The Financial Procast

There's so much bad advice that gets passed around the life insurance industry that sometimes it's hard to point out the real stinkers. But today, we're zeroing in on the misguided direction that some self-appointed life insurance gurus have been spewing into the world over the last few years. What's the bad advice? Well it actually stems from the intention of people really wanting to take advantage of using cash value life insurance to build wealth. The problem sometimes arrises that those people who are looking to use life insurance as an asset class to provide a supplemental retirement income--are not insurable or not at rates that makes them happy. They've some sort of snafu with their health along the way that's left them either completely uninsurable or insurable at less than desirable rates. When you are looking to use cash value life insurance as asset, you're main priority is lower the cost of insurance so that more of the premium you pay is used to efficiently build cash value.  However, if there's some sort of issue in the underwriting process that takes you, as an example, from a preferred rating to a sub-standard (think table 3 or 4) rating, the costs of insurance are significantly higher, thus dragging down the internal rate of return on cash. A Great Idea Yeah, so somebody came up a with a great idea to circumvent this problem.  They had a lightbulb moment. Why not just take that $20,000 per year you were going to put into a policy for yourself and instead buy a policy on little Suzy or Timmy.  You'll accomplish your goal of building cash and this policy will work even better because the cost of insurance is way less. In other words, you will create a much more efficient policy. Brilliant.  Right? Except that lightbulb was pretty dim. While this idea may sound great, it doesn't work. Why? Because insurance companies will want some reasonable financial justification for insuring Timmy or Suzy with a $5million death benefit. Most life insurance companies get really weird about issuing policies at more than a $1million on children. There really has to be a set of unusual circumstances for them to get comfortable with that. In fact, we've had trouble with them being okay with levels half that amount. The idea works in theory but no so much in practice.

There is certainly no shortage of self-appointed financial “experts” making the rounds in the financial media–television, print and on ye olde interwebs. But we think something everyone should consider before relying on the advice of these gurus. Of course the product that which we've chosen to build our practice around is cash value life insurance.  In ... Keep Reading

There is certainly no shortage of self-appointed financial "experts" making the rounds in the financial media--television, print and on ye olde interwebs. But we think something everyone should consider before relying on the advice of these gurus. Of course the product that which we've chosen to build our practice around is cash value life insurance.  In case your a new reader/listener or just stumbled on our site from a search engine. We should be crystal clear...we like cash value life insurance, we sell it everyday and we spend a great deal of time undoing the mess that other financial "professionals" have made of people's policies when they were sold to them originally. Just wanted to make sure that we offer full disclosure. So, what we'd like for people to consider this: the question you should be asking the gurus or even the other so-called financial experts who rail against any use of life insurance other than term insurance, "If all types of permanent life insurance/cash value life insurance (whole life insurance, indexed universal life insurance et. al)  are so bad, please explain to me how they work and why you think they're bad?" Much babbling and bumbling will ensue. Entertaining, perhaps. Useful...not so much. How can an entire group of people legitimately dismiss something when they prove over and over and over that they don't understand how it works? Now, there are plenty of agents out there who are guilty of the "I don't build'em, I just fly'em" mentality when it comes to selling life insurance which is really bad and not to be overlooked. However, we argue that the people who just dismiss it completely wihout understanding how it works are just as dangerous. We’ve been presented with plenty of examples of individuals from people who want to argue against the product, but have no idea how it works and make glaring mistakes when it comes to explaining life insurance and how they take issue with it. Focusing on one or two aspects of a policy that was designed correctly from the start and then calling the product as a whole evil is a common approach, and we believe it's just irresponsible. On the other hand, if you're interested in receiving a clear explanation of how it all works or to have us evaluate a policy that you've bought but are now questioning, feel free to contact us, we're more than happy to help.

