What Is Guaranteed Whole Life? – Episode 121

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[00:01] 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 and No BS Money Guy, Todd Strobel. Hey everybody, welcome to another edition of the Prosperity Podcast. This is No BS Money Guy, Todd Strobel. Once again, I have my co-host and bestselling financial author, Kim Butler with us. And today we’re going to be talking about guaranteed whole life. And if anybody stays up past, I’d say, 10 o’clock, you cannot help but get bombarded by the guaranteed whole life commercials. And we just want our listeners to be able to understand what it is, how it works, and if it’s a positive thing for them to add to their life.

[00:54] So welcome, Kim, and tell us what you think. Well, you know, it’s interesting because my husband, Todd Lingford, just spotted a particular company’s name to remain quiet, advertisement on this product, and they said you can borrow from your cash value. Now everybody that listens to this podcast surely has heard us talk about how critically wrong that language is because you don’t borrow from your cash value. If you’re determined to use the word from, it’s from the insurance company. But a more accurate statement is you borrow against your cash value. So we are kind of laughing, ha ha, you know, here’s this insurance company telling people they borrow from their cash value, and it was a guaranteed whole life kind

[01:41] of company. Now these, as you said, are the late night infomercials. I’ll admit I’ve never seen one. But I know exactly what guaranteed whole life is. And it’s usually a 25 or $50,000 policy. So they’re very, very small. And that’s why these insurance companies are able to offer them because they do not put the insurance company at risk because they’re so small. I must tell you, they are the big game companies that are usually doing this too. Okay, interesting. So yeah, again, they’re typically small. They’re typically considered similar to group insurance. And essentially group insurance, of course, is what you often get at your employer. So you’ve got 100 people and they’re just going to insure the whole group in their

[02:27] overall viewpoint. They may not literally insure it, but they’re looking at it that way. And so the whole life, these guaranteed whole life products are often literally looking at the group of people that might be looking at the advertisement and taking them all together. And then furthermore, and this is the most important, is that the internal rate of return is going to be pretty low on them. So yes, they’ll have cash value, but you’re probably looking at a one to two percent internal rate of return. I haven’t reviewed one in a while, but the illustration that I looked at a while back was pretty low. Now let’s understand, frankly, one to two percent is actually fairly good compared to the banks that are paying a quarter of a percent.

[03:10] But you still have to just understand that it’s not going to be the robust paid up addition oriented whole life type of policy that we talk about. In fact, I believe in most cases, and I do not know this for sure, but I believe in a lot of cases, the guaranteed whole life doesn’t even have the capability of the extra paid up addition rider. Well, there’s this little thing that runs across the bottom that says limited benefits for the first two years. Right. And that’s another way they get around it is maybe you’re going to get a $50,000 for policy, but if you die in the first year, it’s only $10,000. If you die in the second year, it’s only $20,000. That’s one way that they can do that. But then again, the riders, so the waiver premiums and the long term care riders and

[03:58] the paid up addition riders, especially the extra ones, are going to either not exist or be very, very limited in their doing. So I appreciate that they’re getting it out there. I think our society is finally starting to understand that whole life is a better way to go. But any time you have a guaranteed issue or an instant issue, we’re going to start to see more in this instant issue category. And that’s where you pop on the web. And literally in seven to 10 minutes, you have an actual policy via PDF in your email. Same problems. Those are going to be term insurance, universal life maybe. I am aware of one company that was offering $100,000 whole life. Again, the internal rate of return was only 1% or 2%.

[04:49] Because any time you have something that seems like you’re getting an extra deal, you are, but you’re trading it for something else. So maybe you’re trading it for full benefits or you’re trading it for a lower internal rate of return or you’re trading it for no riders or something. There’s always, always going to be a trade off because in the whole life insurance arena, which has been around for close to 200 years, we can truly make the statement that Todd Langford’s mentor, Norman Baker said so long ago, and that is that there are no deals in the insurance industry. If there is a trade off, there is a trade off. So if you’re getting something better than somewhere else, there is something worse.

