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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TEFRA DEFRA TAMRA: How Taxes Effect Life Insurance

life insurance policies have tax rules

Life insurance enjoys some unique tax benefits, but it also faces limits imposed by legislation we know as TEFRA DEFRA and TAMRA.  These pieces of legislation established specific guidelines as to what you can and cannot do with life insurance.

Each of these pieces of legislation creates rules that agents, policyholders, and people looking at whole life or indexed universal life insurance (or any UL product) should know.

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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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Five Reasons Whole Life Insurance is Better than a 529 Plan

 

The 529 Plan began to materialize in the mid 1990’s taking inspiration from prepaid tuition programs in the state of Michigan.

Since the initial formation it has become the dominate recommendation among financial gurus for college savings in the United States—despite President Obama’s suggestion that we end the tax free distribution 529 Plans enjoy during his 2015 State of the Union Address.

Despite the overwhelming support the financial media expresses for 529’s Americans still overwhelmingly choose basic savings accounts to save for college.

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When a 5.75% Return is Better than an 8% Return

It’s not uncommon to hear an investment salesperson or financial guru looking to chum the waters for a possible comment section debate make a statement like “whole life insurance/universal life insurance is a bad investment because the rate of return is terrible.”

Though we’ve addressed this statement a few times on the Insurance Pro Blog, I wanted to distill the point many people miss into as simple a notion as possible. Also, I want to have a conversation about total return or total benefit you get from committing dollars to a specific cause.

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Sequence of Returns Risk and Indexed Universal Life Insurance

We’ve addressed the subject of sequence of returns risk in the past. We’ve even discussed it on the new Insurance Pro Blog Podcast. This subject has become a hot topic in more recent years as financial advisors now struggle to build retirement income plans for their clients and face the problem that few, if any, training programs touch. Why isn't their more specific training for advisors on this issue?  Speculating about that would be an interesting topic for another day.

Today, I want to talk about how indexed universal life insurance is affected by sequence of returns risk especially in the context of using a policy to generate retirement income.

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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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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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Paid Up Additions: How to Create Flexible Whole Life Insurance

Flexible Whole Life Insurance

The fixed premium in whole life insurance gives many people a fear of commitment. But, it doesn’t have to be this way. You need not approach whole life insurance with apprehension. The annual premium is not the massive financial commitment it appears to be.

If buying whole life, don't buy a policy that commits you to 100% of the premium each year it's due.  

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