your risk free part of portfolo tax free and to carry a hefty death benefit along the way. Risk like Nasdaq and index funds can be played at lower fee and more transparently elsewhere.
Hi Matt. Appreciate the video. To be fair, in the past you *have* pitched WL as a CD alternative. Perhaps now you realize how that may be more attractive to people than you realized before. I do love your new tenor!
I just converted to a new Whole Life policy to add diversification to our IULs. I see them as complementary because I know that at any point in time one will be better for some things---and one will be better for others.
IULs are garbage with their high fees/commissions and capped gains. Worse than whole life
Great take! Thank you!
Awesome transparent insurance info...just subbed 👍 👌
Good video. Disagree with a few things. I’d be willing to bet a dividend paying WL policy with one if the top companies would perform better than an IUL in the fixed account. Also, WL has and is better than bonds. I personally have a VUL and a WL. Seems like a better strategy. I’d like to hear your opinion.
Interesting video, especially with the click-baitey title. Without getting into the minutia, a true and adequate analysis of an individual’s financial profile will determine what’s best for client, be it: term, WL, UL, IUL, VUL, IRAs, CDs etc. BTW, maybe I missed it, but there’s no mention of the cap on IUL, just the floor. If you want maximum risk/ reward, then VUL is an optimal option. Bottom line, know your client, then guide them to a solution that works for them.
WL is what you'd get if the local bank you go to give you profit they make with your money, in addition to guaranteed interest, and have it be tax free to grow and use while getting life insurance coverage while you are at it.
Thank you so much for this video. My company is in the same space, focusing on index universal life insurance and index annuities. I agree every single thing you said about the whole life insurance policies, Although I would like to point out that investing whole life insurance policies versus investing CDs are quite different, because cash value life insurance policies tend to have a pretty long surrender period. Most of the bank CDs are either one or two years with a pretty high interest return. It's not feasible for clients with whole life insurance policies For that short length of time. As a result, I would say life insurance policies are better for those ultraconservative and under cash value for a long-term.
How long are these IUL options contracts? Are IULs credited every month or year? When you pay an IUL premium, how much goes toward fees and how much goes toward options trading?
Jason, you are asking great questions, but they are tough to answer in this format. Reach out to talk:
leveragedwm.com/bookmeeting/
Your analysis is in the right direction but its still incorrect. The advice you are giving will confuse people. If someone wants to invest 10K for one year and is looking for safe guarantees, CD's are a great vehicle. Whole life will never return the same as CD if the time horizon is only 1 year. On the hand, if someone is going to only invest in CD's rest of their life, Whole life will outperform by a large margin. Whole life works very well in long term safe money situations. While the reasons you list are valid, the main benefit on whole life are earnings will be available tax free. They are also free from altering earned income tax credit which goes away at 10300 of investment income. Whole life will also let you retire earlier than 65 and not payback Social Security. You cant really do that if you invest in CD's.
This is a great point. If you compare WL to investing in CDs long term, then sure WL is probably better. But the answer to those people investing long term in CDs is not to buy WL, but rather to put the money in cheap index funds that should earn 8% in the long run. On the other hand, if folks are investing for just a year or two in a CD then you can't replace that with WL insurance.
There are specific situations where WL might be good, but every time I look at the numbers it just seems like a way to invest long term at a conservative return. I suppose someone who is super conservative might like that, but if my time horizon needs to be in decades then investing in index funds will have so much better return once you adjust for fees.
But if you withdraw any of the earnings in your policy, it's not tax free!
@@Robert-ju1zbDid you think CDs are tax free?
Does the cash value safe!!!
What about liquidity of your cash value in a whole life policy? I used to have whole life policies, but if you wanted to borrow your cash value the arbitrage between the loan rate and the crediting rate was a guaranteed-1%. I felt like I could only stare at my cash value and not easily access it. So I 1035’d it into IUL’s which I like much much better as my cash values are now much more liquid.
IULs are garbage with their high fees/commissions and capped gains. Worse than whole life.
You can take a loan against it to access it anytime with the option (not obligation) to pay it back
Deciding on Term vs Whole Life vs Mutual Funds? First world problems
Sounds like you need a planning conversation!
