What is Bank On Yourself®?

What is Bank On Yourself?

Bank on Yourself®  is the creation of Pam Yellen and is a process of using whole life insurance as a means to finance major purchases.  The claims made by Bank on Yourself® suggest that following the program will unlock hidden wealth secrets employed by savvy investors and business people. But does it work? We get …

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Indexed Universal Life: Market Neutral?

Indexed Universal Life Insurance Market Neutral

The other day I was part of a conversation with another agent about Indexed Universal Life.  The conversation was more of a challenge to my position that, like whole life insurance and current assumption universal life insurance, indexed universal life deserves just as much credit for being market neutral and falling into the alternative investment category …

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Myth: Indexed Universal Life Insurance has Stock Market Exposure – Case Study

When we discuss indexed universal life insurance with new potential clients, they commonly mention that they already have stock market exposure, so they see no need to gain additional exposure to the market.

I understand the impression they often have, but assuming that indexed universal life insurance gives you additional exposure to the market is a misunderstanding that could lead you to the wrong decision–many clients have expressed their gratitude in our willingness to pause and discuss the product more to ensure understanding.

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Case Study: Whole Life Insurance vs. Bond Strategy

 

We receive phone calls and emails every week from people looking to “de-risk” their portfolio and possibly add life insurance as a complement to their other investment and savings strategies.

A comment that tends to trend among these good folks notes that while we’ve done a pretty decent job explaining the more esoteric aspects of life insurance (according to the comments) it’s still somewhat difficult to understand exactly how this works and why it’s beneficial.

I can accept and agree with this comment and in an attempt to build out more comprehensive understanding I'd like to present a case study today that highlights some of the power behind life insurance when used as an asset in one’s portfolio. We’ll be publishing several more of these in the coming year. While we’ve been given permission to share these stories, names have been altered a bit to protect identity.

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Argument against Permanent Life Insurance: Lack of Fee Disclosure

In our final installment of the five most common arguments made against permanent life insurance we’ll take on fees or the lack of a discussion about fees, as high fees were already discussed.

The claim here is that life insurance contracts are very non-transparent regarding fee disclosure and you never really know what you are signing up for until long after you paid several years worth of premiums.

This argument, like several others, isn’t entirely unfounded. But it takes a large degree of liberal interpretation to the extreme.

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Argument against Permanent Life Insurance: Low Rate of Return

The rate of return argument against permanent life insurance focuses mostly on an irresponsible comparison of dissimilar asset classes.

Chances are good that most of you reading this understand that there is a relationship between the risk of an asset and it’s return; the two are positively correlated. This means the riskier an asset is (i.e. the more volatile it’s returns and the higher the chance you lose money if you buy it) the higher it’s long term rate of return is hoped to be.

People tend to be pretty comfortable with understanding that

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Should you Stop using Life Insurance Illustrations to Compare Policies?

When it comes to evaluating life insurance contracts for a potential purchase, a common tool used in analyzing policies is what the industry calls an “illustration.” The illustration is several pages of policy feature details and numerical details projecting policy values to the maturity date of the policy (generally the insured’s age 120 for policies issued since c. 2006).

But some have suggested that these so-called product illustrations should not be used to compare one policy against another and cite numerous sources who allegedly agree with their aversion to such a use for illustrations.

Should you be wary of a comparison that uses policy illustrations to make definitive or initial comparisons among possible products? And if these illustrations aren’t used to make comparisons, what does one use to discern the differences from one policy to another?

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An Indexed Universal Life Insurance Success Story

I was recently reviewing an indexed universal life policy issued seven years ago. We do a lot of reviews for life insurance policies (especially the ones we ourselves put in force for people) and such reviews look at performance to date as well as a comparison to the original policy projection to review how things have unfolded.

For a lot of policies, there’s little variance from the original projection. This is especially true on the whole life insurance side of things since dividends don’t tend to vary all that much (a few exceptions exist for policies we’ve been asked to review we didn’t have a hand in putting in force).

Not all that surprisingly the indexed universal life insurance policies have tended to do better than the original projections.

For the policies we’ve put in force, this is commonly due largely to our insistence on assuming a 6 to 6.5% annual index credit (a lot of less honest agents/brokers like to use numbers in the mid 7 to 8% range, though recent legislation is changing that).

The market has enjoyed a pretty good run since 2008 and indexed insurance products have certainly benefited. As a result, I often get asked what happens if the policy performs better than the 6% number I assume, to which I always point out, you’ll simply have more money.

This is great in theory, but a lot of people have a hard time grasping what that means in a more concrete sense. So today we’ll review publicly a policy that has been in existence for almost a decade and see how it has performed.

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Indexed Universal Life Insurance: The White Coat Investor Responds

Indexed Universal Life Insurance White Coat Investor

Last week we published a critical piece regarding a recent review of indexed universal life insurance that showed up on Jim Dahle’s website The White Coat Investor. Jim took our criticism seriously and on Friday of last week published a lengthy reply.

Based on the time Jim has taken to address this, I felt it was necessary to offer up some additional thoughts, and even a small critique on his attempt to rebut my biggest criticism of his original work.

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