Warning: Today's conversation is going to get a little bit heated. My name is Kris
Krohn and today we're going to be talking about life insurance because
there's a huge debate going back and forth on is it investment? Is it
necessary? Is it smart? Is it stupid? And I'm going to be interviewing one of the
foremost experts on the matter that's actually gonna break it down for us and
help us know what is going on in this argument. How to leverage it for maximum
gain or how to actually have it leveraged for maximum detriment.
So, I'm sitting here with Andy Gardener who is an expert on this whole entire
life insurance debate. Bro! -How you doing? -Thank you so much for being here
today. I appreciate it. I hope you can actually help people understand what
this debate is all about. I'm going to frame it up. -Okay. -Because here's the deal: There
are some people out there they're like, "Oh, we should get tournament insurance."
And term insurance basically says, you pay a little bit of money and when you
die, there's a payout there's a settlement. There's some people are
saying that's a total waste of money. You should put it in this cash value life
insurance when you put in loads of money. But you don't get that's who you die. And
there's this massive rift out there. And then there's some people that use it
like an investment. Of course that's what caught. My interest because as a real
estate investor. I'm always looking at the investment
side of things. So, I'm hoping that you can help kind of settle the debate on
this today in this video. -Okay. -So, break it down for
us. -So, yeah. Like Kris was saying. There are
a few different types of insurances. So, when you look at life insurance in the
traditional sense, people will think of term life insurance, right? You've
probably heard the saying by term invest the rest. -Yes. -But if we look... -By the way
means what? -Which means and that's a great question...
-And then use your money to actually go and make an strategic investments? -Right.
Okay, but how much is the rest, really? And what are we comparing it to, right? So, if
we look statistically. Insurance is priced on risk, right? And so, term
insurance is very cheap. Why? Because almost 2% of all term insurance policies
actually payout a death benefit. -Wait. So, you're saying that 98% of the people
that pay money towards an insurance policy, they never actually reap the
benefit of it because either the policy lapses or runs out or they stop paying
or something happens? -That's exactly correct. -So, those insurance companies
got to be freaking raking it in. -So, with term insurance, that's what happens.
Generally people outlive the policy. That policy lapses it's not enforced and that
policy never gets paid out. -All right. So, I get that side of debate. What's this
whole... You know, there's actually literally whole life insurance really, "No,
no, no." Whole life invest in insurance. Dump your money in. SSome of it will go to
death and the rest of it is actually like an investment. Maybe like an... Like
like an IRA or a 401k or something, it's like that. -So, life insurance can be used
for a number of different you know methods. Obviously the death benefit is
an important piece of it. And you should have the proper amount of insurance for
your family income protection. But when we're talking about using catch value in
life insurance, we're looking for different ways to leverage this policy.
So that we can use it for different investments. We like to talk about it as
a non correlated asset. What that means is that if we think about the stock
market, right? Stock market goes up and down. We want a policy or a place to
store money that isn't affected by the stock market up and down. -Interesting.
Okay. -And so when we look at whole life insurance, especially whole life
insurance with a good mutual company... And there's quite a few of them out there.
But those mutual companies, their policies are designed and these
companies have been around since the 1800s. So, for hundreds of years, they're
paying dividends. -That they should be around that long. They only payout 2% of
all the money the pays in. -Well, when it comes to whole life insurance... Sorry, life innsurance
business. -Right. So, when it comes to life insurance with whole life, do you know
how the percentage of whole life policies that payout? Well of enforce
whole life policies 100% pay a death benefit. Oftentimes why the
premium is so much more for whole life insurance? Is because these insurance
companies have different restrictions. They have to have high reserve limits to
keep these whole life insurance policies enforced. -Hmm. You use a lot of big
language. I want to break this down to make sure we got this super simple. So,
here's what I'm kind of yearning; You're saying that I can either... Guys, get this.
You can either new term insurance is cheap and only 2% will ever get
paid out. It's usually a 10 or a 20 year policy or whatever. -Yeah. -And so, either
you stop paying it and it lapses or it runs out and then it runs out and it
never pays out because you didn't die. -Right. -Or you start throwing money into a
policy that has a cash value where you're like, well there's a death part
and then there's a part that you can borrow like a bank. You're saying that
people are actually because it's non-correlated asset, out of the stock
market with companies that have endured the test of time; you're seeing
that you could actually put money into that policy and then pull it out and use
it for other investments? -That's exactly correct. -Like for example since I'm a fan of real estate, could I like
put it insurance and then pull it out put it real estate? -You could. -What would
the benefits that be? -So, there's a lot of different benefits as far as... When you
put money out of... If you're going to put a down payment on a house, right? -Okay.
