I want to share a quick story about
a 33-year-old man
who decided to pay in
$100,000 per year
into a whole life insurance policy.
$100,000 per year
at age 33
which means he has to be
doing very well for himself
which he does do well for himself
but he pays it into
a whole life insurance policy.
His name is Steve
it's not me
I know him quite well though
since 2018
he actually works for Grant Cardone
and we've got a podcast with him
on our Youtube channel.
But
I remember the day
he reached out
interested in a whole life
insurance policy
it was March I think 2020
tail end of winter
and one of those days
when it's raining
and it's like borderline
snow, ice
it's cold windy outside
I describe it in that fashion
because I had just gone for a run
and it was just ugh
like cold and damp
I'm trying to warm up afterward.
My brother got in a car accident
just driving right down the road
he was fine
but I remember all that happened
and then I get an email from Steve
interested in a whole life
insurance policy.
Now when he emailed me
he didn't say hey I want to pay
$100,000 per year to this policy
he emailed me for more information
he wanted to better understand it
and see if it was a fit for him.
He knew about it
because I had sent him
videos all the time
not to try and sell him on the product
but more so to critique the videos
because he's got a good mind
for sales and marketing
so when he sees it
he would always
give recommendations as far as hey
you might want to tweak this
or make a couple adjustments here
I really like these
those didn't really keep my attention.
So I'd bounce ideas off of them
but in watching the videos
you could tell he really dug into him
because he inquired
he said hey,
can you tell me more about this
I'm interested in it.
So to speed up the story
we looked at several different options
and he decides
to pay in $100,000 per year
into a whole life insurance policy.
We're going to look at
exactly what he does
he shares details
on his situation in our podcast as well.
Now when we connected
we did not just say okay
$100,000 per year
is the best option to go with.
A couple of things he mentioned
he said hey,
I don't want to have to pay
until I'm 65 years old.
The death benefit
not really feeling it right now
I don't care about it.
In the future
I do
and now he cares about it more
because he's married
or he's going to be married soon
but the death benefit was not
initially a concern
so he looked at different options
based on his cash flow
at $50,000 a year
$100,000 per year
and $150,000 per year.
He asked for 1 option
we showed him
a number of options
he actually didn't start out
at $100,000
but just as we went
through the process.
I said hey
I can start by showing
a couple different options
we can look at the guarantees
all that good stuff.
He said hey that'd be great.
I sent him all the info
along with a personalized recording
so he could see exactly
how it worked
the same thing we would cover
during a zoom call
to make it convenient for him
as we went through the process.
So he selected the $100,000
but a couple of things that
kind of jumped out at him
and things I remember
is he was interested in the policy
for this reason,
he had money
just sitting there
in his bank account
earning 0%.
His wealth-building strategy
presently
is very effective
he
invested in Cardone Capital.
I don't think I spell capital right
but that's okay.
So this is where he's investing his money
and he's very happy
with the internal rate of return
so it's a safe
consistent area to put money
no matter what happens each month
he gets a check
and when a property sells
he participates in that sale
gets his principal back
and another 2 to 3 times that
so he's very happy
with investing with Grant.
And when we look to the policy
so what are the core benefits
to a cash value life insurance policy
specifically focusing
on the cash value?
That's what he was interested in
safe,
liquid,
tax-free.
Safe, liquid, tax-free.
The IRR
falls somewhere
between 3% to 5%.
IRR means internal rate of return
then net growth
as time passes
like that's what the policy will do.
He earned greater than that
even 5%
with Cardone Capital
and he looked at it he said hey
I do earn a higher return
with Cardone Capital
with my real estate deals
but what I like about this
is the idea that it's liquid
a cash alternative
and I really like this Steve
the idea of getting
$500,000 into the policy
so specifically what he wanted to do
is this $100,000 per year
for a period of 5 years
and then stop.
He said I really like
getting $500,000 in there
and just kind of letting it float
constantly growing
I really like the guarantees
as I look at that
the tax-free benefit is nice too
because he's a higher income earner
so that tax benefit
will become more and more valuable
as time passes
but that's what he's attracted to
getting $500,000
total into the policy
$100,000 per year for 5 years
and that's it.
So when we set the plan up
we designed it
where it could pay in for 5 years
but the product is actually
a policy that's payable
until he's about 95 years old
so if he decides to
continue to make payments in year 6
guess what?
He can do that
he is not forced to stop
by any means.
So let's take a look
at exactly what he did here
so we looked at
several different options
and we want to break it down too.
So he's a quick decision-maker
makes decisions quicker than
most people I know
and I've noticed that
to be very consistent
with people at his level
he's got a goal to have a
$25,000,000 net worth in 10 years
I think we'll have more than that
just at the pace he's going
and how focused he is with everything
but he wanted the details.
Just because he's in sales
it doesn't mean he says hey,
show me the numbers
if they look good
let's move forward with it.
We looked at more
than what I'm going to look at here
we looked at the guarantees
worst-case scenario.
You're going to see a couple
variations of this option here
but $100,000 per year going in
he did not
I should have mentioned this earlier
he did not want to receive
a bill for $100,000.
So we talk about this frequently
I want the ability
to pay in $100,000
and with an insurance policy
I think what?