If their is no fee break down on a whole life .... wouldn't that null and void the policy under disclosure ?
My monthly fee index increased every month
Dividends in life insurance is an over payment of premium.
It is a refund of an over charge of premium
I also heard that take also but is it a bit cynical? The dividends are based on the profitability of the company, which obviously comes from premiums, but it also comes from expense management, investment income, etc.
Logically that if that's all it is, then your policy would never grow by the amount that it grows, and you would never receive a dividend after you put a premium payment in. They overcharging because they are actually taking very conservative viewpoints of mortality and charges and so the insurance companies are very conservative in nature so they want to say in case something were to happen. For example, if something happened like a pandemic or a war, something that would cause a massive amount of death claims, they would still be in very good shape.
@@BenOgorek No because you wont get taxed on a "return of premium" in the eyes of the IRS. You want this to be a return of premium so you can access it cash free
So my question is, you can only get a Loan of the amount of cash you put in the W.L. Policy?
typically, initially your available cash value may be less than what you put in, depending on how your plan is structured. Usually then, within 3-5 years your plan can be structured to "break even" and even appreciate over your directly contributed cash value over time.
Comparing WL to a bank product is not singing praise for WL. The fees associated with WL over the long term are so high that I still think you would be better off putting your money in tax deferred accounts and invest in index funds and use a fraction of the money to purchase term life for the period of your life when you need it the most.
You are buying discounted dollars with this product. It's really a bond alternative that is tax-exempt. It gives you control, leverage and liquidity. Depending on the structure you're looking at 3%-5% IRR which is the tax equivalent probably about 5%. That being said there are a lot of people I wouldn't recommend it to. My clients use the cash value to invest in Real Estate using the same dollar twice. They don't have to choose.
How about IUL index fees and COI expenses in IUL?
Assuming a top 1% agent structured the policy correctly then the fees will get cheaper over time because of decreased net risk to the insurance company
The only thing one needs to know about any permanent life insurance is to RUN AWAY as fast as you can.
Lol, if that's how you feel, you should do that!
Another foolish Azz comment😂😂
Let me ask you a few questions:
1. Should everyone have a life insurance policy?
2. After you pay the cost of insurance isn’t the overage accumulating a profit from interest?
3. Can’t you borrow against this policy at anytime and do anything you want with the money, including never pay back the loan?
4.Isn’t the cash profits you make in a permanent life insurance policy tax-free?
So you get insurance and borrowing power to make more money off of the borrowed money. So sir/maám, wtf are you talking about??? Everything I stated is 100% true. But you know what I don’t really care what you do.
Can you elaborate about what happens to the cash value once the insured dies? It all goes to the insurance company unless you want to pay an additional fee to get the cash value too
Buy term and invest the rest in a low cost index fund
Your misunderstanding it. The cash value is the equity in the policy. You're not paying for two items. The cash value is the equity in the policyNot in addition to the policy or on top of it's a part of it. Like a home for example, if you sell your home, do you get the equity and the purchase price? The cash value column think of it as your walk away money if you decide to cancel the policy that is what you get.
you have a death benefit, and you have cash value (don't like the term, but it is what it is) it is more accurately described as an accessible line of credit on your death benefit of the policy. When you take a policy loan, the death benefit is reduced temporarily until it is repaid. Your loan is covered by your death benefit, if you die before its paid off, your benefiicieries get the remainder of the death benefit after loan plus interest is paid. Also interest on most WL policies is annual simple interest , not compound interest, which costs you as the borrower less overall.
Is IUL linked with one year term insurance policy which needs renewal every year?
Yes.
IUL isn’t whole life.
What are some whole life insurance companies to look at? Or index insurance companies?
New york life and mass mutual
@@linnyh8242 thank I will check it out. I am still 50/50 on setting it up. there is a lot of videos on it. still confused on IUL and other stuff.
Nice video. However, with Whole Life the liquidity is gone.
I can do a CD ladder for 1year with my emergency fund and let it grow at 4-5% currently. Yet at the end of every month, I am getting my principal and interest earned back from my CD. I understand the growth will be taxable but the Liquidity remains. On the insurance part, I can have a term life at much less premium and no fees. Let me know what you think?
