Okay, next we are going to
take a look at the objection
of company selections.
So when it comes to
a whole life insurance policy
and I'm in the market for
maximum cash value
flexibility
all that good stuff I always hear about
how do I make sure that I select
the proper company?
So when it comes to
insurance company selections
there are a lot of
insurance company out there
you do not need me to tell you that.
We can just turn the TV on
radio on and advertisement pops up
and we see 10,000 different
insurance companies
is not quite 10,000.
When it comes to
maximum cash value
life insurance policy
every single time
I'll always recommend
the big 4
or 4 major mutual companies.
Being MassMutual,
Guardian,
New York Life,
and Northwestern Mutual.
And the simple reason why
is when you look at
actual policy
that has lived the test of time
not illustrations,
not who projects the best numbers,
but real policies
that have lived the test of time
we have consistently found
that internal rate of return
on cash value with these 4 companies
have produced.
Not to say other companies are bad one bit
a lot of companies have
great business philosophies
I see them growing
and getting to that same level
but we've seen it consistently
from these carriers.
Now,
as we get into details on these companies
what you will find is their size
all of them are massive.
When you look at their financial ratings
cream of the crop
triple-A-rated
98 to100 on the Comdex scale
which it is as high as it gets
very, very strong
from a financial rating standpoint.
But again,
actual performance
because
the biggest issue that pops up
when it comes to whole life insurance
in the industry
where buyer's remorse come into play
is an individual buys a policy
they see the illustration
they think it's going to produce that
or told it's going to produce that
and it doesn't pan out
it under-delivers.
The cash value just performs poorly
when they bought for
cash value purposes
and they make a phone call to
uncle Dave
Dave Ramsey
or a financial advisor
talks to them about whole life that
is against it and beats it up
because it makes it easy to be it up
the policy just hasn't performed.
Where we see that
to be the case
in the least number of scenarios
is with the major mutual companies
specifically when the policy is defined properly
that is a must.
When I say policy design
we've got over here
properly design,
where can my money go
in a life insurance policy?
I can pay it
towards the premium
which does not build initial cash value.
Or I can pay it
toward the PUA [Paid-up additions] Rider
which immediately
builds cash value
guaranteed and non-guaranteed.
So a properly design policy
often entails
minimizing that premium
as low as we can
base on the
IRS [Internal Revenue Service] limitations
that specifically has to do with
my MEC [Modified Endowment Contract] limit
and then (2)
base on the insurance company limitation.
How low can you go?
That's the name of the question.
What you'd find with these
major mutual companies
often we can go as about as low
as that 10/90 design
10% of my total desired
maximum payment
can go toward the premium.
Now to be very transparent here
some companies will allow you to go
a bit lower
some don't allow you to go
as low as 10%
depends on the insurance carrier
and their preference.
But what you'll find
if you're looking at
maximum cash value policy
with any of those companies
you often drive that premium very low
and close to 10%
with most of those carriers
the product selection
will have an impact
if you're able to go that low or not.
Their dividend rates for 2021
are as follows,
MassMutual 6%
Guardian 5.65%
New York Life 5.80%
and Northwestern Mutual at 5% flat.
Now here's one thing
I want to touch on
in respect to dividends
with these 4 companies
or any company out there.
I will not recommend
purchasing a policy
based on who has the highest dividend rate
or projects the best numbers on paper
because if I look at these
companies right now
Northwestern is at the bottom of the pack
however,
I know for a certainty that
they have always delivered
and will continue to deliver
when you look at them as a company
their investment philosophy
policies we've seen over time
and I can't even sell Northwestern Mutual.
They're a company that only
works with career agents
but that stellar performance is there
we've seen it consistent
when the policies are designed properly.
So my point to mentioning that
is we don't want to get too hung up
I try not to this personally
on the illustrated dividend rate
because if I'm paying money into a policy
let's assume I'm paying in
$100,000 per year
for any amount of years
maybe it's 5 years
maybe it's till age 65
we customize it
and I've got the policy set up
in an identical fashion
with each of these companies.
Not joking at all
I can close my eyes
pick 1 of them out of a hat
and I can't go wrong with any of them.
We've seen them
all go back and forth overtime
all stellar in terms of actual performance.
Now what will help one refine
their decision-making process
is often flexibility
and we talk about this quite a bit
specifically what I mean here
is how do I use a
life insurance policy
which typically I think bill,
premium
I pay the same amount
every month
every year
and turn it into a flexible saving asset?
Where some companies
are very stringent with their payment
but some companies
if I have this $100,000 per year
if I want the ability to pay that much in
I can literally commit
to a $10,000 minimum premium
and then have the ability
to add PUAs
at leisure
up to a $100,000 per year
another $90,000 in PUAs
we can design it to be very flexible
I'm not committed to that.
So to hit on the objection we hear
because that's the purpose of this series
is often we hear that
you should consider
a small
to medium-size company
when considering a high cash value
life insurance policy.
And my immediate question when I hear that
is okay, why?
Why would that objection come up?
If there's a good reason for it
a-okay
but the small, the medium-size company
if I do not see
any track record of actual delivery
actual performance
no proof of concept
and I do with the big guys
is I want my money
in a policy that is actually going to deliver.
