Life insurance, an asset or a liability? In this episode, I'm going to address
three ways that life insurance can be classified as a significant asset
rather than a liability for the owner. By the end of this episode, you will understand how
max funded IUL is used for living benefits by many savvy investors.
So, my name's Doug Andrew I've been a financial strategist and a retirement planning specialist
now for more than 48 years helping people prepare for a comfortable retirement and other long-term
financial goals so they won't outlive their money and if you've watched very many episodes on this
three-dimensional wealth channel or read any one of the 12 books that I've written thus far.
You will probably discover that one of my favorite financial vehicles that allow people
to accumulate their money tax-free and then be able to create tax-free income for as long
as they live without depleting principle and then be able to leave behind the money tax-free and
have it actually blossom or increase in value is a maximum-funded tax-advantaged insurance
contract. Now, my favorite is an indexed universal life insurance contract structured properly and
funded correctly. This is what is deemed a laser fund. Laser is an acronym this stands for liquid
asset safely earning returns and so I would dare say that over 99% of you know IUL policies
actually don't qualify to be a laser fund and you can learn about why and how in these various
episodes on this channel and I'm gonna gift you a copy of our most recent best-selling 300 page
book the laser fund. So, stay with me here. But folks, this is incredible a lot of people don't think
about life insurance as an asset. So, I'm going to give you a few examples as we go through right now.
Indexed universal life allows you to link your returns if you choose with your universal life
policy to an index of your choice. This is very valuable in a low low-interest environment which
started happening in the late 1990s. When universal life was first introduced by EF Hutton who was not
an insurance company they were a brokerage firm. It was in 1980 and interest rates were
high and insurance companies were earning and paying on universal life the ones that I owned
between eleven and three quarters and fifteen and a half percent tax-free from 1980 to 1990
and a few years beyond. Interest rates started to come down and so to compete they introduced
indexed universal life because people didn't want to have their money subject to volatility.
That was a variable universal life or variable whole life. I've never owned one I never will. I got
my 3,000 clients out of the market in 1980 when EF Hutton came up with the idea of universal life.
They were never happier and they were able to earn great tax-free rates of return. But when interest
rates started coming down I didn't want them to put their money back into the volatile market
that's variable life. So, indexing allows the insurance company to take the interest
on your money in the policy and it doesn't matter if you have 100,000 and
there 10,000, a million, 10 million. But let's use a million just to use as an example
a snapshot in time and it's easy to extrapolate from a million-dollar example. So, if the insurance
company is earning in a low-interest environment on aaa bonds and mortgages on shopping malls
and skyscrapers and so forth 5 percent. They need one of those percentage points for themselves
and so they can pay you 4 percent. So, that's 40,000 on your million. You can settle for
4 percent tax-free because it is tax-free which is better than what banks are paying.
But if you feel bullish about America and you want to earn a return that outpaces inflation which in
the year 2021 the true rate of inflation was 15%. People who owned indexed universal life earned
25%, 61%, even 153% who followed our advice okay. So, with indexing you're simply telling
the insurance company in that year or sometimes you can use a two year or a five year period,
"Hey, I will give up the interest on my money but keep my millions safe", in this example
and if it's 4 percent they're earning that's 40,000. You can use that 40,000 to
fund an options budget so that you'll have the wherewithal to pay me whatever the S&P or the
Dow Jones what the market does if it goes up. If it goes down the options expire worthless
and I didn't make anything but I didn't lose my million. I do that because 7 out of 10 years
you usually have the market go up you usually make money. Even in the worst decades since the
great depression 2000-2010 when there were five down years. I ended up doubling my money in that
10-year period, a million double to 2 million. Even though 5 of the years I didn't earn anything
or much of anything and the other 5 years I did. That's the beauty of indexed universal life. So,
let's talk about this as an asset. Many people that would come to me wanted to use life insurance as a
living benefit because that's what EF Hutton came up with the idea instead of just the death benefit.
