Whole Life Insurance – Episode 450

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[00:00] Welcome to the Prosperity Podcast. Prosperity thinkers and community, we’re so pleased to have you today. We’re going to cover something that is the foundation of it all. This may be one of those episodes that you will start listening to and think you have what it is like the understanding, and then you’re going to learn something even deeper. It’s a tease, right? Absolutely. Come and join us and learn again, because we always learn more in layers. We get more when we know more. True. And they say that the teacher always shows up when the student is, every single day we’re at a different phase of life, and so you may be experiencing something different in your life that you need this today. The topic, will you explain the topic?

[00:56] And then I’m going to tee it up with something else, Kim. Awesome. So we’re going to talk about whole life insurance today. And as you said it so well, it is the foundation of everything. So we’re going to use that analogy and think about it like a house or a building, and we’re going to build up from there. Perfect. So here’s how I’m going to tee this up. I was reading a Twitter thread from a finance expert that I like to follow. I’m going to preface this and I’m not going to say the name because this finance expert is not in line with all of the things that we talk about. Now, some may be listening and all of a sudden slammed on the brakes in their car and said, what? They’re listening to outside of this.

[01:44] And yes, differing opinions is good. So he mentioned something on here and he said there’s two hard rules that he’ll always stand by. And these are with finance. He’s like, regardless of what it is, these are two hard rules. One is if you’re going to live in the property for less than two years, you should not buy the property. And I thought, okay, I think if you know that, I can’t make that a hard rule. I would agree. The second hard rule that he said, and this is the one where I was like, Ooh, I have to take it to Kim, which is never whole life insurance only term. And I thought, okay, we’ve got topics today. Isn’t that funny? So here we have a product that has been around between two and 600 years,

[02:42] depending on when you choose its starting point. Let’s just go with 200 years. We have a product that’s been around 200 years. Why on earth could it have survived that long if it’s truly that bad, truly that quote expensive, truly that detrimental to people? Oh, the masses just never figured it out. Come on, Kim, what do you think it? Oh, that, yes, so true. So I always just encourage people to be open-minded and dig in and learn a little bit. Absolutely. You’ve got everyone that’s on radio, all the airport book stands are the people that are saying, save your money, do your 401k, only do life and invest the difference, and then you’ve got the renegades, the Kim Butler’s. So why is it that you view this as the foundation of everything,

[03:37] whereas they view this as the problem to everything? Because I have 30 years of experience living with it, working with it, seeing what it does numerically, conceptually, and in clients’ lives, which of course is the most important place, and back to that, both conceptual and numerical, I have a very conceptual mind, so I pick up on things conceptually, and yet when you’re talking personal finances, you’ve got to be able to get into the numbers to a certain degree. And thank goodness for my husband, Todd Langford of the Truth Concepts Suite of Calculators, he has driven those to tell the truth. Now they’re not driven to tell anything positive or negative about any product other than the truth.

[04:28] And the truth, when you weigh in all of the pieces and the parts, like the taxes and the fees and the costs and et cetera, et cetera, et cetera. And the truth is that whole life insurance as a product, which has two parts, it has the death benefit and the cash value, is a very efficient effective tool to store cash. And it pays a death benefit, which is a guaranteed claim because death is a guaranteed event. Okay. So you mentioned a word in there, which is living with it. And I’m going to make an assumption and I want some clarity on this assumption that a challenge that most of the airport bookshelf finance people think is that they’re basing their facts that what they find based on the death benefits, but because they don’t understand

[05:27] the living with it part, is that correct? Yes, it is. And I just want to point out that term insurance, which only has a death benefit, is a perfectly acceptable product. I would say most of our clients have it. I have it. And so I think the debate has gotten confused with this comparison of whole life to term insurance, which is literally like comparing apples and beans, like they really have nothing to do with each other than the one common element of the death benefit, but that’s where the comparison should stop because as you indicated, the living benefits that are existence, in existence with whole life only, the living benefits don’t get to come with term insurance. The living benefits with whole life are one part of the cash value for

[06:23] sure, which again, that asset doesn’t even exist with term insurance, but part of that fact that death is a guaranteed event, that fact that whole life will pay upon death, guaranteed payment combined with guaranteed event. And that guarantee, that proof enables you to bring elements into your life while you are living. So much so that I would call whole life insurance, as in like use while you’re alive, and I would call term insurance, death insurance, as in the only time it’s going to benefit somebody is upon death, maybe that helps make that distinction a little bit, but I again want to reiterate, the comparison is wrong, you’re not comparing equal things. Okay. And so is it a lack of education in the community?

