SPEAKER_01: 0:24

All right. Welcome back to the Make the Most of Your Money podcast. I'm your host today, Colin Page, and joined by my co-host, Taylor Stewart. How are you, Taylor?

SPEAKER_00: 0:34

Good to see you. What are we talking about?

SPEAKER_01: 0:38

So it we we had a lively discussion after our last episode with Victor Yates from Nationwide about permanent life insurance. And we thought, you know, maybe let's let's have an episode on it. So I think it's worth devoting a little more time to unpack this broader topic of permanent life insurance, what it is, when it makes sense, where it's misrepresentative, because there's a tendency even among financial advisors to simplify the discussion. And I know I know, you know, I'm guilty of this. Simplifying the discussion and determined insurance is good and permanent insurance is bad. And like most things in in life and in personal finance in particular, you know, the real answer is more nuanced. And you take the view that, you know, permanent insurance is more of a tool and can be really powerful when it's used in the right situations and for the right reasons and with the right expectations. Um and it's a poor fit when it's sold as a one-size-fits-all solution. So today we're gonna break it all down, uh, talk about the different types of permanent policies, um, situations where they might be appropriate, um, red flags to watch out for if you hear some of the common sales pitches uh floating around about them. And uh and yeah, so it should be a good, good discussion because I think we have some, you know, differing um differing views or just tendencies maybe on on what to do uh with with permanent policies. Taylor, why don't you kick us off? What give give us kind of a quick rundown? We talked about it a little bit on our last episode, but like what is what kinds of permanent policies are out there? What do we mean when we say a permanent life insurance policy? And what are the different types? How are they similar? How are they different?

SPEAKER_00: 2:40

So uh yeah, it it is very simple. It's as simple as the term is temporary, meaning it's a temporary death benefit lasts for a term and permanent is permanent, it's gonna pay out because everybody's going to die. And just keep in mind, like we always talk about with insurance, the the price of insurance, the premiums that you pay is based on the probability of a claim being made. And so when the probability of a claim being made is 100%, as it is with permanent, you're gonna have a higher death, a higher premium. But that at as simple as that's just it. Term is going to be like renting a death benefit, you pay a little bit of money and the death benefit goes away. Permanent is going to be paying a lot more money for a death benefit that's going to absolutely pay out. And um, I think a lot of the discussion, so yes, I want to just get up front. Permanent life insurance is a fantastic tool. It's a tool, it's a tool. That's just it. Now, where all of the controversy comes from is around the descriptions and the tactics. Um, let's just call it what it is, used to sell them. And already we're entering where like your intuition can mislead you a little bit. If I say, well, one is renting where the money's all gone, and the other you get your money back one way or another. That description right there, well, obviously I want to get my money back one way or the other. Um, but there's more to it than that, because you're going to be paying significantly more for a permanent death benefit than a temporary. And so um, I just think like there is so much nuance behind this. This in like I guess you had your little opening statement. I'm gonna say my piece as well that yes, like I think permanent life insurance as a tool is fantastic. There's just really good and bad use cases for all of it, but also recognize that it's so much semantics there. And we've already identified one where like one sounds better just based on the words portion, but you got to quantify it here. So it's a it's a um, I don't know if I actually even answered your original question of the main difference, but one, if you like, so aside from the death benefit being permanent, that's that's that should always generally drive the the decision here is like, do you need a permanent death benefit no matter what? The other main differences would be like with a term insurance policy, you're just paying some insurance premiums, and that's it. You're just paying premium in exchange for coverage. Permanent life insurance, some types of policies or most policies, you're gonna build a cash value that can be used while you're alive, um, which um is another area of nuance of sounds great, but there's a trade-off for it. And so um term insurance is as simple as it gets. You're paying for a death benefit. If nothing happens, nothing happens. It's it just goes away. Permanent is going to be you're paying money towards a death benefit that's gonna pay out, and maybe you can use some money while you're alive. And it gets real complicated and messy uh in between that.

