Wealth In Overdrive Podcast

Why You Don't Know About This 3rd Life Insurance Option

May 05, 2022 Hari Luker Episode 9
Wealth In Overdrive Podcast
Why You Don't Know About This 3rd Life Insurance Option
Show Notes Transcript

When talking about life insurance you know 2 types. Term insurance and Whole life insurance or Permanent Insurance. But did whoever you purchased your policy from demonstrate the benefits of the 3rd option?

Listen in as your host Hari Luker talks about the 3rd option and how it can be the exact option you may have been looking for at the time and how it can lock in benefits for the future.

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Speaker 1:

Good day, ladies and gentlemen, this is the wealthy overdrive podcast. And this is your host, Harry Luke. I appreciate you spending the time with us today. Today. We are gonna go over such an exciting topic. Well, it is to me anyway, and I think for many, it should be at the same time, and that is term insurance or whole life insurance, but half you considered the third option. I know when it comes to term or whole life, you've got all these financial advisors and self-proclaimed experts continuing to debate the topic of which one is best, right or wrong, better for you. Complete waste of money, different ways of using things. But today I wanna bring in, we'll go over the basics of each one, both term insurance and whole life. But towards the end, I also wanna bring in a third option, which I feel sometimes just isn't explained , um , or gone over when you're kind of looking for a quote when , to these specific type of insurances purely because normally when people call into an agent, they're just gonna say, Hey, can I get a quote on this? The agent goes, okay, let me see what I can do for you. And they spit out a quote, and then they move forward instead of actually explaining, and maybe kind of giving you the pros and cons of each one, or maybe just aren't the truest expert in one of these areas. So let's start by resuming , let's say the most obvious and popular choices that's gonna be term insurance. So let's term insurance, let's the insured have more coverage at a lower premium and provides greater protection, such as a death benefit term insurance. So it's kind of one of those things. If you win, you get, you don't get what you want. In other words, if you survive, you lose the death benefit. Now, a lot of people , we can go back to previous, you know , episodes or blog posts. We've put out there that, you know, at that point, that's like a million dollar legacy, not going to your family. If you survive the term policy. So you have to start going back and looking at the true costs of term insurance. We're not gonna get into that today, but something considered, if you live and you get what you want, which is life, you don't get the death benefit, which you may have been paying for 10 to 15 to 20 years. That anywhere from 30 to a hundred bucks a month, just in case something were to happen, all the premiums have gone. And the death benefits gone and the lost opportunity cost has gone as well. When it comes to whole life insurance, whole life is insurance that can, you know, can be used to cover when situations. So when you die, you will get paid and you will get the benefits. Instead of an, if this policy is permanent and allows policy , policy holders to save money while also building equity in a policy that provides a benefit when the insured dies. So these policies policies can be purchased through mutual insurance companies and have a long track record of paying dividend dividends. They also provide tax advantage growth and the option to borrow against your equity. Again, we're not gonna get into details on this, but as you can already see, there's a lot more benefits when it comes to a whole life policy. There are many options in the matter of life, insurance customers feel forced to make a choice life, whole, I mean, term or whole life. It's kind of like a binary choice. Sometimes both term insurance or whole whole life is possible. But what if you actually had both term and whole life in the same policy, think about questions like, you know, steak or lobster, are you a cat or a dog person? These questions will help you choose one. But what if we want both? It's possible to have both surf and turf. So life insurance, should you rent it or buy it? Insurance policies can sometimes be compared to a house that you can rent or buy. Let's say. So term insurance is similar to renting your life insurance. You can only keep it for a specific term. And when it's gone, it's gone. Whole life insurance is a process that allows you to buy the entire asset. As soon as your first premium payment is made similar to how you buy a house or paying for your first mortgage payment. There's another option , um , for life and home insurance, as well, many people rent to own a house. This agreement allows you let's say the lease C to rent their house while also allowing you to purchase it later, you don't have to purchase the home under a lease to own agreement. However, if you wish to, you are preparing to purchase the home. Now, did you know you can also rent to own a life insurance policy. These policies are also known as convertible life insurance, convertible, life policies give you the ins , you know, the insured, the option to convert a term policy into a permanent whole life policy later on the convertible term policy, which is typically a term policy with a level death benefit over a certain term, or set time such as say $500,000 for 15 years can be converted to a whole or partial life insurance. Within a set time, a convertible term policy can be applied to today and placed in between four to eight weeks. You can then decide later whether or not you want to convert it to a whole life policy without having to requalify. And that's kind of the biggest part there when it really comes to it. So if you are looking for a solution to your problem, this could be it. So you don't leave your future insurance in the hands of chant . You know that you want a whole life, but you are in a term financial plan already have a whole life policy want to lock in your purchase power. You want to safeguard your assets and your income you have, or expect to get a child to whom an inheritance is desired. You would like to be able to store cash in an environment that is tax advantaged, and you want , um , to permanently increase your death benefit while maintaining low premiums right now, convertible term insurance is right for you. Take a look at the following. So there's five things you need to know about convertible life insurance. Number one, it secures your insurance. So this benefit is vital, regardless of whether you know it