Life Insurance Notes

Greatest Asset

• The greatest asset is you. You are the one who goes out to work and educate yourself to improve financially, emotionally, and physically.

Main Points on Life Insurance

• Many Americans don't consider life insurance important, but it plays a major role in protecting families.
• This stems from emotional avoidance and a lack of understanding.
• The lack of financial education and avoidance of talking about death are key issues.
• Life insurance can be beneficial financially, helping people move away from focusing solely on death and capitalize on life while they are here.

Four Steps to Create Financial Strength

1. Manage your money wisely.
   • Don't spend more than you make.
   • Manage your debt. Prioritize paying off high-interest debt first. Explore options like balance transfers or debt consolidation to lower interest rates.
   • Create an emergency fund. Aim for 3-6 months' worth of living expenses in a readily accessible account.
   • Set financial goals. Define short-term (e.g., saving for a vacation), mid-term (e.g., buying a car), and long-term (e.g., retirement) goals.
2. Protect your income and your family.
   • Protecting income and assets are key to a stable financial future. Consider disability insurance, long-term care insurance, and property insurance.
3. Accumulate assets.
   • Understand the effect of inflation. Invest in assets that tend to outpace inflation, such as stocks, real estate, or commodities.
   • Understand the power of compound interest. Start investing early to take advantage of the snowball effect of compound interest.
   • Understand the effect of taxes. Utilize tax-advantaged accounts like 401(k)s, IRAs, or HSAs to minimize your tax liability.
   • Understand the effect of risks. Diversify your investment portfolio to mitigate risk and protect your capital.
4. Preserve your legacy.
   • Protect the hard work with a plan to conserve and transfer wealth. Consult with estate planning professionals to create wills, trusts, or other legal documents.
   • Make sure your legacy does not end up in the wrong hands. Establish clear guidelines and beneficiaries for your assets.

Types of Life Insurance

Term Life Insurance

• Temporary; can be 10, 15, 20, or 30 years.
• Expires at the end of the policy term.

Pros:

• Can cover final obligations that will disappear over time, like a mortgage or college expenses.
• Premiums are generally inexpensive, especially when you are young.
• Premiums are generally lower for cash value permitted insurance

Cons:

• Protection is only for a certain period, not for life.
• Premiums increase when the term ends.
• No guarantee of insurability.
• Policy does not build cash value.

Whole Life Insurance

• Permanent policy.

Pros:

• If funded properly, it will provide protection for life.
• Can accumulate cash value.
• Tax advantage (tax-deferred; the IRS does not tax life insurance policies).

Cons:

• Higher cost of insurance.
• No premium flexibility.
• Low rate of return.

Universal Life Insurance (IUL - Index Universal Life)

• Permanent policy.
• Three different components within it and there's three different types:

Fixed

• Has a fixed percentage rate.
  • Example: Regular bank account gets 0.02% interest, while a fixed account might get 4.5%.
• It is tax advantaged.

Cons

• Low interest rate.
• High cost of insurance.

Variable

• Has a challenge and tribulation tax advantage.
• Potential for high return because it's in the stock market.
  • If the stock market climbs high (e.g., 20%, 30%, 40%), the policy can gain that much.

Cons

• When the stock market falls, this policy drops too.
• Can lose everything.

Index Universal Life (IUL)

• Has cash accumulation.
• Tax advantage.
• Minimum guarantee floor (not in the stock market; mirrors it).
  • If the stock market goes up, say 15%, the policy might get 10% interest.
  • Extra 5% is how insurance companies make money.

Cons

• Limited cap.
• High cost of insurance.
• Focus on the IUL for presentations because of the cash value component, high interest rate, and protection against losing money

YouTube Video: Waterfall Method

• Every Rockefeller family member had a large life insurance policy.
• Beneficiaries tied back to the trust.
• Cash value life insurance policy used as a family bank inside the trust.
• Family members can take loans from the cash value life insurance throughout their life.
• Death pays it all back, replenishing funds.
• With each generation, the family trust gets more money, creating generational wealth.

