IUL dwarfs whole life.
In this episode, I'm going to address the topic: Infinite Banking With IUL Versus Whole
Life Insurance.
Get ready because you're going to understand somethings that most whole life agents do
not understand.
So, my name is Doug Andrew and I've helped many, many thousands of people save for their
brighter future, for retirement, business owners, real estate investors by understanding
the merits of max-funded life insurance.
Now, why do people overfund or maximum fund a life insurance policy?
I'm going to explain why and give you the basic difference between whole life and universal
life and why a properly structured maximum-funded indexed universal life will knock the socks
off of a whole life insurance policy for the infinite banking concept.
So, in a nutshell, for years, they were 2 types of life insurance.
Term insurance & whole life insurance.
Term insurance is where you're simply paying for the pure cost, the mortality cost if you
happen to pass away.
And so, you pay a premium based upon your age and your health and so forth based upon
the mortality table.
Term insurance does not accumulate cash, generally speaking.
And so, if you win, you have to die.
But see, when you pass away, it pays out a death benefit.
So, it's a nice way and inexpensive way to insure yourself.
But term insurance gets more expensive through the years as you get older.
So, whole life insurance came around because people wanted to have insurance protection
for their whole life.
But they didn't want to have to keep paying higher, higher, higher premiums every year
that they got older because when you're 60, 70, 80 years old, you may not be able to afford
those high premiums.
So, whole life insurance basically said, "Well, if you pay a higher premium in the early years,
you're going to be way overpaying in the early years but that will build up equity in your
policy."
It's called cash value and that will cover you for your whole life because you over pay
the early years which allows you to underpay the later years because you have cash that's
earning interest inside that whole life policy that allows you to pay a level premium your
whole life and you have enough cash build-up that the interest on that and that cash value
will make up the difference in your later years.
That's called whole life.
And so, whole life has guarantees life insurance since ever since the 1980s was built on a
chasey based upon a 4% guaranteed fixed interest rate.
Well, whole life has merits because it's structured to be able to give those guarantees.
But in a low-interest environment like we have been in recently where a lot of banks
and so forth and Fed rates and the US treasuries are under 1%.
How are insurance companies going to continue to be able to cover you for your whole life
based upon 4% when they're not able to earn 4% maybe?
This is putting insurance companies into a bind.
And so that's why in the WE hours of the very end of the year 2020, congress passed this
part of that big stimulus legislation changes to section 7702 of the internal revenue code.
I have other episodes I'm going to be releasing that explain this.
But that is going to take the guarantee down to 2%.
So, the guarantees inside of whole life are not going mean that much anymore.
Whole life insurance is going to have to perform based upon dividends and interests.
I can prove to you that indexed universal life will knock the socks off of whole life
as far as rates of return.
And that's because of the historical average rates of return.
But also if you're using life insurance for what is called infinite banking to become
your own banker.
Indexed universal life will dwarf what whole life insurance can do.
So, let me explain why and how.
Now, if what I've said so far is intriguing you, subscribe to this 3-Dimensional Wealth
Channel.
It's free.
And I post an in-depth answer to questions almost daily.
And as this topic relates to several others, you will gain insights into how to maximum
fund and insurance policy, universal life versus whole life.
There's a lot of people out there that tout that whole life is better.
And they usually quote the guarantees.
That's all changing.
So, as this evolves especially now, you're going to want to tune in and see how you can
benefit yourself and why indexed universal life I think is by far the best product if
you want accumulate tax-free capital.
If all you want is death benefit, whole life is a pretty good product.
But universal life, can still do well.
But with universal life, your self insuring in the policies that I structure, most people
are self-insured within 10 to 15 years.
Meaning, the cash inside the insurance policy is within 5% of the death benefit within 15
years.
So, the cost of the insurance is next to nothing.
In other words, if you put in a half a million dollars in the amount of insurance required
for it to be tax-free for a 60-year old was 1,250,000, that 500,000 has grown to a million
within 7 to 10 years.
And in another 7 to 10 years, it's going to grow to 2 million.
Well, that's more than the insurance.
So, the insurance stays ahead of it by 5 percentage points.
Indexed universal life is by far the cheapest insurance policy when it's structured properly
you will ever, ever see.
Because it gets cheaper as you get older.
You don't need guarantees because the cash equals the death benefit or almost equals
it based upon the Tefra, Defra tax citations which I explain in other episodes.
Now, let me explain why people would even consider using an insurance policy as their
own bank.
Life insurance for over 100 years is a sacred cow.
In the internal revenue code under section 72E, 7702, and 101A, it explains that money
inside of a permanent life insurance policy...
And by the way, indexed universal didn't come out until 1997.
Universal life came out in 1980.
Who came up with it?
It wasn't an insurance company.
It was a brokerage firm, EF Hutton.
This is where I immediately recognize this is like buy term and invest the difference
under a tax-free umbrella.
It's like on steroids.
Well, it's true when you use universal life for the infinite banking concept.
It's like infinite banking on steroids.
So, Tefra, Defra, and Tamra are tax citations.
Sections 72E, 7702, and 101A say that when you put money into an insurance policy and
you take the least amount of insurance the IRS will let you get away with, it accumulates
your money tax-free, you can access that money tax-free and when you die, it blossoms, it
increases in value and transfers income tax-free.
Nothing else does that that I'm aware of in the internal revenue code..
This is where I have earned rates of return of 6%, 8%, 10%.
I'm talking about net.
Net internal rate of return, cash on cash.
Now, since it's sort of a sacred cow, whole life insurance ofttimes has been touted for
infinite banking because when you build up this cash value and the guarantees were based
upon 4%.