SPEAKER_01: 5:20

Yeah. Yeah. You know, it it might be helpful just just to run down the different types of permanent policies because people have heard of these and and you may not, you know, know what what the heck uh they are. And you know, there are different categories within the permanent life insurance space. And so, you know, to run down on, you know, whole life is the most simple or the kind of original type of permanent policy. It has a fixed premium, which means you pay the same amount every month. It has a guaranteed death benefit. So as long as you keep paying those premiums, it will pay out that death benefit, whether you die next year or you know, at 95. Um it's steady and conservative in terms of the cash value growth. So as you age, as you pay premium, that cash value will build according to a schedule. And eventually, you know, by age 100 or 120 or you know, if if you're lucky enough, the cash value will equal the death benefit. It just builds by design. By design. By design, you know, that's that's that's the way these are supposed to work. So it's it's fixed, it's fixed premium, guaranteed death benefit, cash value grows, you know, by a incremental amount, similar to like a uh an interest-bearing, you know, high yield account or or uh or a fixed bond.

SPEAKER_00: 6:45

Yeah. If you want to oversimplify it, like with the different types of permanent life insurances we're gonna be talking about, again, this is not the technique fully technically correct, but whole life insurance is like the cash value is going to grow like a bond. That's a good way to think about it. Like think about it like bond or a money market account.

SPEAKER_01: 7:01

Yeah. Then then it gets you know m more complicated or or not necessarily more complicated, but people want more flexibility. And so the flexibility goes up with each successive innovation in the life insurance space. So start with a whole life policy. You know, premiums are fixed, but that cash value, you know, grows kind of slow. Um, so enter universal life. Um, what that does is separates out the fixed premium from the cash value, um, the portion of your premium that's going to cash value versus the portion that's going to to the death benefit or to the insurance portion of it. So it adds flexibility. The premiums and the death benefits can change over time. Um, your cash value is is still gonna grow at that fixed income rate like a bond, but you've got flexibility to try to dial up the death benefit, dial back down the death benefit based on the premium that you're paying. Well, and is that a fair description?

SPEAKER_00: 8:05

Yeah, I mean, it with all this though, like whole life insurance works. It's been around for like 150, 170 years. It just works. It's it's very boring, it's very plain, it's not sexy, it grows like a bond. It just does what it does. Now, people wanted that cash value to do more or have more flexibility, so they started innovating on top of it. And this is where things get a little messier because um with some of the other types that we'll talk about. Like, I mean, Wall Street's just as if we kind of stereotype investments as Wall Street and maybe I don't know, like the insurance side. Like Wall Street tried to innovate and they kind of don't always get it right either. Um the with all this flexibility comes more risk too. So, like a whole life insurance policy, if you pay your premiums, it's gonna pay a death benefit. It's just gonna happen. Universal Life with some of these designs, like that's no longer guaranteed. So, like you get flexibility, like, hey, if things go well, I might have to pay less. That also means if things go poorly, you could pay more or literally just lose the policy. So there, there's everything in finance is trade-offs, and especially in these space, when you in the life insurance space, you'll see with each little iteration, you're making more and more trade-offs of certainty for upside.

SPEAKER_01: 9:11

Yeah. Yeah. And then comes the variable universal life or variable policies that we kind of touched on last week. Um, and that's where you've got more flexibility with how that cash value is invested. So you're building the cash value while you're paying premiums. Um, but you know, if you don't want that cash value invested in a bond-like security, you want something that has a little bit more potential for growth. But the flip side of that is also potential for loss. These variable policies allow you to invest that cash value in something like a mutual fund. You know, it's gonna have fees, but it may be invested in something like a S P 500 or something like that.

SPEAKER_00: 9:58

Yeah. And so if you think about a whole life insurance, everything's guaranteed. Like the insurance company is taking all that risk and you're gonna earn like a bond like return. And that's because of what that money's invested in. We don't need to get into the technicals there. Uh, if you go, wow, well, it would be really great if my money could grow like the stock market instead of a bond, that's basically what a VUL is like, yeah, sure, we can put that cash value money inside of a mutual fund. And if it goes really well, guess what? You're gonna make a lot of money. But now, what else can the market do? Go down. And the now the insurance company is like, that's not on us. If that money, if the stock market goes down, those mutual funds drop in value, your cash value is too low, you get to pay more premiums here. So this is a that's a great point of like, here comes that, well, more upside, but more downside. And you're on the hook this time.

