Don’t Cancel Your Life Insurance Until You Hear This – Episode 388

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[00:02] Hello, partners. In this episode, we’re going to talk about how we can go about replacing life insurance plans. Now, this is interesting because I think, depending if you’re in your 20s, all the way up until older years, and we’re all getting older, so we’re not going to say how old that would be. This is an option. So let’s talk about it, Kim. Yes, it’s an important option to discuss because it really gets misdirected way too many times. So here is what happens. You start out your young life. You grab some term insurance. That’s awesome. It’s maybe 30-year level. You should keep it the whole 30 years. Fabulous, full speed ahead. Most people wouldn’t argue that. So let’s say you did that when you were

[00:50] 25. So now 30 years later, you’re 55 and maybe you feel like you want a few more years covered. You grab another term policy. Fine. Awesome. All good. No real problems there because replacing, which is our subject at hand, one term insurance policy with another doesn’t really hurt you any, as long as you keep it for the term of time that you originally set. You should really be adding, but there will come a time to replace like at that age 55 mark. All good. Where the idea of replacing can become problematic is with any type of quote permanent policy. And the reason I put the word permanent in quotes is that there are some types of permanent policies that are truly permanent. They are whole life insurance and they are permanent, meaning they absolutely positively,

[01:41] if you do a minimal amount of work on your part, i.e. paying the premiums for a small period of time, they absolutely positively will be there and they will pay upon death. There are other types of policies, primarily universal life, variable universal life, and index universal life that are not permanent. However, they are often called permanent. And so it’s really, really important that you understand which you have. And I know that’s kind of boring, but this is your personal finances and this is your family’s health and their financial success. And of course there are many types of success, but when you talk about financial success, when you talk about financial success, it is important that you get clear that death is going to happen and we want to have

[02:29] that guaranteed event tied with a guaranteed payoff, which means that your policy needs to be permanent. And where the problem arises is when one permanent policy is going to get replaced by another permanent policy. It is the most drastically wrong step to take in 99.9% of the cases. I’m not saying there’s not exceptions and of course there always are, but I mean it. 99.9% of the time, if you own whole life insurance, if you own a permanent policy, you should not replace it because what that causes you to do, and this is a quote from my husband, Todd Langford, is pay the startup costs twice. Why on earth would anybody want to pay startup costs twice? And I know I’ve even seen some analysis from life insurance

[03:30] agents. Oh my gosh, if you replace or switch from policy A to policy B, both whole life insurance policies, I estimate that you’ll have a little more cash value in the future. That’s just an estimation. And I ask the question again, why would you want to pay your startup costs twice? Is that a legit question? It is a legit question. So as we progress forward here, just putting a nail in the coffin of this idea, no pun intended at all. It’s important that if you have whole life, you’re clear on that. And if you have universal life or sometimes it’s called flexible premium life or again, variable universal or index universal, that sometimes it is best to realize that those types of policies, any of the universal types, truly were not made to stand the test of time.

[04:36] They are not permanent. And so in that case, I’m not even going to use the word replace because I think it just is confusing. I’m going to say in that instance, it might be better to stop that policy and to get human life value of term insurance with a smaller whole life insurance policy that will be there to stand the test of time, that will have a guaranteed payment and a guaranteed death benefit and a guaranteed cash value along the way also. And so in that instance, you’re not actually replacing, you are saying, okay, I made a mistake here. I was given bad advice. I was given wrong information. I didn’t understand what I was doing, all common things. And I’m going to disconnect from this particular policy and go over here where I have the best of both worlds,

[05:33] the term insurance and the whole life insurance. And I can then be assured with certainty that my family will be taken care of with the death benefits term for the term of time that it is. And then whole life for perpetuity. I mean, truly, until I die, that’s why it’s called whole life because it’s designed to be there for your whole life. And frankly, the universal type policies are not. So as we’re going over this conversation here, I’m actually doing research, I’m looking at it and seeing why would people want to change their policies. And for what you’re saying is 99.9% of the time don’t, correct? That is correct. And the things that they’re listing out is, well, hey, you have to take another

[06:20] medical exam, part of startup costs, correct? Yes. And then you have to go through and you’ve got a waiting period. That’s not a cost, but it is called complexity. Correct. You have the hassle and unless I guess if you work at the DMV, you’re like maybe like meetings and complexity and paperwork. I’d say most of us don’t. So you don’t have to do that. But right here, what we’re talking about is it looks like some of the stuff online, they’re pushing it. Oh yeah. It’s like they want this to happen and it’s sad. And I think what that really boils down to and one of the reasons why you and I do this podcast and I’m going to speak for myself why I am a cohost of this podcast is because we’ve never once done an episode and how many

[07:12] are almost 400 episodes, okay? We’ve never once done an episode when it was Kim trying to sell something so that it helps Kim. Thank you. If that was the case, I wouldn’t be here on the other end of this microphone. The problem is when you go into Google and you search things, the results are for that website’s commission or that agent’s commission. And we’re on the Prosperity podcast because we’re talking about the things that are best for you and many times, I mean, look, just in this episode, you said, go to Lemonade. You mentioned where they can go and get it. Not even with you. You know what I mean? Yes. To me, that was wonderful. Wonderful insights. And I think it’ll help a lot of people

[08:00] realize maybe they put the brakes on a few of those decisions and call about the specific suggestions or topics. Now, is there a book or an article or something you’ve written that people can dive deeper into to get this information? Well, it’s a great question. As it relates specifically to replacing policies, I’m sure I can find a blog post and I’ll send that to you so that we can have that in the show notes. At the bigger level, of course, our Live Your Life Insurance book is fabulous. And for those that want a little deeper dive, we have Busting the Life Insurance Lies. And that is 38, I believe, lies. And I guarantee you one of those chapters addresses this issue of replacement that you don’t want to have happen in the whole life

[08:54] space versus maybe just stopping a policy and starting new ones around universal life, term insurance, and whole life. Perfect. Well, listeners, now you know what you need to do and what you need to avoid if you’re thinking of changing a life insurance policy. We’ll put those references to the books inside the show notes. And again, any questions for your specific circumstance, just send it to 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.