You know, you can borrow money out of your whole life policy.
And they'll charge you a nominal interest rate.
And then they'll keep crediting you a little bit higher interest rate.
So, if you borrowed at 2, you might be guaranteed 4.
So, you're being guaranteed twice as much as they're charging you which is good.
But folks, all they've been able to say is "Well, universal life doesn't have the guarantees
whole life has."
Well, looks like the guarantees are going to go down to 2%.
So, that's not such a big deal anymore.
And it never has been with universal life.
Because the cost of insurance, I don't need the guarantee anymore because my cash grows
to equal the death benefit.
And the death benefit then stays ahead by 5 percentage points.
If I have 2 million of cash value, the death benefit is going to be 2.1 million.
If I ended up with 4 million of insurance then the death benefit is going to be 4.2
million.
Most of the money is my money.
So, the cost of insurance goes down as you get older.
Now, I explain this in other episodes.
But let me share with you why banking concept is so dynamic with indexed universal life
compared to whole life.
With indexed universal life insurance, I have 2 ways that I can borrow money.
One is called zero cost or zero wash loan.
So, let's say I have a million dollars of cash value.
It doesn't matter if it's 100,000; 1,000,000 or 10,000,000.
People use their insurance for the banking concept to buy real estate, to use for working
capital for business and so forth.
If you don't understand this concept, watch other episodes where I explain how to become
your own banker.
So, let's say I have a million dollars of cash value.
If it was a whole life policy, I could borrow that and they will credit me a little bit
higher interest rate.
And I'm paying myself interest as I put money back into the policy and so forth.
Folks, that's okay.
Yeah.
If you borrow at 2 and you earn 4, 4% is 100% more than 2%.
I get it.
But those guarantees are going down.
With indexed universal life, I've always been able to borrow at 2 and they credit me 2.
And people say, "Well, that's a wash."
Well, that's not the way I usually borrow.
I can do that.
I opt for the indexed or participating loan.
This is where the insurance company goes, "Well, you can leave your money with us as
collateral.
And we'll keep crediting you whatever the index or indices you're linked to are earning."
So, many, many years I have earned 10%, 16, 25, even 55%.
Some years I don't earn that but the average has been 8, 9, 10 percent.
So, let's...
To keep it simple, say, 10.
If I'm earning 10%, wait a minute here.
I'm borrowing money.
Now, this is called an indexed or participating loan.
They're going to charge you a little bit higher interest.
So, they might charge me 4 or 5 percent.
Let's say 5.
So, they are charging me 5% to borrow on an indexed loan.
So, on that million dollars I borrow, they're going to charge 50,000.
Do I have to write out a check for that?
No.
It's really just sort of a phantom in the first place.
But they deduct the 50,000 from the 100,000 I earn that year.
Because if I earn 10% on my million that is still sitting in the policy that's being used
as collateral for the million dollars they loan me at 5%, I'm earning 100% more than
the cost of the funds.
So, I'm earning 50,000.
It's way better than a measly 2% maybe in a whole life policy.
But do you know that I have had many, many clients who for their business, for their
real estate management where they borrow money to build or to buy real estate properties,
they have borrowed that money at 5% and they have earned sometimes 16, 25 or even 55 percent
on indexed universal life.
In other words, you borrow a million, they charge a 50,000 as deducted automatically
from the 25% that people earned in 2017, for example.
They paid you 250,000 minus the 50,000.
You netted 20% or 200,000.
This is like infinite banking on steroids.
Indexed universal life will dwarf whole life as far as the spread...
What's the spread?
The difference between the net cost to borrow and the net amount you're earning on the compounding
inside the policy.
And the longer it goes...
If you keep earning 100% more than they're charging you, this one compounds and grows
tax-free.
Pretty soon, you're earning, let's say, 10% on twice as much money that you're paying
interest on.
But as it grows, you can keep borrowing more money.
This just keeps getting better and better and better as you go.
So, if you're intrigued with infinite banking, becoming your own banker, I can show you,
I can illustrate that a properly structured indexed universal life insurance policy will
actually perform far better from infinite banking than whole life.
And I have had many whole life agents when they finally listened and they finally saw
the illustrations, they went, "Oh, my heavens.
This knocks the socks off of whole life."
Yes it does.
if you watch episodes that say whole life is better and IUL is not, they don't know
what they don't know.
Make sure you don't make the mistake of doing something that's good when you could've done
something that was better or even best.
So, if this is intriguing you, subscribe to this channel.
But I want to gift you a copy of my most recent bestselling book called The LASER Fund.
The Laser Fund is a max-funded indexed universal life insurance contract.
And you will see in this book how this compares to most whole life insurance policies.
But frankly with this new legislation on section 7702, universal is even becoming better.
The guarantees inside of whole life just aren't that impressive anymore when it drops from
4% down to 2%.
It looks like that's what's going to happen as insurance companies adapt to this.
So, LASER is an acronym that stands for Liquid Assets Safely Earning Returns.
You can learn in this book 2 ways.
Left brain, this side is all kinds of charts and graphs and explanations.
But if you learn by the stories, the examples of how the Laser Fund can be used for not
only retirement but college savings for you kids and grandkids, working capital for business
and becoming your own banker or your real estate management, you can read this stories
on this side.
And this contains 12 chapters with 62 actual client stories and examples.
So, simply go to Laserfund (LASERFUND.com).
Contribute a nominal amount towards the shipping and handling.
I'll cover the rest of that expense.
And I will fire out a copy of this book to you.
There's also options there if you like to listen and learn or watch and learn.
But here is to your brighter future.