WL can be very liquid, around 80%+ right away and almost all by year 5.
You'd need to compare over a longer-time frame, say 20 to 40 years. Your term insurance costs will go up sharply. Your CDs won't make nearly as much when interest rates are near zero, like they were for about 14 years.
@@johnp7739 Who needs life insurance when your old?? kids are grown have their own money by then. Wife has a home paid for, and retirement of her own. You get term life when your younger and working through your employer. When you retire don't need it anymore give up the term life. I have made several 100k dollars in my 401k, roth, and index funds plus company funded retirement. I put my money in whole market index funds they are low cost and not dependent on one company failing.
@@Mike-01234 Plenty of people need it, and if they don't, that extra money is a wonderful bonus for your family. Just hope all your plans don't bite the dust if we have a Great Depression or Japanese stock market correction (Nikkei is still below the 1989 high point).
@@johnp7739 They could just take the same money invest into a roth IRA mutual fund name someone as the beneficiary they would get the money tax free likely 3 times the amount of a policy would pay. WL doesn't pay cash value and the face value of the policy. The beneficiary gets the policy, and the insurance company keeps the cash they invested all those years.
Matt....Spot on!....been hard on whole life you say......Dave R takes the crown on that one...
And ask Doug andrews how WRONG THIS GUY WAS! lol iuls are for the long haul
Way better option that any CD plus your going to pay taxes on the gains with a Cd
0% floor for 1-4 years or. -100% returns for 1-4 years.
What happens if you take out a million dollars, invest it and lose it? What happens if you make money? You keep the difference?
Great stuff! Where can I pm you some questions?
Let me be blunt here. You are comparing to completely different products. CDs that are generally used for short to mid-term investment to whole life polices that are ultra long duration investments/commitments. These whole life polices are for people with high net worth, not for people who go to a bank to open a CD. Wondering how much you were compensated for making this video.
You were definitely blunt but also didnt make any sense. Opening a CD is locking your money way for a guaranteed interest rate. The IRR will be small because its guaranteed, but you will pay capital gains tax on that gain and the money is illiquid. Its not an investment, if it is then its a really lousy one. Theres no risk and no upside, its just a temporary medium to park safe money before it will be used.
Bank accounts have Federal insurance under FDIC Sherlock. As low risk as it gets
Up to 250k, and we have clients whos money is still locked up at SVB after their failure. Insured? yes. Accessible? No.
@@CashValueLifeInsuranceReviews wrong. First Citizens Bank in my home state right down the road took them over and everybody can get their deposits. You don’t know what you’re talking about. FDIC insurance didn’t even have to kick in because nobody lost their deposits.
@@steve-on3234 @CashValueLifeInsuranceReviews is right 👍
You are spot on Matt!
Thanks
Whole Life, the insurance carrier assumes the risk. Any UL product, the insured assumes the risk. Any UL buyer is saying they feel they can manage the policy better than an insurance company can. Many UL buyers will find out that they cannot at the worst time to discover this fact.
Any trash value insurance policy is a waste of money.
@@astroman30 The fact that you think your money is going to waste in a policy tells me that you don't actually understand how these policies work. It's like saying having cash is a waste of money. Obviously you get more from your cash when its sitting in a stock that shoots up 15%. But you can't spend stocks at the grocery store can you? You need cash for everyday living. Why not make that dormant cash more productive that will earn guarantees at 4%-4.5% uninterrupted while spending it at the same time. You're not spending money in a policy, you're parking it there so thats its productive while you spend it.
@@bitcoindom So, tell us what happens to the cash value when the person dies, and don’t lie!
@@astroman30 Genuinely so happy you asked this so I get the opportunity to educate you.
For this you need to understand how the IRS views the death benefit and cash value. In order for life insurance to be tax-free, the IRS has put the MEC 7 pay rule. This basically means that for every dollar you contribute to the cash value, you need to have a certain amount of death benefit with it so that the IRS still considers it life insurance. For cash accumulation, you're reducing the death benefit to the bare minimum to keep the COI low.