But you can use it for either one. So, when EF Hutton came up with this idea it had
universal applications that's why they called it universal life. Which means, you could minimum
fund it. You could pay actually lower premiums into a universal life than a whole life policy
and uh get a death benefit. So, if all you wanted was tax-free transfer when you died
universal life allowed you to pay lower premiums into it than whole life. Whole life had to compete
so they had to pay higher interest rates and so forth and they used to have guarantees now they
they don't but they would say well, a universal life if you pay minimum premium can cause you to
have to pay higher and higher premiums down the road it'll lapse. No, not if you do it
correctly but if you do the opposite end you take the least amount of insurance the IRS will let you
get away with and you put in the most premium you way overpay for the insurance. Now, it turns into a
tax-free cash cow for living benefits to use it for tax-free accumulation and tax-free income.
So, for example, a 60-year-old could put in 500,000 bucks. You could get a lot of life insurance for
that but that's not the objective. The least amount of insurance for a 60-year-old might be two and a
half times that 1,250,000. But that means the 500,000 they would put into a policy
would grow and double like every 7 and a half years if they're earning 9.6% like I've
earned since 1997. And so, this is incredible because you know if you double your money every
seven and a half years 500,000 goes to a million and then 2 million, then 4 million, then 8 million.
Yep, we've had many people that started out with a half a million that now have 8 million. Now, before
I show you something absolutely incredible. If this is intriguing you, click like, but post a comment,
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But this is about you and your brighter future. But stay with me to the end because I want to gift you
my most recent best-selling book. You don't need to pay 20 bucks for it on Amazon, okay.
Now, let's talk about why many IUL policyholders a maximum fund to use it for living benefits
because every million can actually generate a 10% payout. 100,000 a year of tax-free
income without depleting principle. If you've retired at 65 if you live to be 120. Sound too good
to be true. You wouldn't believe how many IRAs and 401ks will be out of money 10 or 11 years after
retirement because you're having to pay tax on it and it's not designed to outpace inflation. In the
year 2021 people who had indexed universal life when inflation was 15% were earning 25, 61, 153, by
linking their returns to the things that inflate. If that is arousing curiosity in your mind
make sure you search on this channel for that but also read the book I'm going to gift you. So, let's
talk about the beauty of an insurance contract as an asset. So, there are five general parties
an insurance contract an insurance policy. Now, there's the insurer
that's the insurance company. There's the insured that's the person that the insurance is on, okay.
There's the owner of the insurance policy. Now, the owner is usually the insured but it doesn't have
to be. Many banks and credit unions own insurance policies on people. Why? Well, because they get the
tax-free accumulation and the tax-free income. They're just putting the insurance on their
stockholders or their board of directors or what have you. There's a lot of companies that actually
buy life insurance policies from people who no longer want or need them and I'll talk about
why here in just a moment. So, you have the owner it doesn't have to be the insured. You have the
premium payor the one putting the premiums into it which is usually the owner and the insured but
it doesn't have to be. I could be the premium payor as grandpa on a policy that ensures
one of my children and the beneficiaries is the family trust that benefits the grandkids, okay.
So that brings up the fifth party that's a beneficiary. That's the one who gets the money
when the person dies, the insured dies. So far so good. There is such a thing as insurance capacity.
A lot of people don't understand this. That means that when you're younger let's say you're 30 years
old and you have six children like my wife and I did by the time we were age 32. If I were to die
I wanted to protect my sweetheart and my six kids so that they would have the wherewithal to be able
to continue to live life in dignity and and go to school and have music lessons and so forth.
Because I didn't stay around to provide that and so you're able to insure yourself for a certain
factor of your income. Let's say it's 30 times your income. If you're making 100,000 a year
they'll let you have three million of insurance. Yeah, you can't have as much as insurance as you
want it's a factor of your income. Otherwise, people would be buying billions of dollars of insurance
these terrorists and they would strap bombs to themselves and blow themselves up to fund millions
of dollars of their terrorist groups okay and so that's called insurance capacity.
