The Annual Wake-Up Call That Builds Financial Certainty – Episode 661

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[00:01] Welcome to the Prosperity Podcast. Prosperity thinkers, welcome to the podcast. We’re gonna talk about policy renewal. And this is a specific type of policy. It’s for the life insurance policy, a very specific type of life insurance policy. But every year there’s a renewal. And that is, we’ll call it an alarm, a flag, a notice for you to gain clarity. So Kim, first let’s set the stage. I’d say most of our listeners know what type of life insurance policy, but let’s give some clarity. And then talk about the renewals, what happens, and maybe some ways to, in the duolingo world, get some extra XP points. Those are called experience points. My kids have been going crazy on the language learning,

[00:50] so I’ve heard, I got this many XP points. Okay, I don’t really understand, but that’s cool. I love it. Good for you for leading your kids in that space. So yes, a whole life insurance policy, and this is true of a term life insurance policy, absolutely operates on an annual basis in some form or fashion. Now, if you’ve converted your payments to monthly, you may not be super conscious of your policy anniversary date. Others are very, very conscious because they pay annually. And oftentimes with whole life, the contribution, so that would be the premium, as well as the pay to petition, the extra money that you have the ability to put in, is going to be potentially substantial in terms of a, quote, check that you would write.

[01:39] And everything’s all online these days, but nevertheless, that policy anniversary date, you said it well, it can trigger a alarm, a wake up call, a oh my gosh, you know, what’s going on here. And it’s interesting to me as I’ve helped people for well over 30 years in this space to see both the positives and the negatives that that triggers. So on the positive side, when you have somebody, and I’m speaking of the bulk of our listeners, they’ve learned their life insurance well, right? They studied whatever they did, they bought whatever they bought, and they’ve either continued to study, including listening to this podcast, reading our newsletters, reading the books when I come out with them, et cetera,

[02:27] they’re clear, they’re confident when that, quote, red flag of a, oh, it’s annual policy time comes up, they pay their premiums, they pay their paid up additions, they make their contribution, and they go right on down the road either without thinking about it or possibly with being very grateful about it or what have you. There is another set, some that might be listening to this podcast, many people out in the marketplace, that when they get a whole life premium bill, they immediately think, why are we putting this much money in here? I should cancel this, this is not a good investment, this is not doing its job. And that even happens to those of us that feel like we do understand whole life

[03:13] because maybe I am in a position where my cash flow is not very good, and so I feel like, oh, I don’t have the money for the premium, or maybe I’m in a position where all my investments are doing awesome and I don’t really see the value in this whole life thing that’s kind of boring and bumping along. So it can still happen regardless of what is going on and there’s positive and negatives all over the place. The thing that I have realized after so many years of helping myself through this, because I got policy premium bills during times of good investment and questioned, should I really contribute money to this policy? I got policy premium bills during times of poor cash flow and questioned, do I really have the money

[04:04] to move around to make this payment? Or is there a way to make it smaller or less or whatever? And so obviously then I’ve seen literally thousands of other people that have dealt with that same situation. And here’s what I can tell you hands down. And that is that our family would not have the financial confidence and capability that we do had we not for all those decades paid our life insurance premiums. I’m not even talking about the paid a petition extra fancy part that everybody thinks is so critical. I’m just talking about the base premium for the term insurance that protected our income when it was high and our children were young and for the whole life insurance, which is building an asset.

[04:56] Now let’s address both sides of it. It’s building an asset. When I’m in investment mode and my investments are good, what does my whole life let me do? It lets me be very confident that even if my investments fail, I’ll be okay, but there’s something more important. And that is I want to let my investments keep doing good. Yet I know I’m going to have opportunities that present themselves where I will want cash. Well, I don’t wanna stop one investment to create another investment. So I’ve got to create cash somewhere along the way. And that is what paying the life insurance premium does. It builds a certainty asset that can go along with all of your uncertain assets. Cause I don’t care how good the investment is,

[05:56] does, was, or sounds like, there will be aspects of it that are uncertain. And so that’s such an important part. And then on the flip side of that, in the times when I have been in lean years, I have found the way to pay the premium, sometimes by borrowing against the cash value that’s there and literally recycling the money and then worrying about the loan later, I have gotten the good as well. And so because I’ve paid premiums, because I paid my bills, basically that’s all it is, the bill. And I’ve done some pay to petitions and sometimes not pay to petitions, but because I’ve paid my premiums, we have the certainty assets, it’s a portfolio of policies that enable us to withstand lean years,

[06:54] take advantage of green years and create something that benefits us for our whole life, which is why whole life is called whole life, is it’s there to benefit you from a cash value standpoint, which I think most people are clear on, but also from a death benefit standpoint, because the presence of that death benefit enables me to do things with my other investments, like keep them invested, that create certainty. So the presence of the death benefit creates certainty that I can surround my uncertain assets with. That’s why it’s called life insurance and not death insurance. Term insurance should technically be called death insurance. I didn’t ever, ever, ever have to wake up and wonder, what would happen to my family if I died?

[07:50] I knew exactly what would happen to them. I mean, there would be emotional issues, of course, but financially they would be okay, because my income was replaced by the presence of term insurance death benefit, especially when I was younger and had high income, I was young. And so the term insurance does the job of fulfilling the human life value to get the certainty so that I knew that my family was okay and they were going to be okay. I like that, I really do. There’s a style of thinking that I adopted this, I would say probably when I first read the four-hour work week from Tim Ferriss. So we’re going back years, almost 20 years ago, sounds like a long time. Yeah, it’s been a while. But it is the principle of constraints.

[08:41] And as you were talking, I took two pieces and I’m marrying them together, which is I’m taking constraints and I’m marrying certainty together. And what life insurance does is it is a forced constraint to save. And as we have in a previous episode, we were talking about the ROI of education and signing up for an event of something that you want to learn or people you wanna be around or whatever, in actually showing up and then showing up with a smile on your face and showing up with an attitude is a forced constraint that good things are going to happen, either mentally or physically. And what you talked about, the certainty that happens and the constraint of us having that annual policy and that time to review is so good.

[09:34] That’s gold, gold, really well said. And then the lesson of lean years and green years. We saw the inflated positivity of silver being pumped and then we saw people lose everything overnight that came in. And then we see the other people that say, I’m doing this for the long haul. So we appreciate you sharing your wisdom with us. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit ProsperityThinkers.com.