Which Life Insurance is best for Banking and Why?
In the world of life insurances there are two basic types: permanent and term. However, within those two basics, there are several hybrids of policies sold in today’s marketplace and are used as investment strategies.
Here are the basic types, and how and why The Money Multiplier only uses one type of policy contract to build wealth with.
Term Life
Term life insurance is purchased for a specific “term” of life. Typically the term ranges from ten to thirty years and the policy owner can choose between a fixed annual premium or an annual renewal premium. The fixed premium will remain the same amount and will be due annually for the life of the term (10-30 years as chosen by the owner). An annual renewal premium is subject to changing each year that the owner renews his policy and typically as the owner ages, the premium increases in price. The Money Multiplier Method does not use term life insurance for their policies because there are no guarantees on your paid premiums. In other words, there is no cash value.
Universal Life
Universal Life is a hybrid of term life and a type of money market investment. Any returns on a policyholder premium are variable and adjusted monthly. Universal Life can either be variable or indexed. There is an attraction to Universal Life because the policy will rise in value with the stock market, cost of insurance is cheap in your early years (20’s, 30’s and 40’s), and there’s a death benefit when you die. If it’s a Variable Universal Life policy, an owner can make as much money as the market will allow, and lastly, in an indexed universal life contract, there is a floor of “zero,” meaning you can’t lose more than you put in. This is a broader category. We will discuss in detail below and then debunked them for banking policies.
Variable Universal Life
This is a type of permanent life insurance but is considered the most expensive of the life insurance options. Payments are determined by the performance of the investment chosen by the policyholder. There are no guaranteed returns and typically the fees involved in this policy are higher than others. The Money Multiplier Method does not use this type of insurance because of the volatility of the returns on the paid premiums from the policyholder.
Indexed Universal Life
Indexed Universal life is a type of permanent insurance and has a guaranteed fixed rate of interest. The interest rate is based on an outside index similar to the S&P 500. All premiums are paid to a fixed account which earns that fixed rate of interest. The interest rate is generally not stated, but there is a minimum and a capped rate. The amount in the indexed account would earn and interest rate based on an index growth rate. The Money Multiplier Method avoids using this as their policy of choice due to the high fees associated with this type of policy. These fees can drastically affect the policy value and have adverse tax implications for the policyowner.
Whole Life
Whole life insurance is a contract which guarantees the life insurance company will pay a certain death benefit to the beneficiary upon the death of the owner and the company holding the agreement will share any excess profits with the policyowners. A whole life policy has a guaranteed cash value that is available to the owner through policy loans. Policy loans may alter the dividends and will affect the death benefit if not paid back, however, repayment of the loan is not required. The Money Multiplier Method uses dividend-paying whole life policies from a mutual company as our vehicle because of the complete ownership and access to cash value allowed for each policyowner. When you take a policy loan, you are not borrowing the money in your policy. You are putting up your policy as collateral and taking a loan from the general fund of the insurance company. You are guaranteed to die so your death benefit will pay the loan. All you have to do is pay the interest on the loan. NO other Life Insurance policy can do this. This is what the richest families and banks have used for generations to increase their wealth!
When you’re ready to get started on creating your financial legacy or if you have more questions, most questions can be answered by watching this video. Start there and then schedule a consult with my team when you’re ready to begin.