I was talking to an individual recently
very sharp
does extremely well for himself
he has a high net worth
and he's considering a policy
he was putting in
around the mid 6 figures per year
is what he's looking to allocate
towards a high cash value policy.
And he was pitched on
a smaller insurance carrier
that is well rated
but the smaller company
when you look at them overall
and there's been no proof
of actual performance
nothing disclosed
other than the dividend history
which I don't care about that
I want actual data.
And his comment when that policy
or that company was proposed to him
from a different company,
not us was
there is no possible way
I'm flowing this amount of money
the amount of money he's considering
through that company.
I want 1 of the top companies
no, let me rephrase.
I want 1 of the best
mutual companies
that I'm going to consider
this cash value life insurance policy with.
And he considered 1 of the top
mutual companies
same company I use actually.
So with that said,
flexibility will help refine
one's decision-making process.
We at our company
primarily use those
some we do consider these guys
as we can.
Northwestern as I stated before
we cannot
because we're independent brokers
however, we can always
make an introduction
if someone was very big
on wanting Northwestern Mutual.
But again, you cannot go wrong
with the performance at all
from a flexibility standpoint
these 2 have a lot of it.
And I would actually encourage you to
view about all about MassMutual
or all about Guardian videos
for more information there.
So on the other quick pieces
over here to you right
properly design
it has to be designed right
if it's not
that's where we can see the policy not deliver
regardless of the insurance company.
Actual performance
this is what I like so much
and which is like
trying to find
a needle in a haystack in the industry
because to find policies
that have lived the test of time
is so difficult
that's why we had to do
so many independent studies of our own.
Not an illustration comparison
I do not want that.
Who did these guys use?
I should put wealthy in there as well
because there is a consistency here
you will see
these major mutual carriers utilize.
In fact, let's take a look
at a bank-owned life insurance policy
granted
bank-owned life insurance
does function differently
that what individuals can obtain
but we can mimic it
as closely as possible.
What I want to touch on here
this was a BOLI policy we put in force
in March actually
look at the company's selection
smaller deposit
when I say smaller deposit
relative to what banks typically pay in
I don't want to sound like
$10,000,000 hey,
small no problem.
$10,000,000 goes in
combine the cash value
the $10,230,000 and change
there is the death benefit
on the 30 officers.
So,
what banks and cooperations do?
They actually deliver
these policies and these companies
that's why.
So, that's a good example
let's also look at this very briefly.
So if we look at some
history here
because we're so big on that.
Here's a policy
of Guardian
that was issued
we put this in force in 2014.
He's in policy year 6
we see he's well north
of his break-even point already
crossed it right around year 4.
If you design it properly typically
you'll see a policy break even
between years 3 and 4.
But again,
actual performance
moving forward
the policy was issued in 2014
we don't want to see
not just the dividend
cause here's the dividend assumption overtime
but what is the actual
internal rate of return
as the years passed?
He right at that 4.2%
for a safe,
liquid,
tax-free area to position money.
If we look at a
MassMutual policy
that's an older one actually
that performs very nicely.
But I don't like looking at these old ones
because it lived through the 80s
and look at these dividend rates over here
it's kinda unfair to say hey,
look at these great shinny numbers
that happened before Steve Parisi
was even born
well right around when he was born in 88
it's not realistic for today.
Let's look at a more
recent example here
so a policy that was issued in 2015
this is one we put in force
what he's actually paying in
year 5
he deposited a total of $578,000
and his actual cash value
was $596,000.
Average IRR [Internal Rate of Return]
annual IRR
we pulled this straight
from the in-force illustration.
Cash value increase over time
the net growth.
Same thing with New York Life
when you look at this guy
here's a policy
that was issued in 2003
17-year average internal rate of return
when we look in at
what he actually paid in overtime
realty to what he actually has in cash value
4.07%.
Same thing happened
when we ran the projections moving forward
based on the guaranteed values
midpoint dividend
and 2020 dividend rate
2021 this would change a little bit
because they came down to the 5.80%.
Point here is performance
everytime we looked at
smaller carriers
to obtain the same information
it's not performed
I haven't seen smaller carriers
deliver over a 4% IRR
for any period of time yet.
1 company I will say
we're working with quite extensively
and they're actively looking for data
I do think that they will find it
They're the only company that
actively has been working for it
and once they do that
I certainly going to information'
and disclose them.
But so far what we've have
what we've seen to be consistent
that solid performance over time.
Right, if you're planning a game
when you get a first down
every single time
you know it's gonna be there
keep on moving
and I want reassurance that I'm set up
with the top carrier
because this is my saved money
I know it's going to be there over time
here's what we've seen
in terms of actual performance.
Nothing against
small to medium size companies
but again, gotta have the proof
that's how we are
a lot of insurance companies
are likely very annoyed with me
because I always go back to that
but that's what we need to see
before we start promoting
and recommending insurance carriers
actual performance.
I hope you enjoyed this one
I always like talking about this stuff.
If you have any questions reach out
and as always
I hope this helps.
Hey guys Steve Parisi here.
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