SPEAKER_01: 10:39

Yeah, if if if you experience a bad string of returns, especially early in the policy, you may have to kick in additional money to keep that policy alive. You may have to pay additional premiums than you were expecting to pay at the beginning. Um, because you know things didn't go as as hoped with the investments. And then the last category, um, which is probably you know, maybe the more most complex one or most mp misrepresented is indexed universal life. And that's where that cash value is invested in some type of index or linked to some type of index return on, say, the SP 500. Um, but there may be caps on how much uh of the upside you can participate in in that index and floors in terms of how much of the downside. So, so, you know, the these are the policies that could be marketed like, oh, it's got you know upside like uh like a stock fund, but no or limited downside. Um and that's all because these are built with investments that are are you know essentially invested in options, um, that that you get some participation in the market based on what the index does, but but you're not going to get that exact return of the S P 500.

SPEAKER_00: 12:01

Yeah. And here again, you can follow the innovation from whole life is it works, but it's boring. It's a bond. I want more upside. So then there's VUL lets you invest in mutual funds to give you more upside, but oh crap, those could all run out of money. So we need to cap the downside. That's where the index universal life came into play. And these indexing strategies are common, they're common in the investment world and in the insurance world as well as in annuities, where basically, yes, all that's going on is you have options. You're purchasing some of the premium dollars, you're purchasing options that can create a typically like a cap strategy. So you get some of the upside with no none of the downside, which all of this complexity is aiming towards doing slightly better than what the whole life insurance policy would have done, saying, okay, we're uh we understand if VUL is super risky, you could lose all your money, so we'll cap the downside and try to get some more of the upside. Um and yes, uh, this is where I don't know when we're gonna start talking about this, but like illustration risk is massive because it can look insane on an illustration and you can cherry pick a certain time period that makes everything look amazing, but there's trade-offs, all this. But um, yeah. And also, um, there is a fifth type of universal life or policy here that's less commonly talked about called guaranteed universal life. Um basically it's a permanent death benefit with no cash value, more or less. Big fan of this um because there are times where a permanent death benefit need is absolutely necessary. Uh GUL guaranteed universal life is another policy. Um basically it slots in between. If if the permanent policies with cash value are gonna be terms always the cheapest, say whole life's the most expensive, V U L and IUL are somewhere in between, and but they're very performance dependent. Um a GUL is a great option for basically a no cash value. It's like a permanent term policy.

SPEAKER_01: 13:44

Yeah.

SPEAKER_00: 13:45

In a way.

SPEAKER_01: 13:46

Um Yeah, well, that I mean that's a national uh natural segue into you know, when does a permanent policy make sense? Um how how do you think about that or how would you explain it to clients?

