“Cash value life insurance plays a massive role in financial institutions, corporations and banks…. Not only does it increase their financial stability and reduce their taxes, it is an ideal place to fund employee pensions, healthcare costs, and other benefits.” – Jake Thompson, Money. Wealth. Life Insurance.
“Many consumers forget a life insurance policy is another tool they can use as an asset to borrow money.” – Larry Ziegenfuss, Senior Vice President, Conestoga Bank
Borrowing “from” vs. borrowing “against”
There’s a trick to borrowing money at favorable interest rates. The trick is having rock-solid COLLATERAL.
Collateral assigment also allows you to borrow money without having to jump through the usual qualification hoops. No income proofs or credit checks. You don’t have to demonstrate your ability to pay it back or defend your reason for borrowing it.
Collateral can work just as well as “money in the bank!” Perhaps even better if your collateral can grow tax-free while you borrow against it!
One of the significant advantages of a participating (dividend-paying) whole life insurance policy is this: the policy builds cash value that you can borrow against at any time, for any reason, without a credit check or even an application process!
How Old is “Too Old” for Life Insurance? Understanding Life Insurance Rates of Return, Insurability, and Insurable Interest
On today’s episode of the Prosperity Podcast, Kim Butler and Todd Strobel analyze whole life insurance rates of return for different age brackets. Surprisingly, this reveals that “you’re never too old for life insurance!” The current net rate of return is discussed.
Finally, if you do not qualify for life insurance due to health or lifestyle risk factors, have you considered the alternatives to insuring yourself? There are ways to be the policy owner without having to qualify for life insurance if you can establish an insurable interest in someone else, such as a child, grandchild, business partner or key employee.
Kim and Todd also discuss something she is very proud of: Kim’s daughter, Kaylea Butler has released a book, Every Day is A Miracle: Lessons from Susan Rammekwa.. The book be purchased on <http://amzn.to/1HZt6lY>Amazon.com.
Picking up where they left off last episode, “No BS Money Guy,” Todd Strobel, and best-selling financial author, Kim D. H. Butler, resume talking about life insurance and how we can use it for our benefit before our death.
Todd and Kim discuss two different working examples of how we can utilize our death benefits during our lifetime. They present the pros and cons of various life insurance policy options and make recommendations on which they believe could be in our best interest in certain situations.
Many people do not realize how life insurance can be used to transfer wealth while the policyholder/insured is still alive and well! We are encouraged by the hosts to not wait until death to use our insurance to benefit others, but rather to give while we live.
“Character is the ability to carry out a good resolution long after the excitement of the moment has passed.” – Cavett Robert
Last year we published Parts 1 and 2 of “Make a Million Dollar Resolution,” and today, we continue with Part 3.
The Power of Decisions
The decisions you make today, combined with actions and habits in alignment with your decisions, can add as much as a million dollars or more to your wealth over time. Whether the decision is a New Year’s resolution or made in June or August is irrelevant, but the beginning of a new year is the most popular time for setting new goals and intentions. As Oprah Winfrey says, “Cheers to a New Year and another chance to get it right.”
“Many banks have more invested in life insurance policies than they do in bank premises, fixed assets and all other real estate assets combined.”
-Denver Nowicz, Equity4Profit
Financial institutions don’t follow their advice to YOU!
Denver Nowicz was profoundly affected by watching how his family fared from following the traditional advice of financial planning. In spite of savings, investments, and pensions, Denver’s parents and grandmother had to rely on him and even move in with him when their own efforts at financial independence had failed.
Nowicz’s father owned a business, but could never quite keep up with taxes and inflation. When his health took turns for the worst, his savings did not last long. Nowicz’s mother watched her inheritance from her father disappear in the stock market. After her husband’s passing, she moved in with her own mother, who had outlived her own small savings and pension, to pool resources. However, the demands of a home and their own medical care proved too much, and they came to live with Denver until their passing.
