“I have often said that if people truly understood this product, that they would line up around the block to purchase it. That product is participating (dividend-paying) mutual whole-life insurance.”
– Todd Langford, Truth Concepts financial software
“Is Whole Life Insurance a Good Investment?”
Perhaps no question has generated as much controversy on financial blogs and forums as this one.
Indeed, The White Coat Investor website’s most popular post on whole life insurance (written by a self-appointed, unlicensed financial “expert” who is a full-time physician) has generated over 800 comments from both fans and foes of whole life. The posts begins with a warning that the comments may take “over 4 hours to read,” and links to further articles that reveal the author’s limited understanding of the product. Financial planning with insurance is a curious hot button.
“Typical” advisors, media-hyped financial gurus and bloggers say, “Stay away from whole life insurance!” Meanwhile, many passionate agents and advisors try in vain to correct the misconceptions, irritating others who believe their enthusiasm is motivated only by commissions.
And regardless of which side of the fence the opinions fall, both sides often get their facts wrong, and few seem to understand the role of saving and liquidity in an investor’s personal economy. The long-term, generational benefits of both cash value and death benefit are often overlooked. Diversification is also poorly understood, and the fact that you can’t have all of your dollars in equities (or even in stocks and bonds) and be properly “diversified.”
We have noted in a related article about whole life insurance that it is not properly classified as an investment, however, it IS an EXCELLENT place to store cash for many investors. Our Ultimate Guide to Financial Planning Myths is another excellent resource for learning how insurance really works.
But what is the TRUTH about whole life insurance RETURNS?
In this video from from The Summit for Prosperity Economics Advisors, Todd Langford of Truth Concepts software uses a Funding calculator, a Diversification calculator and real policy values – along with bluntly honest (and entertaining) commentary – to reveal the whole truth about life insurance, as well as other financial vehicles.
Although Todd is speaking primarily to advisors in this video, it is useful to any investor who wants a detailed peek behind the curtain at our financial institutions and products. Using his financial planning software, Todd shares the truth about life insurance in this meaty, 85-minute video. From life insurance to mutual funds to banking and interest rates, THIS is information that investors (and advisors) need to know!
If video does not play above, click to watch here===>> Todd Langford at The Summit
As Todd demonstrates, the numbers reveal that a modest whole life policy’s returns approximate that of a taxable account of mutual funds earning 8% or more, when taxes and fees are factored in. When an investor diversifies a portfolio of stocks and bonds using whole life insurance, returns are likely to increase. And as Todd points out in his foreword in the revised expanded version of Live Your Life Insurance, all assets are not equal:
It is said, “numbers don’t lie,” although they can be used to tell half-truths….
The numbers reveal that whole life insurance cash value outperforms other safe and liquid financial vehicles when held long-term. When tax benefits, dividends (paid every year for over 150 years) and the death benefit are factored in, the returns often best that of the stock market. And when distribution strategies are compared, once again, whole life insurance surprises with its efficiency.
But numbers don’t reveal everything.
How do you calculate the value of liquidity and the opportunities that arise when you have high-quality collateral and guaranteed access to money?
How can you compare whole life insurance to a qualified retirement account that will one day be divided up between the government and the investor who will have to pay income taxes at a likely higher “to-be-determined” rate?
How do you measure the stability of companies that have been paying dividends decades before the mutual fund industry even existed? It’s equally difficult to quantify the value of the peace of mind that comes from knowing that your cash value and your death benefit will only grow over time.
And have we considered the significance of the fact that mutual life insurance companies have no stockholders? Mutual companies are owned by the policyholders who receive – in , addition to modest guaranteed minimums – ALL of the profits of the company, after costs and required reserves, in the form of dividends.
As Todd likes to say in his trainings for advisors, it’s hard to beat 100% of the profits! Shared ownership among the policyholders allows mutual insurance companies to make long-term financial decisions that benefit policyholders.
On the other hand, stock companies (that are not mutual) can be forced into short-sighted decisions to drive up quarterly profits or pay for 8-figure executive bonuses. This is why it is important to make sure that you purchase whole life insurance only from a dividend-paying life insurance from an established, highly-rated, mutual company!
Ultimately, storing cash in a whole life policy is a long-term savings and protection strategy, not an investment. However, it can be an important foundation of a prosperous personal economy.
To understand more about Prosperity Economics investments and also Prosperity Economics principles, we recommend Kim Butler’s book, Financial Planning Has Failed, and the other resources in our Prosperity Accelerator Pack.
Is It Time to Start Saving More Cash?
If you want to increase your investments in the future, having policies where you can store and save more cash now (while protecting your earning ability) is an important first step!
For a review of your current policies, a new policy illustration, or to find out more about the non-correlated investments we offer, contact Partners for Prosperity today. We’re now booking appointments for early January.