Life Insurance Company Ratings a Marketing Game?

Life Insurance Company Ratings a Marketing Game

Don’t fall for the marketing hype of a life insurance company being great because their ratings are “Superior”.  In the grand scheme of things, this really isn’t the most important aspect of what you should consider when purchasing of a life insurance contract.  Not that it should be completely discounted, but I wouldn't make it a consideration of the highest order, maybe second or third.

Realistically you should be much more concerned with the actual performance of an individual policy from the company vs. the platitudes about financial strength and stability that a company touts in their marketing material.  Because here's the truth, almost all of these companies (not all though so watch out) have stellar balance sheets–that sort of comes with the territory.

Keep Reading

The Cash Value Life Insurance Question-Reddit Style

The Cash Value Life Insurance Question-Reddit Style

I know this probably seems like a topic I discuss repeatedly, however, we still receive emails almost daily from people who are being shown cash value life insurance policy illustrations (both whole life and indexed universal life insurance) that grossly misrepresent the most efficient use of cash value life insurance as an asset class. The …

Keep Reading

The Third Dimension of Cash Value Life Insurance

The Third Dimension of Cash Value Life Insurance

Cash value life insurance is a funny subject. I strongly admire and strongly detest this product within the American system of finance, long known for its stable returns and obscurity. Proponents tout its many benefits while opponents scream about its expenses and lack of disclosure.

For those who have followed us for a while, you'd expect today might be one where we reinforce the benefits and side with the cash value friendly crowd.

You'd be sorely mistaken.

Keep Reading

Cash Value Life Insurance as an Asset Class – How it Works: Part 2 Universal Life Insurance

Cash Value Life Insurance as an Asset Class

Last time I talked about designing cash value life insurance as an asset class using whole life insurance, today we'll dive into how it works for universal life insurance.

Universal life insurance is often used by agents as a lower premium permanent life insurance option as compared to whole life insurance, huge mistake. As a product that seeks to establish a permanent death benefit, it needs adequate incoming money to build an appropriate reserve to ensure the policy's sustainability.

Keep Reading

Cash Value Life Insurance as an Asset Class – How it Works: Part 1 Whole Life Insurance

Cash Value Life InsuranceIt occurred to me somewhat recently that all my praise for cash value life insurance has left some unanswered questions regarding execution.  This is purely a function of precious little time and the needs for a more diverse range of topics.  This week I'll be rolling out a two part series on the subject (two so that we can spend ample time sorting out how it's done with whole life and universal life insurance).  And since whole life is way trickier, we'll start there.

Keep Reading

Invest in Real Estate? Why not Modified Endowment Contracts?

Why not Modified Endowment Contracts

Sometimes I just feel like being edgy, and throwing the words invest and Modified Endowment Contract about seems like a good way to be edgy. Of course this so called “edginess” is more a testament of my dork-dom–analogous to my saying, “I know my AGI is >$33,750 but screw form 6251.”

If you got that joke, I think I love you.

But in all seriousness a few recent events played out that gave way to this post. You see, It's been a long time since I thought real estate was a good place to invest. When I was in college I had a professor point out that the 30 year CAGR on real-estate in the United States was under 4%. Yikes! That was before the bubble popped, and let's not forget that real-estate can be super volatile.

Keep Reading

Modified Endowment Contract: Pro Blog Style

Modified Endowment Contract: Pro Blog Style

Modified Endowment Contract is frequently known as a condition where an insurance contract becomes “paid up” within 7 years. That's an okay understanding of a basic principle (it served me well for about 6 months and insured I didn't do anything really stupid when I was armed and dangerous as a new agent), but there's more to MEC's than just not making it paid up within 7 years.

Keep Reading

The Business Insurance Zone Day 5: Life Insurance Loans

Life Insurance Loans are the one thing just about every agent who has cash value life insurance in their quiver can tell you about. And why? Because they're TAX FREE! But wait, there's more…

httpvh://www.youtube.com/watch?v=GzIzsHWuSUg&hd=1

Unfortunately, however, we're not about to tell you about what you get if you call within the next 15 minutes. No, instead we're about to let you down somewhat hard. The more to this story is the ugly side of life insurance policy loans. To be clear, this isn't some tirade against them as I've been known for some other slick life insurance trick. Nor is it a suggestion that you not use them. We simply need to set some ground rules to keep you all honest and out of trouble.

Keep Reading

Universal Life Insurance is NOT the Cheap Alternative to Whole Life Insurance

Universal Life Insurance is NOT the Cheap Alternative to Whole Life Insurance

Universal Life Insurance rolled out to a lot of excitement and confusion.  Originally released in the late 70's, this products was incredibly innovative for it's day.  A premium that could be adjusted (at will) up and down and the ability to surrender cash values without taking a policy loan to get them.  Sounds like standard operating procedure these days, but it certainly wasn't the case when it first arrived on scene.  The industry and regulators were up in arms about whether or not the product could even be considered life insurance.  The Tax Equity and Fiscal Responsibility Act of 1982 made a final decision on that (the answer was yes).  And TEFRA was one of those hoorah Republican/Grover Norquist drag the government into the bathroom and drown it in the bathtub sort of legislative accomplishments.

Then, like a crack-head on day two of a detox program, the Government quickly realized it needed a hit and passed the Deficit Reduction Act of 1984.   DEFRA took a mean swipe at the life insurance industry as it sought to eliminate the use of life insurance as a fairly unlimited tax shelter (and entire careers were made in the matter of months as money rushed to life insurance to be grandfathered from DEFRA's new rules).  So, with the hide your money train pulling out of the station, insurance agents who neglected to buy a ticket had to turn to some other sales idea to write business.  And then, mathematical and insurance illiteracy set in…

Keep Reading