SPEAKER_00: 13:57

So um I I it is so interesting. So I should clarify. Um, you know, my my dad's been an advisor since the year before I was born. And frankly, uh how do I say this respectfully? Um was a very big whole life insurance fan for a very long time. I've been learning, like literally got a detailed walkthrough of my first life and whole life insurance policy in 1997 when I was seven years old and would be able to like, not that I know everything, but like this is just been around this for a very, very long time. And I think this is part of like I'm I'm conflating a couple of things here, but um, whole life insurance used to be an unbelievable tool, like a hundred years ago, like 50 years ago, before mutual funds were common, like that was the way there was pensions and whole life insurance policies were the main vehicles for people. Um whole life insurance is great. Just the the world has changed and iterated. And I think what like one of the issues you'll find with some of this is people haven't updated their perspective. They're still kind of stuck in like the early 90s type of stuff. Um how did I get onto that? I'm so sorry. I'm like all fired up about this conversation. But um what was your question? Yeah, the question, you know, when when does a permanent make sense? I I say I I've seen a ton of use cases for this. And there's um, I think the most common, like like what you're gonna get almost no debate for. Let's say uh you have a disabled child. So like I'm gonna use my example, my situation, for example. My four-year-old will never be independent. She's gonna, there's gonna need care forever. If we die, she's gonna have a lot of costs. And so we could just say, you know, all right, you're gonna be awarded the state when we're dead, but we think probably not. So we have permanent life insurance policies on. My wife and I, well, my wife does. I for some underwriting reasons don't just yet. But that's one case where you're like, okay, there's a if life insurance is there to replace your income when you pass away, you know, what position will those people be in? We have a need of our income's going, there's going to need to be money for a very, very long time. So that's an example of when I think most people, nobody's gonna really argue with, yeah, Taylor, you probably need some permanent life insurance in your situation. That's that's the most acceptable, but there are also legitimate planning use cases for it. If actually, if you're um if you want if leaving a legacy is really important to you, that's another time where a permanent death benefit makes a ton of sense. Um that yeah, I mean, it's that's literally what it does. It's it repl it it leaves it it's guaranteed to leave a legacy behind. Um it can also sometimes mathematically, but definitely psychologically, increase retirement spending as well, of knowing the term that's used is like a permission slip. So, like let's say you get to retirement and you've got two million dollars and you're like, wow, we want to leave some money behind. If you know you have a death benefit there, you can spin that up. It and it it replenishes the assets when you die. And so I think if you think about like winter, their use cases for uh permanent life insurance, think about what the underwriting rules say. Like more generally speaking, you're gonna take like how what your current income is times how many years you have left to work. So it's income replacement. The other underwriting guideline is one and a half times your assets of retirement. That's straight up in the rule. Like they'll like say, yeah, okay, you got a million bucks of retirement, you're not making any money anymore. We'll still underwrite you for some for for for life insurance because we know people want to replace their assets that are spent during retirement. And so um yeah, I mean, it's to replenish like legacy charitably inclined or legacy-inclined people who want to leave some money behind. That's a great use case for it. Um and then people who have uh people relying on them that will outlive them, in theory, is another time. I think it makes a lot of sense.

SPEAKER_01: 17:24

Yeah. I mean, I think you've you just outlined perfectly the situations where average people may it may make sense for the average person. There are some other use cases in more niche situations or or or situations that don't apply to the average person, such as, you know, in estate tax situations for the very wealthy or for business owners who have, you know, maybe estate tax issues or liquidity issues if they if their wealth is tied up in a in a business and they need to have liquidity when they they pass, um you know, then you know it can make sense for business succession planning or planning for estates that don't have you know assets that they can readily liquidate or split easily easily between heirs or um, you know, so the the simplest way to to to that I explain it is like when do you need permanent insurance? It's when you have a permanent need. When no matter what, you are going to need that money um when you pass, or someone is going to need that money when you pass, um, then it can make you know a whole lot of sense. Um I think there are some other situations and and this is where there can be some interesting planning opportunities around permanent insurance, um especially on the tax side. And and the big benefit here is that all all like all life insurance, the death benefit is tax free. It's it's income tax-free. Um and so what that means is, you know, if you think about the uh ultra high net worth person wanting to to be able to pass on more assets, um, there are some use cases there where you're able to then pa put assets into a a death benefit that's going to pass tax-free and and and if structured properly, kind of can get around estate taxes. Um the the other important advantage of of all life insurance policies, but but particularly, well, I guess it only applies to permanent policies, is that that cash value is growing tax deferred. Um, meaning, you know, if you are investing that cash value or earning interest on it, that that increase in the cash value is not taxable to you. Um and there are ways that you can access that cash value tax-free if you if you structure it correctly, either by you know withdrawing amounts that you've paid into it. Those premium dollars come out first and those are tax-free because they were paid in with after tax dollars. Or, you know, if if you structure it as a loan, like against a death benefit or something like that, that that can be um accessed again without paying income tax. Um so that so there are some, you know, this is where it kind of gets complicated. And I think we're um sometimes these policies are misrepresented too.