The experience spurred Nowicz to examine conventional wisdom. What he discovered was that the banks and other financial institutions don’t follow the advice given to most Americans:
“Banks, when it comes to investing their own money—don’t follow conventional wisdom and put their cash into mutual funds, stocks, hedge funds, term life insurance or risky real estate deals. Instead, they place a large portion of their vital reserves, known as Tier One Capital, into high cash value life insurance or permanent insurance….
“Banks invest billions into high cash value life insurance. Surprisingly, for many banks, life insurance is their largest asset class.
The amounts invested into life insurance companies are large and quickly growing. In late 2010, bank-owned-life insurance assets (in the form of cash value) reached record highs of over $140 billion (with a “B”) dollars, according to the Michael White/Meyer-Chatfield Bank-Owned Life Insurance Holdings Report. By the first quarter of 2012, bank-owned life-insurance assets (in the form of cash value) reached a record $145.6 billion in the third quarter of 2010—a whopping 8.7% increase from the same period in 2011.
What your banker and stock broker didn’t tell you.
Why would banks invest in life insurance – namely, cash value life insurance? After all, aren’t the financial institutions doing exactly what Suze Orman and Dave Ramsey warn consumers NOT to do?
“Why do banks look to insurance companies for sound investment? Unlike banks, life insurance companies do not use excessive leverage. If a bank has $1 million on deposit, it can lend out up to $10 million to the public. This leverage is called “fractional reserve lending,” and it can lead to instability. Indeed, excessive leverage is a major reason why banks are failing today and have throughout history.
“However, if a life insurance company has $1 million on deposit, that company may loan no more than $920,000, and usually only a fraction of that. As such, life insurers are 100 percent reserve-based lenders, which makes them stable institutions in down economies.”
Capitalism: (The real scandal isn’t the life insurance policies)
Corporate-owned life insurance, has been practiced for over a century, and not without controversy. In Capitalism: A Love Story, Michael Moore described “dead peasant policies,” or, the practice of major corporations and banks of purchasing life insurance policies on their employees. By some estimates, Fortune 500 companies and large banks have policies covering approximately 5 million employees.
The topic is covered in expose fashion: how dare those banks make a profit on a loved one’s death – especially if the family didn’t even have life insurance! But perhaps Moore misses the real point of the policies. Rather than being exploitive, the cash value insurance policies are used to fund long term benefits for employees, and even pensions. If Enron had been purchasing whole life policies instead of looking for fast money and cooking the books, history would look differently for Enron’s employees.
New rules and laws make corporate-owned policies illegal in some states, and notice must be provided (or permission obtained) in most other states. However, most employees are not offended that their companies invest in insurance and agree to the policies.
The real lesson buried in the segment of Capitalism: A Love Story is a powerful invitation for action, not of protest, but of participation. The families Moore featured had the same opportunity as the employer. They could have insured their loved ones, not only preparing for the potential loss of income in the event of an untimely death, but saving money that can be utilized or borrowed against in the meantime. The real shame exposed by the film is not that the employer took the opportunity, but that the families neglected to do the same.
Model proven methods for success.
The trick to building wealth is to do what the financial institutions and their executives DO, not what they tell investors to do. (We’re speaking historically here, prior to 21st century credit default swap meltdowns… those are strategies nobody should ever follow!)
Banks tell us to put money in CDs at incredibly low rates for “safety,” but do you think they are investing in certificates of deposit? We are advised to invest in mutual funds, but do you think that financial institutions put their assets into mutual funds and cross their fingers?
Of course not! Banks and other financial institutions are investing into “real” assets such as life insurance and, of course, real estate. (Consider how many buildings are named after banks, brokerages, and insurance companies.)
How can you follow the example of banks and profitable institutions?
Un-plug yourself from how we’ve been programmed to act and invest. Re-examine your assumptions. Find out how wealth is really built and sustained. Divest yourself of conflicts of interest and recommendations from an industry that benefits when we do what they say, not what they do.
This website is provided for informational purposes only. The information contained herein should not be construed as the provision of personalized investment advice. Information contained herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security or investment. Investing involves the risk of loss and investors should be prepared to bear potential losses. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future.
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