You can only have a certain amount of life insurance based upon your income or your net worth. Later
on as you get older what happens? When you're in your 60s the kids are out of the nest hopefully
and you have fewer years if you were to die and so the insurance company might only give you six or
eight times your income or they'll insure you for maybe one times your net worth and people
will use insurance to pay off estate taxes or what have you and so that's called insurance capacity.
But many times I've had insurance capacity based on my net worth or my income even when I'm 60 or
65 years old that is more than I'm using. People say, "Why buy insurance if you don't need it?", well,
look at what it does and so I have told my kids, "I want you to be automatic millionaires when I die.
I want you to all buy a million dollar life insurance policy on me you're the owner. You're
the premium payor, I'm the insured". So, they own a million dollar policy they put in you know 500, 600,
700 dollars a month. Do the math. If you put that much money in an IRA or 401k it would take over 30 years
at 11 or 12 interest for them to net a million after-tax on an IRA or 401k. If they put that
into a policy on me they're going to get a million bucks any time when I die and I'm not immortal.
I'm gonna die someday and that million dollars can generate 100,000 a year of tax-free
income for as long as they live by putting it into a new IUL. I just did this for somebody who
lost actually their their grandparent. So, look at what it does it'll knock the socks off
of an IRA or 401k in my opinion. But many times people as they grow older if they no longer want
the insurance the death benefit are no longer needed or can afford it sometimes they just go,
just let it go just let it lapse. Well, I've had people do this where they think, "Well, I'm just
gonna let it lapse I don't need it anymore. Now, they've been minimum funding or whatever", and I
go, "Whoa, hold on it's an asset", they go, "What do you mean? It's a liability,Ii'm having to pay premiums
and I'm not going to enjoy the benefit it's going to go to somebody else when I die", I'm going, "Yeah,
look at what it does". Now, there is a market called the life settlement market. The life settlement
market is simply where you can shop a market of institutions that will buy life insurance policies.
Why? Because they do the math. So, I've had people who have a million dollar policy, a three million
dollar policy, they no longer want it or can afford it and they shop it among these life settlement
companies and they have investors and they may give you you know 500,000 for that 3 million.
They may give you 250,000 bucks for a million dollar policy cash unless that exceeds the amount
you paid into it it's tax free. So, before you just say let it lapse, you know contact me. I can
point you and shop for you you can check me out on 3dimensionalwealth.com and let
me know you're interested and I can point to that but I've helped many people that have a million
dollar insurance policy get 150,000, 200,000, 250,000
dollars of cash out of it instead of just letting it go by selling it to somebody else.
Now, they now own the policy and they have to pay the premiums but they get a million bucks when you die.
Do the math and so don't just give it up, it's an asset. If you have 2 million, 3 million,
I was able to help somebody that had a little over three million of insurance get nearly a million
dollars out of it that they were going to just give up if they just let it lapse, okay.
So, make sure you understand that insurance can be an asset not a liability and you check
out all the possibilities. That's why I love the flexibility behind insurance especially
indexed universal life because it's the most flexible. So, to claim your free copy
of the laser fund. The laser fund is a properly structured maximum funded indexed universal life
go to the laser fund or just laserfund.com click on that link below and you contribute
a nominal amount towards the shipping and handling. I'll cover the rest of that cost
and I'll pay for the book and fire out a hard copy to you. This is actually two books in one 300 pages
200 pages of the charts and graphs. Another 100 pages when you flip it over are the stories 62
of them and so claim your free copy and there's options there to listen and learn watch and learn.
There's even an 18-hour master class that my two sons and I who are co-authors of this book
do with a very deep dive into these concepts. But claim your free copy and check out some of our
virtual events that we do on a regular basis because this is for you, your brighter future.