SPEAKER_00: 20:21

Yeah. So I think like we're we're departing though. The first question you asked was like, when does a permanent death benefit make sense? Yeah. And you were you're completely right in bringing up the estate tax thing, which is much less of an issue now, but it used to be way more common. It's like basically 30 million per couple now is when you you have to worry about that. So there's when the when does our permanent death benefit need? That's one conversation completely on its own. And I think we most I I think everything we just said almost nobody will disagree with. The business purchasing a business, um, estate taxes, somebody relying on your disabled child type of situation, and possibly for some income, you know, for asset replacement or retirement. That that's there's no controversy there. But that's talking about when is there a death benefit need. You brought up cash value and being able to use it while you're alive. That to me is where all the mess comes from, is explaining how the cash value works and how you can use it while it's alive. This is this is where the controversy comes from, in my opinion. Because this is where you get into subjectiveness and like comparing and like different that that's where all the mess comes from. I think that's the tough one. Would you agree with that? That's kind of the line in the sand, like there's or not.

SPEAKER_01: 21:35

Yeah, I think I've never heard it phrased that way, and I think that's a really helpful way to like parse the planning. You know, when when when is this a planning need uh uh in terms of like you need the death benefit to to protect a disabled child or or buy a business partner out or something like that, a permanent need, versus when is it used as a tax planning tool, which introduces a lot of complexity and also with complexity comes potential for abuse or misrepresentation or just misunderstanding.

SPEAKER_00: 22:10

Yeah. Yeah. And and that's so yeah, because I I don't really know exactly how to start talking about all the the mess that comes with cash value, but if we all say, like, okay, we under we're on the same page about permit death benefit. Yeah. Well, there's ways to do that. You can just buy a G U L. That's really the cheapest way to buy a permanent death benefit. So why don't people do that? Well, this is where I get into like I said like early on, like there's this the intuition can be misleading here. Where I say, well, why would you want to pay into something that's never, you know, don't you want to get your with a whole life insurance, you're gonna get your money back one way or the other, right? If you live, die, or quit. You can access your cash value, get the death benefit. That sounds great, right? But you gotta look at how much more you're paying and then compare it to what you could have done if you didn't, if you just kind of you, if you unbundled it, if you would, took the permanent death benefit and maybe saved outside of the insurance account. This is where it just gets messy. And and then you have people that say, like, forget the death benefit. Let's use life insurance cash value for what for the cash value, because it grows tax deferred. You can access it tax-free and all this and that. And this is like, I don't know how we're gonna what all we're gonna be able to talk about here, but this is just where it gets all the mess, all the disagreement, all of the incentive problems that let's just call it what it is. Um, an insurance person generally gets paid for the premiums that get put into a policy. So there's the it just this is where everything goes haywire. So I'll let you tell the where you want to go from here.

SPEAKER_01: 23:39

Yeah, I mean, I'm just it's just this just reminds me of why you know I'm susceptible to falling into that uh permanent bad term good because term is just simple. It's just simple. I I am paying a premium and renting a benefit, if you want to call it that, or thinking about it like uh, you know, uh uh uh a homeowner's insurance. If if something bad should happen, I'd I'm not expecting to die in the next 20 years, but if I did, it would put my family in a bind, and that's why I need insurance. Just like I buy homeowner's insurance. I'm not expecting my house to burn down, but if it did while I'm living in it, that would be that would be a major hit to our assets. And so I need a policy that covers me while I'm living there. Um, you know, that's simple to understand. And then when you it and and so is the the the permanent need, you know, for for a benefit. And and you know, I can get behind that. It's just my knee-jerk reaction to um these more complex cash value type strategies is like, ooh, like A, what are you put what what commission is that agent earning on this? Number one, so how much is lost to to commissions or fees, you know, those products within the um policies that the the funds you're investing in, they have management fees too. You know, it's not like you're you're putting it in a Vanguard fund with three basis points of of of fees. You know, these can be potentially much higher um investment fees. And then, you know, do do you even understand, like, especially with IULs, these complex calculation methods for how the actual return that gets credited to you is even calculated, and then the ways that those calculations can be misrepresented. And so yeah, I'm j I I definitely fall into the trap of, yeah, let's just, you know, let's not think about that if if uh if we don't have to.