Uses and Benefits of Life Insurance

• Income replacement upon the breadwinner's death.
• Pre-needs foreclosure and peace of mind.
  • Pre-needs: Setting up tombstone, casket, cremation, etc.
• Prepare for college expenses.
  • Use the cash value account to pay for college instead of taking out loans.
• Payoff of mortgage, business, personal loans.
  • Use the built-up money for these things.
• Tax-deferred versus tax advantage concept for supplemental income.
  • Tax-deferred like a 401k (not paying taxes upfront).
  • Tax advantage: not paying taxes at all.
• Regular income replacement if the policyholder is unable to work due to illness or injury.
  • Living benefit component: If you get any type of illness that are qualified under the contract, they will allow you to get an advancement of your policy to help you pay your bills and pay your mortgage and continue to live your lifestyle that you were living prior to you getting this illness knowing that you can't go to work.
  • Get an advancement of the policy to help pay bills if unable to work due to illness or injury (living benefit component).
    • Example: Cancer patients can file a claim and get up to 75-100% depending on the severity of the illness.
• Provide a lump sum payment if the policyholder is diagnosed with a covered critical illness such as cancer or heart disease.
• Leverage it as collateral for business loans.
  • Use the IUL as leverage when starting a business.

Key Points

• It's best to start life insurance early rather than later.
• Financial literacy book available with information about mortgages, loans, debt, business, real estate, budget sheets, and a financial dictionary. (QR code available)

Life Insurance Brands

• Most big companies (AAA, Aflac, New York Life) offer term policies, which are temporary.
• Permanent policies have the same premium for life.
• When a baby gets a Social Security number, put an IUL on them.

Unclaimed IUOs

• If they go unclaimed, the beneficiary is able to take the contract and present it with the death certificate to get the funds.
• There's also a contingent beneficiary if something happens to the first beneficiary.
• These stay within the family.

Importance of IUL Contracts

• IUL contracts are a contract, and the insurance company is agreeing to front whatever the face amount is.
• If you get sick or injured, they'll give you a portion to help you while you're ill.
• If you pass away, they'll give your family whoever the beneficiary is because you have a contract with us.

Companies that sell Permanent Life Insurance

• New York Life, GEICO, National Life, Emeritus, Mutual of Omaha, Ethos (offer IUL).
• Fidelity and Guaranty (F&G) is one of the top carriers.

Advice for Oral Citation

• The earlier the better to lock in a contract because the younger you are, your at your your peak health, and you can be able to lock in a contract at a lower rate versus waiting and coming down with some kind of sickness illness, you know, any type of diabetes, cancer. Cancer is running rapid now. Just all kinds of different things that we can come across when we get older, back issues, stuff like that. So blood issues, heart heart attack, blood clots, you know, having to have a stent in your chair, like all kinds of stuff.
• Suggestion: Act early, get as much information as possible, invest in yourself, and lock in a contract as early as possible.
• Treat life insurance like car insurance or phone insurance.

Potential Life Insurance

• The Trump administration will not affect anyone's life insurance policy because these are individual contracts with an insurance company.
• Variable ones that are in the stock market were impacted at that time.

25-Year-Old Wealth Builder Example

• Initial face amount: $100,000$.
• Initial premium: $150$ a month.
• Option B (increasing).
• At age 26, after ten years (total paid: $18,000$):
  • Guaranteed column: Minimum pay if the stock market falls.
  • Fixed column: 4.25%.
  • IUL column: Varies based on the stock market (can be as high as 15%).
• Cash value account (after paying the insurance premium).
• Surrender value: Money received if you cancel the policy.
• Term policy: No money back if canceled.
• Face amount (starts at $100,000$ and grows over time).

Cash Value Options

• Withdrawal can reduce future benefits because it's not paid back.
• Loan with 12 months to pay it back.
  
  • If not paid back the impact is a loss of values in the policy

Supplemental Income

• At 65, stop working, stop premiums.
• Total paid into policy: $72,000$.
• Surrender value: $250,000$ (due to compound interest).
• Cash value account: $259,000$.
  
  • In the event that the client was to pass, the beneficiaries obtain both the death benefit and the surrender value.
• Face amount at 65: $360,000$.
• Take out $19,936$ per year (approximately $1,600$ a month) from the cash value account.
  • The remaining money in the cash value account continues to accumulate compound interest.
  • Living off interest.
• The Face Amount will drop due to withdrawals

Financial Freedom

• Financial freedom can be achieved when assets pay for expenses.
• Assets include digital assets, rental houses, life insurance policies, and stock markets.

Age 90

• Stop getting $19,000$; just want to chill.
• Cash value life insurance account has built up $1,300,000$.

#