Life insurance Rule

[FinalExpenseDojo.com]

I have a 24-point checklist where I compare permanent life insurance to 401(k)/IRA, Roth IRA, 529 plans, and after-tax brokerage accounts. (I have a similar one comparing permanent life insurance to owning a home as well.) I'm comparing the tax situation, liquidity, and overall risk/returns of the overall market... but I'm not talking about or comparing to any specific individual securities.

Can you post that checklist here please? Sounds like gold!

 

[DHK]

It is... and that's why I won't post it.

I consider it proprietary and it won't be shared here.

 

[FinalExpenseDojo.com]

It is... and that's why I won't post it.

I consider it proprietary and it won't be shared here.

How much you need to share with just me? Do you accept PayPal?

 

[AboutThatLife]

How much you need to share with just me? Do you accept PayPal?

When you do get it, can you add it to the members section of your website?

 

[DHK]

He's not getting it and I'm not selling it.

It's not personal.

 

[somarco]

He's not getting it and I'm not selling it.

It's not personal.

 

[DHK]

 

[scagnt83]

If you cant create your own version of his checklist... you have no business selling IUL in the first place.

Take the time and effort to learn it... and you can do what he does yourself.

 

[yorkriver1]

Having been exposed to some now discredited sales tactics for life insurance, I can make this statement:
If your prospect has to ask somewhere substantially into the sales presentation,
"Is this life insurance, Jim?"
It's not compliant.

 

[DHK]

I think there are more restrictions on insurance COMPANIES versus AGENTS.

In my opinion, it is important that you don't "re-label" life insurance to be something it isn't. I call it "Investment-grade life insurance", but it's obviously still life insurance. I wouldn't call it a "7702 Retirement Plan" - even though it could be that.

On the FB group, we recently had a thorough discussion on whole life vs term (with a few Primerica agents)... and we were privileged that Michael Finke, PhD, CFP and Chief Academic Officer of The American College chimed in.

Here are his posts:

This is a genuinely great discussion. Thank you DHK for referencing our American College texts as references for digging into the mechanics of insurance pricing. If you're going to make a convincing sale of insurance to a high income client, you're going to need to know your stuff.

Wade Pfau and I have been doing a lot of research on whole life using historical data comparing term to cash value. I want to start by pointing out when term is the best choice.

As others have pointed out, Americans are generally underinsured. Term provides low cost insurance for young families when they need protection the most. A young family with dependents and a modest income who needs protection against the death of a breadwinner needs a term policy - and probably a larger policy than they'd imagine. Recommending cash value at the expense of death benefit is not in the best interest of a client.

Insurance companies are not limited in their ability to position cash value policies as an investment. But there is an investment component to cash value that isn't well understood by many. A cash value policy is a term policy (mortality charge) plus a savings account whose purpose is to fund future mortality charges at an older age. These are expensive so the amount saved is significant.

Meant to say that companies "are limited" in their ability to explain the investment benefits of insurance.

This savings component of a permanent policy is tax deferred - similar to a non-deductible IRA. This provides a particularly significant advantage for tax inefficient savings such as CDs or bonds. For a high income client in a high income state, a cash value policy can be a far more efficient vehicle for non-qualified bond investments. I say "can" because expenses and mortality charges above term rates create a drag on returns. There should also be a need for the death benefit, but my sense is that most families appreciate having a death benefit when a breadwinner dies. Given enough time, taxes, and an efficient policy and the net return can match a qualified bond portfolio even for a household that doesn't need the death benefit. This is pretty remarkable.

Other tax advantages include the ability to consider mortality charges as part of the policy's basis. In other words, someone buying term and investing the difference simply loses all of the term premium payments. With a cash value policy, the term payments (mortality charges) are considered part of basis and cash value growth can be withdrawn tax free from this amount. It simply adds to the tax efficiency of the savings component. Think of it as turning your premium payments into a free Roth conversion.

But this requires that you take a holistic approach to portfolio planning. Think of cash value as part of the bond portfolio (if you invest in bond-like assets). I generally prefer to house bond-like investments in cash value because they are most tax disadvantaged. This will mean increasing the equity allocation in other investments.

This also means that cash value makes the most sense for high-income clients in high tax states. If you're a doctor and you're not considering cash value as an investment option, you're leaving money on the table.

My response to that last post:

Thank you Michael Finke - Chief Academic Officer at The American College!

Now, I do see other applications, because often, when I see case-studies for higher-end income earners, they don't factor much in the way of any consumer debt, which is more of an issue for middle income households. Permanent life insurance, which has its liquidity provisions via loans, can help promote responsible borrowing - when properly explained, and can help families have more liquidity, use, and control of their asset... compared to a qualified plan. This is one way where families can have uninterrupted compound interest, even when borrowing, as long as they pay at least the minimum interest on the loans every year to restore the total policy earnings and performance.

When we bring debt and future spending needs into the planning equation, other facets of permanent life policies show how much better they can be compared to other investments. NOT to say that you should ONLY have cash value insurance, but I personally believe it's the FOUNDATIONAL product that every family that's qualified to have... should have.

While I'm certainly not an "academic" (I don't even have a bachelor's degree), this is my blog post on how permanent life insurance can be a great foundational strategy for one's lifetime financial planning.

https://davidkinderfinancial.wixsit...etKsnXjZ6kgAsKWKHuGRaOIWQ5_X4JX2potI6FjNhIJ8Y

Michael Finke continues:

DHK this is a good point. The liquidity of cash value allows a household to hold a lower emergency fund, which can provide a higher overall portfolio return by moving cash to less liquid assets.