SPEAKER_00: 25:43

And and that all I I think even so it's just all about expectations. If you just describe it for what it does, not overhype it, just exactly what it does, the pros and cons, you can tell, like, okay, there's a a case for that or not. Like, like I'll I'll use us for example. So I've sold one whole life insurance policy in my life, and it was to my wife. It's the only one. And I want to also be clear, I've also uh how do I say it, helped a client get out of a whole life insurance policy through a very involved process. So like I I've been on both sides of this. I'm not all in on one way or another. But like let me just explain like how ours our policy works. So we pay screw it, uh$10,000 a year premiums for about a$1.75 million permanent death benefit. That cash value we paid into it for nine years now, and there's about$90,000 of cash in there. It's gonna grow at like 3% the cash value is. That money can be used. I use it to pay off my car, and it's a it's a it's a loan. I borrowed it and I paid the interest back to the insurance company. Cash value also grew, but um, oh man, we're that's a whole nother conversation there. But like I'm just explaining it how like with no frills, like it's just a pool of cash that I can borrow against, kind of like a securitized investment account. Um, it's steady. Uh we have to make the premiums every year, so it's like a forced savings account. Um, so it's a good behavioral tool. It may not be mathematically optimal, but it's it's a good behavioral tool. Um, if we if my wife needs long-term care, she can access most of that death benefit over a million dollars while she's alive to use long-term care. And if we pass away, there's gonna be money there for our daughter. It works for us. It's simple. It's not mathematically optimal. If I would have taken that money into the SP 500 for the last uh 10 years, that'd be way more money. Don't care. Not trying to solve that purpose. It was not that money was not there to try to maximize growth. It was there to provide optionality, and optionality is going to sacrifice upside. I love that policy. I would I've never sold it to anybody else, which is a weird thing. So, like if you love it so much, because like I understand the trade-offs, um, it absolutely works for us. It's a little safety net for us. It's a big pile of cash that we can use if we need it, and it's got just all these different things. Um, and that works for us. And I think that has to be like understood that like there are different risk preferences for things, and not every single dollar needs to maximize returns at all times. Is that there is an odd like there you go. Like that may not, that was probably not even a very compelling pitch, but I love it right there. Like I straight up know it's not the like it's the investment account would have done better. But that's also because we have an insane return for the last nine years. And so um, yeah, I mean, it's just that's that's really what it is. It's just flexibility, it's optionality. I'm not expecting it to beat the stock market or become an investment account. I'm not comparing it to my investment account. It is a freaking bond, it's it's a bond portion that's just going to be steady eddy going to provide a safety net there for a very long time. And that's great. And I think right there, that nobody, I would guess, would have a problem with how I just described it. You may think there's something better, but like that description is what it does. Right? It's when you get into like comparing it to market-based accounts that things go sideways. So I don't know. What what are your thoughts on on that?

SPEAKER_01: 28:52

Yeah, I I think you it it's hard because these products mix investment um uh aspects with insurance and and there are varying degrees of it. You you the policy you're describing is pure insurance, basically, with flexibility, you know, as it's building cash value. And and um we don't like you said, the important thing is the expectations. You don't expect it to to perform like a stock fund. Um that's not its purpose. Um and that and I can't I definitely can't argue with that. Um I think uh and I think we probably agree. I mean, I don't want to put words in your mouth, but like with with with when when you mix those and uh insurance with uh investment upside, it's it just it's it's it really complicates things. Um and it can make it difficult to compare when you're not clear on what the purpose of this money is. Is the money is this money for insurance purposes or is this money for investment and growth purposes? Well, somehow it's both. And how do you then compare that to one or the other when you're thinking about, you know, opportunity costs? What could we have done with that money? Um so I mean, I yeah, I I think where where my kind of hackles go up are on those sales tactics that are used. To put people in policies that may not actually solve a need that they have. You know, when when they're pitched as having, you know, no downside with stock market-like returns, well, that's not actually how IULs work. Or when they're pitched as infinite banking, be your own banker. It may be technically true in like concept, but but usually like the benefits may be exaggerated. Or if it's it's pitched as being a secret strategy that the rich use that they don't want you to know about. Well, uh a super high net worth person using a life insurance policy strategy, you know, to to for estate planning purposes is totally different than somebody who's not worried about estate tax purposes. It's a totally different objective, totally different situation. Um, or I mean this is this is one that my wife got when she was in medical school, and an insurance agent, you know, who was uh introducing himself as a financial advisor was pitching the the whole life policies or these um VUL policies as tax-free retirement accounts uh or like an unlimited Roth account. And and it was just those things like get me uh get me get me fired up or get me going.

