Car Insurance Agents and Life Insurance – Episode 269

This transcript was auto-generated and may contain errors.

[00:03] Welcome to the Prosperity Podcast, fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street. Here’s your host, bestselling author, Kim D.H. Butler. Here’s another episode of the Prosperity Podcast. Today we’re going to be speaking about life insurance. But one of the questions that we get and often other people have is, should you buy life insurance from your car agent? Kim Butler, what do you think? Such a great question, Spencer. So the answer to, should you buy life insurance from your car insurance agent is, of course it depends. If that’s too easy, come on. So there are absolutely a lot of car insurance agents that have some knowledge around the life insurance realm, but the biggest differentiator is that life insurance is

[01:04] a when event, W-H-E-N. And car insurance, home insurance, even disability insurance, liability insurance are all if events. In other words, if you get in a car accident, then you need to make sure your car insurance is really good, if your home burns down, et cetera, et cetera. And because all of those other insurances are if events, and life insurance is a when event, making extra emphasis on W-H-E-N, these two areas are completely different. Consequently, your typical car insurance agent is not going to have a lot of knowledge in especially permanent life insurance. And by this, I mean whole life insurance. There are definitely some car insurance agents that have knowledge around the term insurance

[01:55] area. Great. Have at that. That’s not a problem. There are also a lot of car insurance agents that are going to have knowledge only around what’s known as universal life. And they’re going to call that permanent life insurance. And yet, it is so important that people realize that in most cases, even if you add a bunch of fancy writers to it, universal life insurance is not permanent life insurance. The only life insurance product that should truly qualify for permanent, meaning it’s absolutely, positively going to pay when you die, is whole life insurance, W-H-O-L-E. And I don’t mean to imply that term insurance and universal life wouldn’t pay if you died early or died young. And yet, it is very important to understand that term insurance and universal life typically

[02:52] are not going to pay if you die at a normal life expectancy of 90, 100, 110, 120 as our normal life expectancies increase. So it is super important that if you are going to use your car insurance agent for life insurance, that you understand the differences. And obviously, once you start to get into the differences, it becomes pretty clear whether that person has a depth of knowledge around life insurance and how it works and how you can take advantage of the guaranteed event called death and a guaranteed payment called the death benefit or the face value. Those terms are kind of interchangeable, whereby if this person really has a lot of knowledge, they’re going to be able to help you understand how to utilize those two

[03:45] guaranteed events currently. In other words, you have a guaranteed event in the future. And consequently, because of that, you can use that in your life today. And I’m going to guess that most car insurance agents do not have that knowledge. So let them help you with term insurance. But that’s probably where it should stop. You know, you’re actually this is so relevant because I had this conversation with my car insurance agent probably about three to four weeks ago. And I was asking him simple questions. And he was definitely pushing the term and universal policies. So maybe what are some of the first things that a person could ask to start to field and see if their car insurance agent would be qualified even to go down this?

[04:30] Yeah, you can just be very specific about the products. In other words, you could just ask the car insurance agent, do you have knowledge around whole life? And many of them are going to say, oh, no, but I do have knowledge around universal. And here it’s really similar. And you can make it do this and that and et cetera. And that just should be an immediate red flag because universal is not the same as whole life. I don’t care how many writers get added to it. And what’s really funny is that if you bring up that discussion and they try to make universal act like whole life, it makes me say, why don’t we just get whole life? I mean, why try to make it act like it? The answer they’re going to give you is because it’s less expensive.

[05:13] Well, ding, ding, ding, ding, you know, immediate red flags. If something is the same, then it’s the same. And if it’s something that’s less expensive, then it’s usually not the same. And the car insurance agents just don’t have the knowledge around whole life because their companies typically don’t provide whole life. And there’s definitely a couple exceptions. But as a general rule, your car insurance agent, especially if they are an agent that is tied in only with one company, I believe it’s called a captive agent, then if their one company doesn’t offer whole life, then they don’t probably know anything about whole life because they’ve never been trained on it. And so if they have a variety of companies that they can operate with,

[05:59] then just ask them, well, do you have a company that works with whole life because that’s the kind I’d rather have? And then it’s up to you if you feel like you can get your own knowledge to a high enough level to understand the whole life in order to buy it, even if they don’t. So maybe they can provide it to you. That’s one question. But then the second question is, do they know enough about it to help you actually use it? That makes a lot of sense. So I think a lot of reasons why people are trying to use their car insurance agent for life insurance, because there’s less people that you have to deal with, less meetings you have and everything else. Just keeping it in-house seems easier. So let’s flip the coin for a moment and let’s talk about what are the things