[07:25] Is it because other institutions are not rewarded for this? What’s the variable that’s causing the schism? And of course, there’s probably no one variable, but I’d love to, you know, at least start to address that. Yeah, it’s a great question. I think it comes from Wall Street to a certain degree. So Wall Street with all of the assets that are there, typically stocks, bonds and mutual funds, and the help from the government that Wall Street gets has an amazing marketing machine and they have massive amounts of dollars to entice people to give all of the components of Wall Street money. And so you have that going on, whereas the mutual life insurance companies, so we need to make a distinction here between the types of insurance companies

[08:20] and I won’t get sidetracked on it now, but the mutual life insurance companies don’t have those kinds of resources, don’t want to play in that game and don’t choose to try to compete, which is wise because I don’t think they could in terms of advertising dollars and space and loudness, etc. And so while the mutual life insurance company, so I’m talking like Guardian, MassMutual, New York Life, Northwestern Mutual, Penn Mutual, Lafayette, Mutual Trust, Security Mutual, and there’s probably five more I could rattle off, those types of companies have existed for 150 to 200 years, have paid dividends almost every single year forever and ever, but they just choose wisely, in my opinion, not to get in the race of the Wall Street game.

[09:11] Whereas in the early 1900s, all the way up to about 1950 or 1960, those were the companies that were the darlings of the financial world. Those were the companies that were respected and the whole life insurance space with the mutual life insurance companies just got run over by starting with EF Hutton and then the 401k environment, and then all of the other things that Wall Street brings to the table. Okay. So that was 50s, 60s, is that correct? I believe so. Yes. What else happened to our money in the 50s, 60s? Go ahead. Did you know? Yeah. So for me, at least, and I would love to get your perspective, a major change that happened to us in the 50s and 60s, specifically the early 1960s, is that our money no longer contained silver, was actually no longer this

[10:13] real asset, and we became this monopoly play money type of country. We were monopoly playing money before that, but it really just, at that point, became an entire monopoly. It’s interesting. And then you have the whole taking off the gold standard issue as well. But I think those things, while they play a role, they are not anything that we can control. And so I often set those aside because we’re all on a level playing field in that space. But back to the, why does this product have such a negative impact? Why are people so uneducated about it? Something that I saw just recently was a note from my financial journalist that said, oh, now that COVID is over, it’s a good time to buy stock in the life insurance industry, and comments like that

[11:13] help us realize that they’re completely missing the point of what asset life insurance as an asset, so whole life insurance, can be on a balance sheet, because to them, everything is a stock or a mutual fund. Oh, buy stock in companies. And there are life insurance companies that you could buy stock in, like Prudential and John Hancock and Transamerica and a variety of others. Those companies no longer offer the product called whole life. And so you have stock life insurance companies and then mutual life insurance companies. And the ownership of them is entirely different. So as we know, a stock life insurance company, you can buy stock in it. Like anybody out in the public can buy stock in it.

[12:04] Well, a mutual life insurance company, you cannot do that. The only way you can be an owner, because when people buy stock, they’re an owner of the company, the only way you can be an owner of a mutual life insurance company is to actually buy a policy. So the mutual life insurance companies exist in a completely different space. And again, Wall Street, it’s like they’re blind to it. They don’t even understand that an entire different type of legal structure of company exists and it’s called a mutual life insurance company. So I would argue that they’re not actually blind to it. I’d argue that it’s very intentional and it’s it, we can take this almost same thing to the healthcare industry. We’ve got a lot of larger institutions that are healthcare providers now.

[12:51] And essentially they have become groups that are working for the pharmaceutical companies. Right. If they analyzed, the real prescriptions that they’d be offering out there would be, Hey, have a whole food type of diet. Oh, you might want to exercise more going to fundamentals. And that same thing is happening with this product, whole life insurance, which is the fundamental, as you mentioned at the beginning of the episode, hundreds and hundreds of years old. It is interesting how really mixed up we get because of the information that we choose to take in. And so it’s always wise to look at your sources. And I have gotten very particular about this in terms of what I’m feeding my mind and I don’t want to feed it in correct information.

