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Should Doctors or High-Income Professionals Buy Whole Life Insurance?
Well, the correct answer from a financial planning perspective is – IT DEPENDS! Because I am a financial planner, I can’t give you a definite answer if you should or shouldn’t buy whole life. The real question to ask is:
Does owning whole life insurance make my life better?
Here is the reality of the situation; you can get just as much death benefit protection with term life insurance and only pay a fraction of the premium. So why would anyone pay so much more for the same amount of death benefit?
There must be something more to whole life insurance, don’t you think?
Whole life insurance does a number of things that investing money into stocks, bonds, or real estate just doesn’t do including the fact, it can be leveraged to INCREASE YOUR RATE OF RETURN AND BEAT THE RETURN OF THE STOCK MARKET as part of a more comprehensive investment strategy.
Six Reasons Doctors and Professionals BUY Whole Life Insurance
A death benefit if you die when others depend on your income
When you are young, whole life insurance provides a DEATH BENEFIT in case you die while someone else depends on your income.
The people depending on your income, could be family members or business partners.
The big idea is that the life insurance policy blossoms to instantly create a cash benefit if the insured dies to REPLACE the income and support that individual provided.
TERM LIFE INSURANCE can provide a death benefit for a fraction of the premium when compared to whole life. So, by itself, the death benefit to replace your income when you are young isn’t usually a good enough reason to buy whole life insurance because of this higher premium commitment and long “break-even” timeframe…
A death benefit when you die AT ANY TIME...
Whole Life Insurance provides a death benefit when you die at ANY TIME to create an estate.
We all hope to live happy, fulfilling lives to a ripe old age, but we don’t know the exact day we will die.
The death benefit of a whole life insurance policy can be used to replace other monies you will spend while you are alive, such as a pension or Social Security that ends when you pass away, or to replace assets you spend down to have a better lifestyle in retirement so you can gift money to your family or even your favorite charity.
This is part of a bigger plan so let me keep going with the benefits of whole life…
By the way, it is easy to LEVERAGE whole life insurance to create income while you are alive, so you don’t have to feel you are tying your money up in a policy for a time in the future when you die.
The investment industry doesn’t talk about this method, and frankly it is because there isn’t any money for them to make when people use it. Once you see how it works, you can decide if this method is superior to what they promote which is putting your money at risk in a diversified portfolio of stocks and bonds.
Again, I will provide a resource at the end of this presentation so you can understand what I mean…
Whole life insurance's "Self-Completion" option.
Cash value life insurance, like whole life, has a “self-completion” option where the insurance company will pay your premium on your behalf IF you become disabled during your working years.
You see, as a high-income professional, you can AND SHOULD own disability insurance to replace your income if you are unable to work due to an accident or illness.
After all, it took you years of hard work to reach this point in your life where you are capitalizing on your experience and knowledge to generate the income you have today.
When you think about it, your ability to work and make money is likely your BIGGEST ASSET, so you should insure it just like you would insure a piece of property that has value.
You just need to know how to pay the premium for disability insurance which I will also explain later.
However, when you do buy disability insurance, most insurance companies will only replace a maximum of 66% of your income with a disability income insurance policy.
Can you imagine being forced to live on only 66% of your income?
By owning whole life insurance with the DISABILITY WAIVER OF PREMIUM option, the income you were setting aside to fund the policy is replaced by this additional WAIVER OF PREMIUM BENEFIT so you can continue building wealth inside your insurance policy if you do become disabled.
A 401(k), 403(b), S.E.P., or IRA doesn’t provide this continuation benefit. If you aren’t taking money out of your income to fund these accounts, even if you become disabled and not working, they are not being funded. Whole life can solve that problem.
I can tell you when I had esophageal cancer back in 2016, I used this benefit, and it was valuable.
Whole life insurance has cash value you can borrow and withdraw
When you pay the premiums for a whole life insurance policy, the underwriting insurance company invests these monies on your behalf into a portfolio of primarily bonds, mortgage-backed securities, and preferred stocks.
You know, safe low-yielding assets to protect principle.
But here is something cool..
When you buy a whole life insurance policy from, specifically, a MUTUAL LIFE INSURANCE Company, you become an owner of the company and are eligible to receive dividends which can increase the rate of return the policy’s cash value receives.
The way this works is as the owner of a whole life policy from a mutual insurance company, you receive any SURPLUSES the insurance company experiences.
You will want to understand the whole life insurance product is just one product these companies offer to people.
These surpluses that create the dividends can be increased when the company pays out fewer benefits than anticipated on not only the whole life product but also from the other products the company offers, such as TERM LIFE INSURANCE, Disability Insurance and Auto Insurance.
Also, surpluses that create whole life dividends are created from the profits off of their investment broker-dealer business’s and special projects they may be invest in.
Some, such as myself, have compared the cash value of a mutual whole life insurance policy to that of a hedge fund because its rate of return is not directly correlated to any type of investment.
And as I mentioned earlier, you can leverage these cash values to increase your investment portfolio’s return and manage risk better than a diversified portfolio of stocks and bonds…
BUT HERE IS A BIG POINT I want you to know…
Even though there is a rate of return on the cash value of whole life, WHOLE LIFE INSURANCE IS NOT AN INVESTMENT because investments have a potential for loss, while the cash value of whole life insurance has a CONTRACTED MINIMUM GUARANTEED RATE OF RETURN and PROTECTION OF PRINCIPLE that investments don’t have.
Whole life is insurance first with a cash value earning a rate of return that can be leveraged as part of a bigger investment strategy to reduce risk AND increase wealth. By itself, though, it doesn’t have the performance to accomplish these goals very effectively. Instead, it is a piece of the puzzle…
The cash value of whole life is creditor and lawsuit protected
Depending on the state you live in, all the cash value in whole life insurance is protected from creditors and lawsuits.
Whole life insurance has unique business, and estate planning uses
Of course, the big thing is you will want them IF you can have them without you sacrificing your other financial goals. And that is the best part – YOU CAN!
Here is the deal. As a CERTIFIED FINANCIAL PLANNER, I have a fiduciary obligation to recommend the best strategy for you when my company and I work directly with you in a client-advisor relationship.
After being in the investment industry for two decades, I have come to the realization that the investment industry doesn’t always promote what is best for YOU. They are all about collecting your money and accessing fees on it to generate their profits under the guise they are being a fiduciary.
It’s simple. The more demand they can create for stocks and bonds, the more companies will use their services to “GO Public” and raise capital which generates more fees for them.
This doesn’t do anything for you!
Still, every dollar that goes into products like whole life, takes away from the money that goes into their products, so of course, they don’t want you putting your money into it.
But you want the best return with the least amount of risk, right?
Well, if that is you, I want to tell you about my “C.O.I.N.S. Strategy.”
The C.O.I.N.S. Strategy
Listen, without knowing you, I can’t tell you if or how much whole life insurance is right for you, but in the webinar I created to explain the C.O.I.N.S. strategy, I explain how you can beat Wall Street by playing the game by the rules they use.
However, when you understand a lot of what is under the surface that you didn’t know you didn’t know, that information can be LIFE CHANGING!
Even with that, if you still don’t want to check out C.O.I.N.S., no problem. Feel free to check out some other articles and videos I have made to help you make the best decisions with your money.
This is Kevin Wenke signing off and remember, the decisions you make today will manifest the life you desire tomorrow.