[06:41] that a whole life insurance agent can do for you. So we know car and sometimes they’ll, you know, they’ll take care of the car and the house and that term. But what are the different things that a whole life insurance agent can do? Yeah, that’s a great question. And just as we make this transition, I’ll just restate. Yes, go ahead and get term insurance from your car insurance agent. There’s nothing wrong with that. Everybody should have some term insurance. You’re probably not going to be able to have enough whole life anyway. And so you should have a combination of whole life and term. And you absolutely can buy the term insurance from the car insurance agent. Now, what can that other advisor, that whole life insurance agent

[07:22] slash expert do for you? In my mind, there’s two very specific things. The first is they should be helping you utilize the cash value while you’re living. So the cash value is an asset. It goes on your balance sheet, similar to a savings account, and it should get utilized. In other words, it should get borrowed against. It should occasionally get withdrawn from. It should pay dividends and you should make decisions about what to do with those dividends, et cetera, et cetera. Most whole life insurance agents out there know how to teach their clients how to use or utilize or make use of or work with the cash value of the life insurance. That’s the first big part. Does that make sense so far? It does.

[08:05] And then the second big part, and this is a little trickier, is that a really good whole life insurance agent should be able to teach you, the client, how to also utilize the death benefit of your life insurance while you’re living. So obviously, everybody knows how to utilize it. If you’re dead, you take the money that you got and you recreate the income that you were providing to your family. Maybe that isn’t so easy, but as a general rule of thumb, it should be. But the use of your own death benefit while you’re living is a very, I don’t want to call it complicated or sophisticated, but it can be. But it’s definitely a high level strategy that not all whole life insurance agents know how to do or even how to teach.

[09:00] And yet, it’s a very important part. So for you, the listener, right now today, if you have a whole life insurance agent and you ask them how can I make use of the death benefit while I’m living, and they don’t know the answer, don’t worry about it. Because you’re not going to do that until you’re in your 80s or 90s anyway. And there’s a whole bunch of resources that we can provide that will help you learn how to do it. All you really need today is one important sentence. And that is that I can use my life insurance death benefit while I’m living. And if you want to put it another way, it is this life insurance death benefit that was an estate creation, an estate creator. It was the kind of thing that if you didn’t have built

[09:56] up enough wealth, your death benefit was going to come in and create that wealth. That’s the first reason why people buy life insurance. But the second part of it is that it becomes an estate conservation tool or an estate conservator. And so this is the aspect of using life insurance or utilizing the life insurance death benefit while you’re living that is the slightly trickier, slightly more advanced environment. But again, just remember the one sentence. I can use my death benefit while I’m living. That’s a pretty good summary. And I think one of the takeaways that I have as we are wrapping up here, when we have the difference between the car insurance agent versus we’ll call it a financial advisor,

[10:47] is that a car insurance agent you can go to for a quick rate quote and a quick and easy answer for a lot of things and solve problems that happen to be a little bit more immediate, whereas your financial planner and your whole life insurance agent is someone that’s actually going to pull out the magnifying glass. They’re going to look through things. They’re going to give you a strategy. And on top of that, they’re going to educate you for the long term. Is that a good differentiator? Yeah, I think it’s well said. And you’ve used terms that are very widely used in our industry. And it is interesting to me, if you get somebody that’s more in the stock broker side or the wealth advisor side, they typically

[11:33] don’t know how to use whole life insurance either, whereas if you get somebody on the life insurance agent side, they should know how to use whole life insurance. And then you have what I like to be called, which is the financial advisor. And the reason that I like that term is financial planner implies that we can actually plan our finances, which is a joke. You cannot plan something that is 30, 40, 50 years from now. It’s just impossible. You can plan maybe what you’re going to have for lunch today, and that’s about it. And some people would even argue that. And yet, giving advice, providing advice, financial advice is something that every person that is helping you as a client with your finances

[12:21] should be able to do. And maybe that’ll be a subject for another podcast that we do sometime, is the difference between advice and how you pay for it, and then the actual products that you’re buying, and whether it’s commissionable or not, et cetera, et cetera. We could have fun with that. So just for today, I think it doesn’t really matter who your person is and what they’re called. What matters is, are you getting the results that you want? Way to summarize it. I love it. Now, for our listeners, if you do have questions, what you can do is email those directly to Kim, hello at partnersforprosperity.com. You can also take a look at all of the other episodes and the content we have inside of the podcast.

[13:03] There are over 200 episodes you can stream on Spotify, or you can download onto your device. So make sure you hit that Subscribe button and send in your questions at hello at partnersforprosperity.com. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit us at partnersforprosperity.com. If you liked this episode, make sure you subscribe and leave a review.