[13:47] And so much of what is read or listened to, or even watched, the experts are experts in journalism. They’re not experts and they may be a financial journalist as opposed to a home economics journalist or something, somebody talks about decorating homes or putting things out for art or whatever, but they’re still a journalist. And this is, I think where a big problem comes because as our society learns, we need, we want to pay attention to what we’re learning from. Absolutely. So I think for our listeners that have been on this podcast and have listened to for several years, they may understand the foundation of this. And for new listeners, as we see that new listeners are coming in onto the podcast every single month, because they’re waking up.

[14:45] They’re seeing that what they’re being told from typical financial advisors, financial planners, or whatever that may be, that it’s just not working. And so you’re starting to share that truth and help. Can you help us dive off with one quick example of how you have lived your life insurance and then what we’ll do is we’ll explain a website or some way that people can learn more about this, how they can live their life insurance. Going back to that analogy of the foundation. So if you think about all of your finances as a house and you want to have as big of a home as you can possibly think of the foundation, the literal cement foundation for most people is so important in the building of that home.

[15:41] And what I see is people tend to start oftentimes with their finances on the first or second or even third story instead of on the foundation. And the foundation is liquidity. It’s savings accounts, it’s emergency money. It’s the liquid dollars that enable us to withstand emergencies and take advantage of opportunities. So that emergency slash opportunity fund, if you will, most people just use savings accounts or money market accounts and they don’t know where else to go. And so this is the job that the whole life insurance cash value does. Is it provides a more efficient, more effective place to store that emergency opportunity fund and all of your typical financial planners are going to go to money markets, short-term bonds, maybe CDs.

[16:38] I see articles all the time. Everybody’s scrambling right now, looking for a good place to store cash. And they just forget or don’t choose to look at the mutual life insurance company as a place to store cash, which then is the foundation of your life. Because, so here’s the story. If you have an emergency, let’s say that you have a home and my kids are dealing with this right now. You’re going to have to replace your heating system. It’s $10,000. You can withdraw that from savings. You can put it on a credit card, or you can borrow against your cash value of your whole life insurance policy and get the furnace installed. And then over time, pay that back and then use it again. So there’s an example of solving an emergency.

[17:34] Well, let’s look at the flip side of what this foundational account in our lives should do. We want to have investments. We want to have opportunities. Maybe we want to buy something, but it takes $50,000 to invest in it. So our lives tend to operate monthly. So we need a place to store the liquidity that we build up every single month in order to get the $50,000 lump sum to go do whatever it is that we want to do from an investment standpoint. And so again, the life insurance cash value does the job of being the place to contribute monthly in order to build the account so that we can then borrow against it, go do the opportunity that we want, and then use the income off the opportunity to pay the loan back and thereby recycling that

[18:21] opportunity capability over and over and over again, as we build the first and second and third and fourth floors of our home. So those are just two examples on the cash value side. We’ll do another podcast on the death benefit side, but back to your desire for where else do I go to learn about this, there is a book that I’ve written that’s fairly short and it’s called live your life insurance, because again, that’s what life insurance is for whole life insurance is for while you’re living and it has part one, which talks all about the use of cash value for emergencies and opportunities. And then it has part two, which talks about the use of the death benefit while you’re living, the ability to utilize that guaranteed

[19:06] event that’s out in the future with a guaranteed payment. And so the book is available on Kindle. You can get it as a hard copy or sorry, it’s a soft copy, a physical book, or you can listen to it on audibles and it’s well done. I’ve had a lot of help with the book. I’ve tried to make it super short and the points are there. There’s a glossary in the back that’s super helpful because life insurance has a lot of words in it that are not a normal part of our daily conversation. And so again, live your life insurance. It’s on Amazon and all three formats. And that is the best place to go to begin or to further your education for clients that already own life insurance. I so encourage a reread of that book.

[19:50] It’s like an owner’s manual for your policy that you will own the rest of your life. Oh, so true. So what we’ll do is we’ll put a link to that book inside of the description of this podcast episode. And then for any of you that may have questions right now, because again, we have listeners that are coming on brand new and some of their questions may feel urgent. If that’s the case, then send an email to hello at prosperity thinkers.com. We’ll also put that inside of the description of this episode so that you can send out that email is specific, monitored for this podcast. It’s like that VIP place where it’s going to get in, get your questions answered, and then we’ll have a link to that book as well.

[20:39] Hey, Kim, thank you for setting the foundation of whole life insurance with us today. You’re welcome. 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.