[05:35] And that’s okay. You just have to figure out what that thing is and be crystal clear on what you want your whole life policy to do for you while you’re living and your family when you pass on. So would you say if you find yourself 60 years of age, maybe a health condition, these could be a good thing? Yeah, absolutely. If that’s especially with the health condition issues, if that’s all that you can tackle from a cash flow standpoint, and they’ll actually give you the policy because, of course, just because they advertise on it, you know, they’re still probably way further down in the fine print. You know, they may have ways to not offer it for you. I truly don’t know. I’m just sort of guessing typical television stuff.

[06:21] But yeah, absolutely. It’s not going to hurt anything. The death benefit will pay upon death. And because death is a guaranteed event and it’s not a negotiable thing, you know, nobody can argue, oh, he’s not quite dead yet. Then unlike disability and health and, you know, all those other areas that are absolutely negotiable, you know, your car accident, did you cause it or not? You know, all those things are negotiable or are challengeable or I can’t get the quite right word. But death is not that way. And so consequently, a guaranteed whole life is going to pay when you die, period. One of the things I would like to mention, and this has totally surprised me, is the number of our clients who are 75 and 85 and still able to qualify for standard

[07:11] issue a whole life. So don’t just assume because of your age that you have to go with one of these guaranteed policies, correct? Absolutely. And as we’ve shared on the podcast before, if you are that old and you do have health issues, a great solution is to buy insurance on your adult children. Now, that doesn’t get death benefit in your camp. And if you are interested in death benefit when you die, these guaranteed a whole life products would absolutely do that job. So would you recommend that number one, before you apply for one of these, you try for a traditional whole life or would trying for that traditional whole life potentially disqualify you from getting the guaranteed issue? That is a very good question.

[08:00] So we’ve recently learned that there is a source for medically impaired elderly people that want life insurance. And if somebody is in that instance, we would love to try to help you first. And yes, you want to get help first because we can do so on what’s called an informal basis, whereby your name and your medical information bureau MIB data, which is kind of like the credit bureau, but it’s for your health. So medical information bureau will not be impacted by an informal application. And so, yes, if you are interested, we can see if we can get you something on the more normal whole life side. And then, of course, if not, then you can go get the guaranteed issue and be done with it. Super.

[08:52] And that would be by going to partners, the number four prosperity dot com. And I believe there’s an eight hundred number that might be convenient for them to use as well. Sure. Eight, seven, seven, eight, eight, nine, three, nine, eight, one. Extension 100 for Teresa would be the best starting place. But I will readily admit that our team works a lot better on email. And so they can just email me a little bit about their information to be great. Kim, at partners, number four, prosperity dot com. So I would encourage everybody to take advantage of that. Check it out. See what the best possible solution is for you. We believe in the term optimize, which I believe is exactly what we’re talking

[09:38] about. That is true. Optimize is getting the best possible solution for you, the best environment where your dollars are doing as many jobs as possible and as efficient as possible. It’s a great definition of it. Super. And I think you wrote a book on life insurance. Maybe we could mention that’s available on Amazon. It is. Live Your Life Insurance is a book that summarizes the whole life product very thoroughly. And it’s got some great little stories in it, case study examples. And it’s available as audio as well. So on Amazon, live your life insurance. And if somebody really wants a video, that’s it. Live your life insurance dot com. Super. Well, we appreciate you, Kim Butler. And once again, this is a area that may not affect most of us.

[10:25] But if you’re at that age where you think you’re too old to buy life insurance or maybe you think there’s health reasons that would keep you from buying life insurance, encourage you to contact partners for Prosperity, let them help you make the best decision for you. So again, this is No BS Money Guy Todd Strobel. Special thanks to Kim Butler and take care, everybody. Thank you for listening to the Prosperity podcast. To take control of your money and have it work for you. Visit us at partners for Prosperity dot com. If you liked this episode, make sure you subscribe and leave a review.