SPEAKER_00: 31:45

Yeah, no, I mean that is well, I would say yes. There are I I I know so many life insurance producers that are unbelievably detailed planners that are great financial advisors. Um there's a bunch that that do the BS that you just talked about. And listen, like it's not like a huge hurdle to become a investment advisor, but it's an even lower hurdle to be able to sell insurance is part of the issue here. So it's pretty easy to just hop in, you can tell a cool story and make a decent amount of money doing it. Um yes, like it's all about framing. Like what all those things that you talked about, like the secrets of the wealthy, these like you could you can use life insurance to appeal to fear and greed in a couple of ways. Um what the rich don't want you to know. Uh it's just there's rebuttals to all this. Like, don't none of that, that's when you know like that we're we're we're entering the no-go land. Like this is just that's when it's if it's departing from runaway. Yeah, generally, like like if again, like that's why I think the first thing I tried to say early on was like you should always start with a permanent death benefit need. Because like if you want to grow your money, like wrapping it inside of a life insurance policy is just not going to be the best way. Like every investment thing, even the IUL strategies, you can unbundle and do outside of an investment of a life insurance policy. There's no reason to bundle it in there. Uh sales tactics, we could go on and on about all the other crap. And I mean, maybe we should, especially some of some of the ones you mentioned. Because I'm sure people see it.

SPEAKER_01: 33:13

Yeah. Yeah. Yeah. I mean let's talk about, you know, what what if you already have a permanent policy? Um what you know, sometimes life changes, kids are grown, debt's gone. Um, maybe you bought it for the right reasons and those reasons have changed, or maybe it was misrepresented to you and you bought it for the wrong reasons. You know, what can you do with a permanent policy you don't need anymore?

SPEAKER_00: 33:37

Yeah. I mean, a mature whole life policy is pretty good. Um if if you if it's like 20, 30 years old, they're actually starting to work. You kind of got through the annoying part. I'm sorry, you know, you didn't say anything when I said we paid in like 10,000 a year for nine years and there's 90,000 in the account. I see that all the time. Like you pay in for all these years and there's no money billed. Who cares? Like that's it's a long-term thing. I don't care about that at all. But some people will point to that as somehow a negative. Like, if you have you looked at a mortgage amortization table, it's the same thing. Um, but like 20, 30 years later, uh, like you there's a couple of things you can do. If it's a whole life policy and it's paying dividends, you could use that to offset the premiums that are being paid. You could take the dividends and just live off of them yourself. Um so I think a lot of times it's it's a hard story to like replace a mature whole life insurance policy. Um, you can always surrender it and maybe pay a little bit of taxes, depending like depending on where you're at, that that might make more sense. I think something I have done a handful of times is uh exchange them into a long-term care policy. If there's not a good long-term care writer uh on a policy or you want to get joint coverage for a spouse, you could take a whole life insurance policy or a permanent policy in one person's name and 1031 it into uh a long-term care policy. That's another great option. Um yeah, I mean, I mean it's kind of like obvious, like you can keep it, and within keeping it, you can offset premium, use it. You can continue to like if it has paid up additions, sorry, I'm getting a little technical here. There's options if you want to keep it, there's options to surrender it, there's options to exchange it.

