Indexed universal life has greater benefits than whole life. In this episode, I’m going to address the question head on “What kind of life insurances right for me?” So, put on your seat belt because I’m going to show you somethings that properly structured maximum funded life insurance can do for you that will knock the socks off of other traditional ways to save for retirement or college funding or real-estate management.
It’s what i call the Laser Fund. And I’m going to gift you a free book at the end of this episode. So, stay with me.
I have a national radio show that’s been running for 12years. It’s weekly. I’ve written 11 books. My goal is to write a book every single year the rest of my life and release it. I’m going to share with you how I learned how to optimize assets and minimize unnecessary tax.
And now I’ve literally helped thousands and hundreds of thousands of people who have read my books and listened and watched and learned. So, in this episode, I’m answering the question that I’ve been asked millions of time span I’m talking about literally. “What kind of life insurance is right for me?”
So, let’s start with the basics and then we’ll get into the more complex way to analyze what kind of life insurance might be right for you. So, there’s basically 3 kinds of life insurance. Let me summarize and explain what those are. Generally speaking there is term insurance, whole life insurance and universal life insurance. Now, in all honesty, all insurance has a term insurance component in it. The pure cost of insurance.
Term insurance is usually used for situations where you need some life insurance protection in case you had an untimely death for a temporary period of time. So, if you think you only need life insurance protection while your children are young, if you were to be killed in an accident or die or whatever (cancer).
That you would then have the money left behind so that your spouse your wife would be able to live in dignity and be able to have music lessons and send the kids to college and so forth with the money that you would have earned had you stayed around. So, see in that case, the insurance need is to create the immediate estate that would be required because of the economic loss created or suffered by your beneficiaries, your survivors.
And so, a lot of times people say, “Well, I only need insurance protection while my kids are young.” Later on, when they’re out of the nest, I don’t need the insurance anymore. Or when i have enough in investments, I don’t need insurance anymore because my wife will be fine if i die when I’m 50or 60 because I plan on having millions.
Okay. If that’s truly what you do then term insurance may be a good way to go. And so, I was a big proponent of buy term insurance and invest the difference and pretty soon you’re self-insured.
Well, that was until 1980. See, up until 1980 there was only term insurance and whole life insurance. Whole life insurance was designed for you instead of having to pay a higher premium every year. Because term insurance generally the premiums group as you get older. Because the cost, the amount of people dying at age 30 and then 31 and age 32 age 33.
More and more people die the older they are. And so the cost goes up with term insurance because you’re paying for the chance of how many men, how many women out of 1,000 are going to die at age 30? Well, not as many as age 35 or age 40 orange 50 or age 60. In fact, it used to be that by age 65, one-third of males were already dead.
And so, term insurance goes up in price. Whole life, they simply said, “Well, why don’t you pay higher premium?” It could have been 10 or 20 times the actual term insurance. But inside the whole life policy, they’re only really deducting the actual cost of the insurance but you’re way overpaying the actual cost and you’re doing that because later on if you pay a level premium for your whole life, then it covers you for your whole life. And pretty soon you overpaid so much in premiums the early years that in the later years your underpaying and all the cash value inside that whole life policy is now earning interest and covering the cost of the insurance when it gets really, really expensive.
Does that make sense? So, it’s a level premium for your whole life. It’s called permanent insurance. But whole life and term were primarily designed for death. It really should have been called death insurance. See, I like life insurance because I use it for life, for living benefits. So, that’s why in1980, EF Hutton, who was not an insurance company. They were the brain child behind the emergence of universal life.
Can you use universal life for death protection? Sure. In fact, you have to apply for an amount of insurance and the insurance has to be justified based upon the economic loss that would be created by virtue of you dying, okay? That’s called reason and justification for the insurance. You just can’t go get a bazillion dollars of life insurance because there’s crazy people out there that take out millions of dollars of insurance and then strap a bomb around themselves and they leave it behind to their cult.
And so, you have to qualify based upon your income and your net worth and what have you. When you’re younger, you’ve got young kids. You can get insurance up to maybe 30 times your annual income. If you make 100,000 a year, you could qualify for three million of insurance. But later on, when the kids are gone and so forth, you may only qualify for6 times. Maybe ten times your income or one times your net worth. If you’re worth 5 million, you can get five million of life insurance. So, what happens is whole life is still designed to have these guarantees in it that it will never lapse. It will last you your whole life.
Hopefully, okay? Based upon certain assumptions. In 1980, EF Hutton who was a brokerage firm said, “We’re trying to earn an average return of 12% with our clients in mutual funds in the market stocks and bonds and so forth.
“You’re not going to always average 12. But assuming you could, they realize people weren’t netting 12. If you earn 12%, if you have a million bucks in the market and it earns 12 that’s 120,000. But if people pulled out 120,000 they had to pay taxes of 40,000, a third. Another uh 10 000 fee if you earned 120(thousand). You’re only netting 70,000 after taxes and fees to buy your gasman groceries. Hutton said, “Why are we doing this? Why don’t we simply have them earn 11 a net 10?” Well how can you do that?
