I’m going to tell you a secret that the life insurance industry doesn’t want you to know. Not all life insurance premiums are set in stone. If you buy term insurance the insurance company sets the premium and commissions. Everything there is pretty industry standard. It is what it is and it can’t be changed.
Permanent life insurance is a different story. The insurance company sets a target premium. They pay a standard commission rate up to the target. Anything over that is usually paid at a 2-3% clip. Now most agents are trained by insurance companies. They are trained to sell you a policy at target premiums. Herein lies the problem with the life insurance industry. Those aren’t usually the best premiums for the policy holder.
These premiums are also where the rumors arise with cash value in life insurance. These target premiums produce small returns and can take 15 years to produce positive results. Who wants that? How does that help a policy holder? If it’s best to just have permanent term (a permanent policy that you aren’t looking for cash value growth) then use secondary guarantees on a universal life policy. However, if you want a policy that is going to build cash value you need it to be properly funded. This is where most insurance agents fail. The truth is that these premiums are completely flexible whether it’s a universal, variable or whole life policy. Yes, whole life policies have just as much if not more flexibility than universal life policies these days.
Do you want a policy that is balance sheet neutral? Positive returns in 3 years? 95% of the cash you paid in in the policy within the first year? These things can be done when the policy is properly structured. Life insurance is the most underutilized financial tool or maybe the most misused. Don’t fall victim to life insurance agents that don’t know any better. It’s used by the largest corporations in the US to fund deferred compensation agreements, buy-sell agreements and various executive benefit plans. It’s a great way to fund a personal pension plan or to maximize the pension you might already be eligible for. You want to leverage real estate or use a bi-weekly mortgage plan? It makes them better. College funding, it gives you complete flexibility without the market losses. Don’t like banks? Be your own bank. Lend yourself money and pay yourself back all while the money is earning returns. This is only the tip of the iceberg for life insurance. The best part is what it will do for your loved ones, peace of mind and a future with or without you. That’s the biggest gift it can provide.
September is Life Insurance Awareness Month.
- Get a Life Insurance Audit.
- Talk to the right professional to make sure your policy is set up properly.
- Let me know if you have any questions, e-mail me.
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I could not agree less with your point of view i nthis post. Whole life insurance is a horrible investment. Insurance should not be used as an investment or savings tool period. There are so many better opprotunities to use your money out there elsewhere. For most people, term life insurance is the best option and cheapest.
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