Now you need to know what Net risk is and why 99% of people don't understand how the fees work in a properly structured policy.
The IRS says you need a certain amount of life insurance for your cash value right? What they don't mention is that you can close the gap of the insurance companies net risk with your accumulating cash value to pay for less insurance as time goes on.
When you pay your first premium, all of the risk is on the insurance company because your cash value is tiny relative to the death benefit. In other words, if you die after your first $1k payment, the insurance company has to pay your beneficiary $100k (or whatever the death benefit is) so the first year you pay for $99k worth of insurance.
Over time, as your cash value builds and your death benefit stays level, you close the gap on the risk for the insurance company.
For example, the next year your cash value is 2.1k, then its 3.4k, then its 4.7k and so on... this now reduces the insurable risk for the insurance company. Instead of paying for $99k of life insurance the first year, after a few years you're now only paying for $50K of insurance.
When your cash value catches up to the death benefit then, the insurance company adds whats called a corridor of insurance so that if the insured dies prematurely then the family will still receive a greater death benefit than the cash value. That corridor may be $15k of death benefit until age 95.
By the time of the insureds death say at age 100, their cash value and death benefit should be equal and the client is now fully self insured which is why these policies get cheaper over the course of time.
So to wrap it up in a bow nicely for you, if you live long enough you actually get your compounding, tax-free cash value back. Its just labeled as "death benefit" so that you don't get taxed on it.
The client has now won the game of insurance and has gotten every single dollar back that they've ever put into the policy plus the decades of tax free compound interest. Not to mention the fact they could've taken some income from the compound interest in the form of a loan or used that money to make investments along the way.
You're welcome. Anything else I can help you understand?
@astroman30 The response would be something like "It blossoms to the death benefit" when in reality they keep it.
Can you comment of Kansas City life ?
Not good for whole life designed for saving purpose.
Do you know anything about Kansas City Life?
@@StacyWorth I know it's not good for WL that's set up for saving purpose. Other than that, it's just like any other life insurance company.
Of course the growth is tax free in a whole life insurance policy, it’s money you paid tax on before you gave it to the life insurance company! 🤦 people please invest in the actual stock market
Huh? You know stock gains are taxable even if it's bought with money you paid taxes on, right?
Any kind of policy,,,, if structure properly,,, you can make money ,,,,in cash value,,,
I have a whole life policy ,,been paying on it over 30 years ,,,,made over 60 percent return
In cash value,,,, this past year my cash value is $2731.46,, my annual premium I pay out was
$1254.00 ,,, subtract the cash value of $2731.46,, the policy pay out $$1477.00,, so please
Tell me what percentage is it,,,, then tell me how much money I made,,,,or lost ,,,,,.?
Bull-shirt---You build up cash value in policy ,but when you die, the insurance company keeps your built up cash--your loved one gets only the face value of the insurance company. Great deal for the insurance company--the insured get screwed. Buy Term & invest the difference... These big insurance companies based in Massachusetts, have humongous & big building in Boston; they did not get the money to build those skyscrapers by looking out for the middle class insurance customer
This is just factually incorrect as long as the policy is designed correctly.
Wrong! Net Amount at Risk + Cash Value - any loan= Net death benefit. The cash value is a component of the death benefit (the equity) it's not in addition to it.
I sell life insurance, if you reside in Florida I would love to assist you.
I buy term and invest in stocks and index funds. Why pay a middle person, when I have access to the market, especially with user friendly financial tools and $0 trades offered directly by financial brokers??? I do not have a investment mechanism with none of my other insurance products - e.g. home, auto, health, dental, etc...for a reason. Think about it folks and buyer beware of WL and IUL sucker commissions.
Deferring taxes is a horrible idea…
Tax rates are at LOWEST rates historically speaking.
A great read is “Confessions of a CPA” by Bryan Bloom.
Great point!
Thanks for the comment. I appreciate your willingness to interact here. You are certainly missing some major details in the IUL strategy.