or not, life insurance can only be obtained. If you are considered to be healthy, same as with like home insurance can only be obtained. If your house isn't on fire, it's possible to secure a higher qualifying class than what you would normally be able, which can lower your insurance costs. So you may experience high blood pressure, you know, higher blood sugar or cholesterol as you age. So you can guarantee your future insurability by purchasing a convertible term insurance early on. When you know you are healthy, but if you are currently healthy, but have a family history of diabetes, heart disease, or cancer, future insurability could be very important. It cannot be stressed enough that you don't know what the future holds and you ensure ability can change in a flash overnight. Number two, convert within a specified timeframe. Convertible term policies cannot be converted during the whole term. This is usually the first half of the policy's term. If you have a 10 year convertible policy, you may only have five years of the conversion. It is important to understand and properly manage the policy's timeframes. Number three, converting a small portion of the policy can be converted to a whole life insurance policy . So you can convert half or all of the convertible term policy that has a death benefit of a million dollars to a convertible policy. So you should keep in mind that the minimum amount required by the company for convertible term insurance policies, maybe $200,000. This could impact your option . So you have to be aware of it. You cannot convert the entire amount of a convertible term policy. If you have a $200,000 policy, number four, you want to ensure your human life value. There's not a need for analysis to determine the optimal amount. Now insurance companies will not offer you insurance for any amount that you desire a person earning a minimum wage and having minimal assets. Won't be able to get a 10 million life insurance policy, no matter how much money you make. It has to make sense. There are two ways you can determine how much life insurance to get first, the needs analysis method determines how your family will survive the loss of a breadwinner in the family. This could include the amount required to pay for mortgage or pay college tuition. Um, it may also be used to maintain , um , a certain standard of living for the spouse and the family. We prefer to measure human life value, which is a person's economic worth as measured by their earning ability or assets. This is how insurance companies determine how much insurance a person is eligible for the human life. Value of a person is usually TW 15 to 20% of their income. However, it can go up to 30% for business owners. Another way to calculate your human life value. When the insured is no longer working is to measure gross assets. This includes debts as well. Human life value is preferred over economic worth as a needs analysis. Often short changes, spouses and limits life insurance, usefulness life insurance is the best way to pass assets to the next generation and generations. You may never ne never even meet or fund foundations and charities is it also provides a financial vehicle that allows you to store cash efficiently. Number five, if you want permanent insurance, but don't need to pay higher premiums. A convertible term is an excellent option. Convertible term policies can be purchased at a competitive price. You get the most amount of coverage for the least amount of cost it's as simply put as that, even though you may be putting in a permanent death benefit premiums for convertible term policies are not significantly higher than regular term policies. Converting can even result in cost. Savings. Credit is usually given towards your whole life premium for the amount of one year's convertible term premium payouts. Many people wait until it's too late to get life insurance. So convertible term is a good option if you're unable to afford the policy due to desire. So if you are in the market and looking for whole life, but you run some quotes and you realize, that's a , that's quite a bit more than I was expecting. Then hook yourself up with a convertible term and then realize what you need to aim for. And when it's a good time, then you can convert that time, but you're locked in. And if anything happens and you, haven't gotta worry about getting the , the medical exam done again. So you get a lifetime guarantee like stake lobster. The question of whole life insurance or term insurance, false contradiction is almost always presented false contradiction presents two seamlessly opposite options and tells you to choose one. This implies that you can only buy one or the other, but not both. And there are no other options. This question distorts the benefits of life insurance policies into a false economy between now and later, are you looking to save money now, lower term premiums, or later by securing equal premiums with your whole life. Do you want to get the maximum death benefit term or a permanent benefit whole life that will provide a guaranteed benefit for the future? You can buy whole life and term insurance. In fact, this is a great option that we recommend very often convertible term. However, is another option that allows you to choose from many options. And it's something that we never want people to stay away from. So when people sit down with us, it's always on the table that there are three options to go through. You've got your whole life, you've got your term, and then you've got your convertible term and it's all up to you or how your life and your future predicts on which one you should get, but you should always have the options. So I know for some, this is a very unique topic to go through. For some, it can almost be watching like paint dry primarily, but it is so valuable in what it can do for you, your family and your legacy in the future that planning for today can really take care of that future generations that comes with your, so if you receive value from this podcast today, no matter if what

Speaker 2:

You took, just one thing away or two things or three things, I'd love it. If you could like share, subscribe and comment down below, no matter what platform you're watching this on. We'd love to have you pop down for the next podcast as well. And please let us know if you have any questions on how we can help out in the future and different topics you'd like us to mention to . And of course the biggest thing that we could ever ask is that you share this with a loved one or a family member. So you can , so we can help benefit their lives on the same . We , we have hopefully benefited yours. This is Harry Luca at the wealth and overdrive podcast. We'll catch you on the next one.