Premium,
bill
I have to pay it.
However with the policy
you can actually choose
where your money goes
you can direct it
toward an insurance premium
or you can direct it
directly toward what is called
a PUA [Paid-up additions] Rider
that's the compliant term
and that's what this column is here
this additional cash contribution
he's dumping money into cash value
it does impact your death benefit
positively long term as well
but money can go
toward these 2 areas
and with his policy
his premium
which is his insurance premium
and also term insurance
that we attached
is just about $10,000 to be precise
you can see it here
$10,200 and that's premium
plus his term insurance Rider
then everything else
$89,800 for a total of $100,000
all goes toward PUAs
hyper growing his cash value.
So how he's got it set up
he does not pay $100,000
at the beginning of each year
he commits to this
so on his anniversary date
when he gets his premium notice
like he would for any type
of insurance product
that's when he pays the $10,200
and then at his discretion
he just logs on to his online portal
and throws money in
anytime he wants.
I do the exact same thing
with my policies.
So he's got now
not just a boring insurance bill
but he has a flexible savings asset
where he can pump money in
at discretion
it's really neat when you think about it.
I've got a cash value
life insurance policy
and I can use it
as a safe, liquid, tax-free area
to position cash.
He looks and says hey,
I love the idea
that it actually grows over time
my bank account doesn't do that
and I like the liquidity here too.
So if my own
real estate deal comes along
that I want to personally
control and invest in
I can now use my life insurance policy
to take advantage of that
instead of financing it
through a bank or lender
using cash
whatever it might be.
He'd probably use cash
he doesn't have any debt
he's very smart with his finances
because he studies them intensely.
But here we go
here's his planned funding
$100,000 per year for 5 years
this is based
on the present dividend rate
we looked at the guarantees
and also an index strategy
with the same product
but here you go
breaking even
when he's cash on cash
between years 3 and 4.
Year 4
he's paid in a total of $400,000
and he's got $404,000.
Death benefits at $3,500,000
mainly because that gives him
a MEC [Modified Endowment Contract] limit
of guess what?
$100,000.
And if you're new to this
that MEC limit of $100,000
that's an IRS [Internal Revenue Service] limit
any of our policy design videos
or modified endowment contract videos
really go into full detail
the importance of that
and how we can set it.
It has a direct relationship
to an individual's age
and death benefit.
But here
plan funding
after 5 years
doesn't pay a penny into it
cash value continues to grow
did exactly the same thing
based on the guarantees
and it looks good.
This is what he was attracted to
but at the same time
do we stop there
and say okay
sign right here
as uncle G would say
his boss?
No.
We want to show
additional options too
with the same policy
so not additional options
to sell them on
but to say hey Steve
this is what it looks like
if you do everything
according to plan
but if life happens
and you only fund it at 50%
of the total amount
so you have the ability
to pay in $100,000
but you only get $50,000 per year in
what happens here?
What will we notice?
The minimum commitment
is exactly the same
$10,200 per year.
The additional payment here
$39,800 instead of $89,800
for a total of $50,000
okay.
I get a total of $250,000 in
when am I cash on cash?
In this example
when I max funded the policy
so if I 10X my minimum premium
minimum premium $10,000
total of $100,000
10Xing it is as aggressive
as the insurance company
will allow with the top companies.
He's big into the 10X rule
because that's where he works
so it was just kind of
a nice coincidence in that respect
but as we look at this
if he max funds it
10X it each year
breaks even between years 3 and 4.
If he does not do that
what happens?
Still performs
but the break evens year 5
just about.
He's paid in $250,000
he has $249,000
year 6 he's positive
continues to grow
but a little bit delayed
break-even point.
Cash is definitely going to be less
because I've only paid half in
compared to the example on the left
but still
a decent area to position money
much more satisfied
than his bank account
that doesn't do anything.
But then we also compare it
to a worst-case scenario
what it looks like
if he only pays
the minimum in each year
and with that
it's not attractive at all.
In fact in this example
we would say don't do it
or if you did start a policy
and life just happened
you say I can't pay anything in
like everything went south
I'm paying in $10,200 per year
then what we would do
is actually what's called
a policy change
and we would take the base premium
kick it down to $1,000
kick the death benefit down
to $350,000 instead of $3,500,000
which would give us a MEC limit
of about $10,000
technical stuff.
The point is
we would reduce
the insurance expenses
kick everything down
and then of his $10,200 per year
he could still pay that in
but only a $1,000 premium expense
get more money into cash
and you'd see it breaking even
right around year 5.
And we've got some
other content on that
I know it's a technical topic
I just mentioned there.
My point to mentioning it
is in the event
we are really underfunding a policy
I bite off more than I can chew
you can make adjustments after the fact
you just have to know what to do
ask the right questions.
If you're an agent to the company
if you're a client
or a policyholder to your agent
and sometimes the agent doesn't know
so they can do extra work.
If you work with us
we've got a training program
that goes through that.
Anyway
this was
a fun case to work
and a privilege to work with Steve
I thoroughly enjoyed it
and I hope you enjoyed this.
If you did enjoy the video
please hit the like button
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and as always
I hope this helps.
Talk to you soon.
Hey guys Steve Parisi here.
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