You have a point. But by investing yourself you pay a lot in taxes. With whole life insurance you can borrow money and skip paying taxes while earning money on didends
@@miltonkevelier3778also, dividend paying whole life is essentially a tax advantaged corporate bond fund that's also supplemented by institutional business profits. Individuals are not likely to beat it with HYSA or swapping CDs and Treasuries, and paying taxes each year, like the OP is very likely to end up doing.
Term life insurance and invest the difference is the way to go!
Wrong
@@fireindahole857 Can you explain why?
Absolutely. It's almost crazy to suggest otherwise.
Cash out 65
Jiff
Whole life safe, liquid and tax free you can keep the gamble
I use whole life insurance not to become wealthy but safety give my children a tax free safe gift 🎁 legacy matters
Term life does the same and provides more protection for far less costs. Build up your savings during the term, to fund your plan, then when your term expires, you should be fully self-funded and you no longer require life insurance! If you can't do the savings part on your own, then also purchase a burial plan alongside your term, when your term expires, your burial plan is fully funded. You're welcome.
@@frankcostello8489 that’s silly advice I invest in a Roth IRA taxable investment account I also have real estate.. I don’t rent anything I lock up everything and believe in God and compound interest and in legacy.. slow and steady wins the race term is like leasing it’s setting money on fire.. take the 25 cent mask off trust in God
@frankcostello8489 Term Provides zero prorecron for 99% of the people. its a false sense of protection cause you dont need.. otherwise they wouldn't have sold it you..
Who needs life insurance at 60? My kids are grown have more money than I do. Most people need life insurance when they are young don't have all that much money saved. Homes are not paid off and you're living on a much tighter budget. Term life is lot cheaper, and I can invest in a roth IRA in a low-cost index fund make more money than whole life. There is a reason people selling whole life make a lifetime of commission off the products they sell to people.
I won't disagree except to say I bet most people nearing the end who don't have life insurance wish they did. The phrase "needs life insurance" can mean something to different people. Maybe not to pay off a mortgage or a child's education, as you state, but some nice amount left in trust to help grandchildren start a business or buy a home, etc. Hopefully it's decades away, but if my nieces and nephews owned a home which my death benefit helped to pay for . . . to me, that's important. Is that a "need for life insurance?" Probably not, but it's not nothing.
@@richardbryanesq Just put the same money into a ROTH IRA set the beneficiary to them. In the end you have way more money and buy term life when you're younger. The beneficiary of Roth IRA won't have to pay tax on the gains as long as the account has been open for more than 5 years. Roth will have 3 times as much as a whole life insurance plan would.
@@Mike-01234 - that sounds like a smarter idea.
@@Mike-01234can you drop 20-30k a year in a Roth? If you find that one let me know cause I’d 100% put some money there too.
@@juliandaza82 Most people don't have the money to drop 20-30k a year in anything. Yes, I agree an insurance policy investment works for people of high net worth. Those represent small minority of people who end up buying these. The ones who sell the most to are working class who can't afford to put 4000-5000 a year. The working class who making far less money much better to buy term life and invest in a roth.
You were not wrong. You were right before.
Google “Ernst & Young whole life”
Read that study and eat your words.
Read that study from E&Y???
Buy term instead, it costs far less and provides far more protection. Build up your savings during the term, to fund your plan, then when your term expires, you should be fully self-funded and you no longer require life insurance! If you can't do the savings part on your own, then also purchase a burial plan alongside your term, when your term expires, your burial plan is fully funded. You're welcome.
Term Provides zero prorecron for 99% of the people. its a false sense of protection cause you dont need.. otherwise they wouldn't have sold it you..
Bruh... Think about it if its this complicated to understand, They ripping you off somewhere in the complexity.
This guy talks like a politician or an insurance agent, he speaks confusion and can’t factually answer questions. Jibber Jabbash.
Let me guess, BTID guy??
Both whole Life and IULs are garbage. Trash Value insurance is never a good purchase.
You obviously don't know what you're talking about
@@fireindahole857By all means......please elaborate.
@@astroman30 I'm not your homeroom teacher look it up
@@fireindahole857In other words, you don't know wtf you're talking about.
@@astroman30 ok if you're a dolt just say that
Trash value policy
!xc Vax AZ