By putting your money into an insurance company inside of an insurance policy and you take the least amount of insurance the IRS will let you get away with and you put in the most premium. And it turns into a cash cow because now you’re trying to self-insure.
Now, when you have a million bucks in there, it’s your money and it’s tax-free and you’re able to earn 11%.Do you know from 1980 until 1990, I never earned less than 11 and three quarters?
I earned as much as 15.5%. But even since then, I have averaged 11.17 and netted 10 cash on cash. Now, people say, “What? I’ve never seen an insurance policy do that.” Well then you’ve never seen one structured the way I’m talking about. Just because you haven’t seen it, doesn’t mean it doesn’t exist.
I can show you historical actual rates of return of thousands of clients that have earned average returns of 7 to 10 percent or more on their max funded index universal life insurance contracts. The point is this: When EF Hutton came up with the idea, it was for living benefits. It’s life insurance.
Not death insurance in their mind. I mean, it’ll still benefit you, it’ll blossom in value and transfer tax free when you die. But it was designed so that if you had a million bucks earning a net rate of return cash on cash after all fees and costs of 10% then a million dollars would generate 100,000 a year of tax free income instead of a net of 70,000 out of a mutual fund portfolio.
Well, unfortunately, most mutual fund portfolios for people in retirement are only earning about 3.5%. So, this is incredible. It usually gives you double, triple ,sometimes quadruple what you would earn out of a portfolio in the market. And so, I like to use indexed universal life because there’s three types of insurance –term, whole life and universal life.
Universal life was designed for living benefits. There’s fixed. That means you just take whatever the insurance company is earning which has been anywhere from 4%up to 15.5% for the last…You know, since 1980.
But then they came out with variable universal life. I’ve never owned one, I never will. That means your money goes out in the market and you can lose 40%. I don’t want that. When indexed universal life came out in 1997, I said, “That’s what I want. “Indexing allows me to have my money safe in the insurance company earning the general account portfolio rate(lately) of 4 or 5 percent, I can settle for that any year I want.
But any year I feel bullish about America, I can tell them to take that interest and buy upside options. And then I can earn 10, 15. Sometimes 25% when the market goes up. If I guess wrong and the market crashes, I don’t lose because my million is safe in the insurance company earning 5. I simply gave up the for sure 5. That’s called indexing.
Now, if you are even slightly curious about, “Whoa, this sounds too good to be true. “I want you to consider if you want to use life insurance not for just the death benefit but also for living benefits,
I would recommend universal life and i would also recommend that you learn about indexed universal life because this is where I have earned average returns in excess of 10%.It’s the only vehicle in the internal revenue code that allows you to accumulate your money tax-free, access your money tax-free and when you die, it blossoms and transfers tax-free.
Every million I have in my portfolio of indexed universal life which i call The Laser Fund or my laser funds, every million can generate a $100,000 a year of tax free income for as long as I live. And if I die tomorrow (I’m currently 68), every million right now would blossom to about 2.5 and transfer income tax free in a death benefit. And people say, “How much does that cost? “I’ve already told you.
I’m earning 11 and netting 10.That 1% is money that would otherwise go out the window in unnecessary tax if i did anything else for my retirement. So, the answer is… If I were using life insurance, I would take that money and put it to work for you for living benefits and also have the death benefit coming along for the ride. If all you need is death benefit temporarily, use term insurance. But if you want some insurance that will last as long as you do but all you care about is what you leave behind in death benefit, you can use universal life, you can use whole life.
But if you want to have living benefits and a tax-free death benefit too, indexed universal life will knock the socks off of any whole life policy i have ever seen even with the same insurance company offering both products.
Most whole life if it earned 8, which they haven’t been earning that high, you’d be lucky to net 6% by the time you’re 95 years old. With universal life, I can earn 11 and net 10within 10 years. I don’t have to wait until I’m about 100 years old before I receive that net internal rate of return.
So, this is why it’s so powerful. I’m going to show you how you can learn more about this with a free book. So, I’m an author. I’ve written 11 books. Most of my books will talk about my favorite vehicle, the max funded index universal life insurance contract. Which passes the liquidity safety and rate of return test with flying colors. That’s the 3 key elements of a prudent investment. So, that spells the acronym LSR, or laser. Liquid asset safely earning returns.
So, that’s the title of my book The Laser Fund. You’re going to learn in this book, there’s 300 pages that contain charts graphs and explanations. You flip the book over this way and there’s 12 chapters with 62 actual client stories. The book retails for 20 bucks. I want to gift you free a copy of this book. You simply go to laserfund.com to claim your free copy. You simply pay $5.95 shipping and handling. I’ll pay for the book, you pay for the shipping and handling.
There’s options there if you like to listen and learn and watch and learn for additional resources. But this is the beginning of your brighter future. And when you learn about this you’re going to go, “OH, my heavens.” Now, you’ll know what kind of life insurance is best for you. bye! 🙂