For all of the joking around we do in this episode, we actually like disability insurance a lot.  What we're a bit annoyed with is the fact that there are a great many agents, insurance marketers and insurance companies that love to talk about the underserved disability insurance market. Now, they base that on the ... Keep Reading

For all of the joking around we do in this episode, we actually like disability insurance a lot.  What we're a bit annoyed with is the fact that there are a great many agents, insurance marketers and insurance companies that love to talk about the underserved disability insurance market. Now, they base that on the fact that so few people actually own an individual disability insurance policy. But is the market really underserved? Probably not. Yes there are undoubtedly people out there that should have a DI policy and don't have one.  That exists in every market and is not exclusive to the insurance world. There are certainly some people who work in particular occupations who should definitely have it.  Physicians as an example should most certainly have it but in our experience most of them do. For most people that spend a majority of their time sitting behind a desk, it's a much tougher product to own and for an insurance salesperson to justify the expense. The product becomes much more important when you are more specialized in what you do.  To the average American worker, there is no specialized skill behind what he or she does, so he or she tends to devalue his or her wage earning opportunity This doesn’t mean they are right.  They probably should own the product, but it can be tough for people to justify the cost and to find the value in paying the premiums (which aren't insignificant). Working with Disability Insurance is Tough There's a big reason that not too many agents focus on writing disability insurance. It's really difficult to sell to prospective clients and then you learn that part is just the first step. How do I put this delicately?  Underwriting sucks.  Yes it is arduous, extensive, and takes a while. Additionally, you will be asked even more detailed questions about any health issues you've had and you will be asked to open up your financials to the underwriting process--tax returns, income statements etc.  Not a process that most people relish. What's more challenging is that most people are way over confident about their health and they don’t appreciate DI until after they need it. Of course at that point, like any other type of insurance, it's not possible to purchase. Despite all the downsides and difficulties, we think it's a product you should own. A few things to consider: - 1 out of 3 working men experience a disabling event for at least two years throughout their working carriers and 1 out of 2 women experience the same - 50% of all personal bankruptcies are caused by some sort of disability - 50% of all mortgage foreclosures are caused by disabilities  

Since the inception of universal life insurance in the late 1970’s, the whole life world has felt threatened and rightfully so. Universal life insurance boasted a myriad of benefits that improved upon many of the drawbacks that long plagued whole life insurance. And the one argument the whole life insurance champions have long leaned on ... Keep Reading

Today we're going to talk about regulation. Now, we're never in favor of MORE regulation…let's be clear on that. But, we do think that the life insurance industry needs to do a better job of policing itself. If we don't, regulators will intervene and that won't be pretty for anyone. It's a bit of an ... Keep Reading

Holding onto a life insurance policy because you want to recapture the premium you’ve paid into the policy is playing exactly to the insurance company’s hand.  The reason they love to have so little cash surrender value in early years, is related to the thin margins they pull from a life insurance policy at this ... Keep Reading

What's the problem with binoculars?  They perform a great duty in that they make things that are off in the distance become very clear to us. The problem is that they isolate your perspective so much that you often miss what's right in front of you.  What's that got to do with anything you ask? ... Keep Reading

Having tax free retirement income eliminates a large degree of risk from your life. We’ve probably all seen the historical tax rate chart that show us the ebbs and flows of income tax rates over time. If you could put yourself in a position where you are not subject to the whims of these tax rate ... Keep Reading

It’s always a bit disturbing when there is a headline that makes such a bold and definitive statement. Just makes me cringe. However, in this case I can honestly say that the title of this procast episode is not done to be sensational in any way. No—it’s spot on. Exactly how we feel about variable ... Keep Reading

There are certain aspects of owning a cash value life insurance policy that are pretty similar to the alternatives. Like all savings plans, there is a degree of management that must take place. Part of the responsibility falls upon you, the policy owner and a part of the responsibility falls squarely on the shoulders of ... Keep Reading

Preface: this post and podcast episode is focused mainly toward our fellow agents, however, there are some nuggets in here for everyone. Have you ever been one of those people that spends an agonizingly long amount of time thinking things over, looking for ways to talk yourself out of taking action? Whether it is was an ... Keep Reading

Why don't life insurance companies do a better job of marketing the many benefits of using their cash value life insurance policies?  They talk a lot about death benefit, not so much about anything else. The truth is that most advertising and/or marketing that's done by large life insurers is more focused on brand recognition ... Keep Reading

Lately we've been asking ourselves if given all the difference in policy features from company to company and policy to policy is it fair to spreadsheet to cash value life insurance? And what is spreadsheeting anyway? We should probably explain what we mean by that. It's the process by which we take all the data ... Keep Reading