SPEAKER_01: 35:07

And there's also options to um to gift it or sell it. Um, these are more maybe niche cases, but say, say you don't need that money and your heirs don't need that money, you could transfer the title to a a charity. Um, and it could, you know, fulfill a philanthropic goal uh at death. The charity would would get receive the death benefit. Um you can also sell it. There are ways you know to have life settlements if if you are in poor health or um need access to funds to to um you know provide for care or things like that. There are ways that you could sell the policy rather than surrender surrender it and maybe even be able to sell it for more than well, you know, you would only sell it if you could sell it for more than that surrender value. Um, but that's that's also you know sometimes an option. But I think you know the key takeaway is you know, permanent policy doesn't always have to be all or nothing. There are there are ways you can kind of repurpose it um to suit another need if your needs have changed or unwind it in a in a kind of smart way to support the other goals you have. Um let's wrap it up. I mean, um my key takeaways for for this are you know permanent policies can make sense for the right person. Um and you know, that starts with the death benefit, whether you need a permanent death benefit. If you don't need a permanent death benefit, um it's probably a much longer discussion over whether it's gonna be a good fit or not for what your goals are. Would you agree?

SPEAKER_00: 36:42

It totally. Like if you just need a permanent death benefit, I would probably look at GUL. Um if you're intrigued by the cash value option, I I mean, I I think I've said at one point, like it's all about sizing. Like I the pro like I I could make an argument that like one to one to two percent of like every person's net worth and a whole life insurance policy would not be a bad thing just because it's a the the flexibility, the buffer, the like the long-term care. It's just great. But it the problem is you're gonna get it outsized worth like 50% of somebody's net worth. So again, there's nothing in like there are some inherently flawed things with indexed universal life. Uh, but whole life insurance is just there's nothing wrong with how it's designed. It just is what it is. It's there's just improper use cases and dosages of it. And so most people absolutely do not need it. Um always start with a permanent death benefit need. And then if you are intrigued by some of the things you can do with the cash value, just make sure you put the right amount of money into it, which is not very much.

SPEAKER_01: 37:39

Yeah, yeah, not your entire retirement savings.

SPEAKER_00: 37:42

If you get in, is is any of this too good to be true stuff, be your own bank, you're paying yourself interest, secrets to the wealthy don't want you to know, unlimited Roth, just there's maybe we should rebut those at some point because like those are those are crap. And and yes, understand incentives. The fact that somebody makes a commission does not make it bad, but understand that that angle does exist. Also, frankly, just look at who's selling it to you. Um yeah, like if like look into the firms, like there's a couple of big ones. Um, I guess we're not supposed to say names, but um yeah, so like just be cautious. But like don't it's it's it's not like I think the biggest thing is it's not like it's not so simple term good, perm bad. It's just not true.

SPEAKER_01: 38:21

Yeah. Yeah, it's a tool and you have to match the product to the problem. Yeah. You have to pick the right tool for the job if you're if you're trying to to get a you know, use a hammer to do uh a screwdriver's job, you're not gonna do a very good it's not gonna it's not gonna get the job done. But there's a right job for uh or a right use case for a lot of these different types of policies. And and yeah, and lastly, you know, having understanding how they work and and having appropriate expectations and not expecting them to do something that they were never designed to do. Or um you know, that that's that's key.

SPEAKER_00: 39:01

That's it. That's literally like my whole soapbox. Just it's all about expectations. So like the all the I uh all of the problems of whole life insurance come with how they're described, outside of my AWL with how they're how they're designed to Yeah.

SPEAKER_01: 39:14

Well this this has been this has been super helpful because you know, we've had this, we've had discussions around this before, and I feel like I always learned something, and I come away, you know, come away having learned something, feeling, you know, a a little bit less like defensive or or uh a little more open minded. And uh so thank you for for this conversation and for education.

SPEAKER_00: 39:36

Of course, man.

SPEAKER_01: 39:36

It's always a pleasure. Pleasure. Um all right. Well I guess I'll see you next time.

SPEAKER_00: 39:42

See you next time.