-You're going to take that money from your bank account generally. You're going to put
that into the house. The next time you can access that cash is either through a
home equity line of credit right or a sale of the home. -Yes. Actually quite
inconvenient. -Yes. And so if you take a home equity line of credit, now you're
paying the bank interest to borrow your own money. -I've done that before. So,
your borrowing your own money and you got to pay heavy yet tax... Super heavy on
the interest so to speak. "TAXED" metaphorically spoken there. -So, another
way to do that is if we took the money from our life insurance policy and put
it into the home... Yes, we still access that money the same way but what happens
with life insurance and certain companies treat their dividends
differently so with certain companies that you can work with, you'll actually
still be earning interest in dividends on that money that's in the cash value
while it's in the home. -Okay. That right there was that pretty sure that was a
mic drop. I'm processing all of this. So, Eddie, what you're talking about is I can
put money in life insurance and get the death benefit. -Yeah. -But then I can get living
benefit? -Correct. The living benefit is I can borrow out of it like a bank way
easier than a home equity line or selling a property? -Yes. Which is for most
people is a big life-changing decision. Instead, this is like I actually my life
insurance is kind of like a bank account. Like, I can take it out. And in my charge
interest on taking it out? -So, if you take it out, there is an interest rate that's
charged. And that's basically variable with what's going on in the
marketplace today. -Okay. -So, different companies will have
different rates. And obviously, you'll want to look into what those rates are.
And then you also want to be working with the types of companies that
we'll still continue to pay your full dividend even when you've taken the
money out. Because it seems to me from what I've learned about this that when you
take money out, whatever interest you're charged seemed to be very closely
similar to the dividend that you're getting and they seem to cancel each
other out or come close to that. -Right. Historically, it's either a wash or
sometimes you're getting about a 1% spread. -But even on that 1% spread, even
if you had a negative spread, you're still not paying it out of pocket. They
actually take it off the death benefit? -Yes, that's true.
-Okay, guys. This is starting to like shape up as something... First of all, I get why
this is... This is heated like I could put a little in insurance. I can put a lot in
insurance. That's what creates the debate. The idea of putting insurance, pulling it
out and using it as a vehicle for other investments and getting some tax
benefits from that and either doing it for either some dividend benefits, it
seems if there's a number of things that stack up that says, "This is absolutely
worth looking into." -Absolutely. And think about being a real
estate investor, right? When you're pulling money out of that home equity
line, you're paying all this interest in all these things. How are you you know, by
using the life insurance, you're able to really leverage. And be able to
create some value there for yourself where you're really in charge.
And now the the money that's getting paid that interest, because historically,
it's about a 1% spread to the positive. -Yeah. -So, think about earning money on
money you have out on the street and there's not a bank in the world that's
going to pay you 1% to borrow money. -That's pretty amazing to get paid
with 1% to borrow or even break even. -Yeah. -It's like either... That's amazing.
That's incredible. -Yeah. -So, Eddie. Thank you for being here. Guys, one of the
things that what you understand is this is a topic that I'm hugely passionate
about because I'm always looking for a way to optimize my own investments. And
so, whatever you invest in, whether it's real estate whether it's business or
something different, I found that there's a way to take insurance and connect it
to the investment to produce additional benefit. And so, if you're looking at
getting going in real estate or if you have a business or what a start a
business and you're like, "Kris, how can i optimize my financial choices?"
There is a link in the description below to the epic team. And so if you go to
that description and actually click on it, you actually get an opportunity to
interact with them. You might even be talking with Eddie himself. -Yeah. -Or
someone on his team where they can really break it down for you and just
help you understand. What are the pros and cons? What makes sense. Personally, I
have been successfully leveraging insurance for the last 12 years of
my life. So, I own multiple policies. I'm grateful than I do. I've used them to
optimize my real estate investment. Even though it's a really hot topic, it's
absolutely worth diving in in. And learning more about. So, that link is
there below for you. Eddie, thank you so much for being here. -Thank you, Kris. -Guys, today's videos
is all in services you becoming your own financial genius because you can't
outsource that to anybody else. That's yours of my responsibility for in
charge of our financial destiny. So, make sure that you subscribe. I got another
video coming your way tomorrow. We'll see you then.