We’re going to talk about selling whole life insurance specifically and with a laser focus on the cash value, because, frankly, this is something that has been around for a long time, and there is so much information on it out there.
How do I get the right information? I hear a lot of good stuff and then a lot of bad stuff. So typically, what we will hear first, if we’re an agent objections that it is expensive, it’s a scam. You’re much better off buying term in investing.
If someone tells me not to go with a certain method not to go with a certain strategy not to buy whole life insurance. I want to know why. And then what you immediately see is negativity and emotion. Not much actual data other than a couple air fact thrown out there here and there. Now, while we hear all of that around the negativity, what’s interesting is when you look at cash value life insurance. When you look at the wealthy big banks and corporations, they’ve been using this forever.
This is a strategy they have used forever. The product itself has been around for over 160 years, with a lot of the top companies out there and some core benefits to a cash value. Life insurance policies, specifically again, whole life insurance is that it is safe. Our cash value is very liquid. I could get to it anytime. If I set it up properly, I can use the funds completely tax free. Now there are ways in which I can trigger a taxable event, so I want to make sure that that does not happen. But if everything is done right, I can use it 100% tax free without penalty or anything like that. And then I’ve got a nice, calm, pounding feature and really, how this works.
This has to do with policy loans, But a unique feature to a whole life insurance policy is that once a dollar passes through the cash value, regardless, if I just let that dollar sit and grow, or if I elect to borrow against it, if I pull that money out, I will continue to receive com pounding on my entire bucket of cash value as if I never touched it in the first place. There’s no lost opportunity cost.
Now. I do have the loan there if I like to pay it back or if I elect not to pay it back because often loan repayments are optional there. Then we’ve got historical data which more so validates that these products have been around for a long time, and they have been extremely effective for a long time. Here’s the thing when we often hear negativity around a product that we sell or we want to sell, maybe you’re a new agent or your experienced and, you know, hey, this product like look how good it is. I see these banks corporations and individuals putting away tons of money every single year into these products.
Why does it have such a bad rap like? Well, what happens? Well, you’ve got the negativity. You ever hear the saying that people tend to buy on emotion? Extremely true. Now, the thing is, how do you combat that without just getting emotional and then getting in a dogfight where whoever has the greater emotions is going to win Now? We don’t want that. If you’re gonna buy any kind of product, I want to know the data, the fax, if you can pull the emotion out of it. And I can see everything transparently exactly for what it is. Well, then, yeah, sign me up because I’m not going to be not going to be influenced in one way or another. So facts and proof, this is the best way to combat negativity and emotion.
So how do you do that? Begin with a story. Get the individuals attention. So quick story. When I was in the industry, in my early years, we were designing a policy for a large construction company modeling the policies for maximum cash value, but the owner or I should state the founder of the insurance company. He had owned several whole life insurance products, and he had been paying into them for a long period of time.
You know, I’ve got these whole life insurance policies and aside from the ownership in my business, all of my stocks, bonds, mutual funds, everything else thes whole life insurance products have been my best performing assets. So you’ve got someone that does it very well for himself has money in several different areas and states.
Aside from the ownership in his company, his life insurance policies have been his best performing assets because he makes a payment and sees the cash value grow by three times that amount after he’s had the policies for so long. Extremely attractive there. When you look at how those products are performing and he did share those policies with us, we’re able to actually track the performance from when he first opened them, compared to 30 years after the fact, and they performed quite nicely. So a quick story. This could be a story you have. You could use that story right there that I just shared questions. Engage the individual. This is extremely important. This is the most important thing.
Actually. What we don’t want to dio is have motor mouth and just talk, talk, talk. And then, by the end of an hour long presentation, we ask questions. They’re burnt out like they’re done. They’ve had it. I’ll think about it. I’ll come back later. Every time we engage with someone, I’ll begin with the questions. Hey, from your research thus far, Do you have any questions or can I get you any information to start? And more often than not, they have a couple questions. This way you can answer their questions first. That is the most important thing to Dio. You can cover the important items that you know you have to cover, but answer their questions.
And if you think well, I can’t answer the question. I’ve got to go through my presentation first. What if it was you? If you have a question, do you want your question answered? And if it’s a very complex question, if someone says good question, we’re definitely going to cover that. I’ll be sure to emphasize the point when we come back to it, but there’s some other points I want to touch on first. If that’s okay, just make sure you are answering it. And if you can answer it right off the bat, that’s important. Everyone likes their questions answered immediately, and in fact, you ever hear the saying People tend to believe what they see, not always what they hear. So if we go back right to the objections, why not take out with whole life insurance? Horrible place to put money Week returns.
Have you ever shopped on Amazon? Who has it? Is there any emotion involved in that selling, or do you see the products that benefits benefits, features price points, and you can just selected. That’s it. Very easy, much more transactional, very transparent as well. How about Apple? You could argue that they put some emotion into their advertising, and they’re very good at it. But at the same time, do you have much sales there if you go into an apple store, maybe a little bit, But you can get whatever you want to purchase an Apple store or right online. Very easy to transact business with them because you can see the product. Okay, so those are hard products. Typically, I’m purchasing from Amazon or Apple Cash value.
Life insurance has to do with money. What about stocks when the most people, by based off of what they hear, Perhaps sometimes, if you hear it from a mentor, or perhaps it’s a financial advisor. Hey, here’s a great opportunity for you. You want to get into it. But when the most people buy right, if you have the stock market app on your iPhone or any phone, you pull that up. Hey, the stock is just crashed. Let me by now because I can see what is actually happening happening. I can look at market history. I can see the money patterns and then elect what move I want to make. I can see it same thing here. So typically, when people see whole life insurance, what do they see?
They see something like this. Here is a policy or an individual 40 year old male is paying in $20,000 per year. Now look at his cash value right off the bat. Our pays in 20,000 every year in bold here. Cumulative outlay. This tracks the total payments. 14 years he’s cash on cash has more money in cash value than what he’s paid in. That means it took 14 years to get his money back or break even. He has a death benefit all the way through. So we paid a very high premium initially for a life insurance policy had cash value buildup. But before he sees any benefit there 14 years traditional whole life insurance, what most people are exposed to when it comes to cash value, life insurance or whole life insurance.
How many people find that attractive run away? I don’t want anything to do with it when they are interested in the cash, then Same policy, same company. Same out of pocket. Different design. 20,000 per year in cash value. Right off the bat. I have a hit, but I’ve got about 85 to 88% immediately. Breaking even between four and five. Look at that same insurance company health rating. All that good stuff, much more attractive. Cash values continues to accrue. Big difference at 15 years, close to $100,000 difference just by redesigning or tweaking the policy were actually choosing where our money goes. We can choose how much goes towards insurance premium and then towards other riders, which can accelerate the cash value growth.
Same thing here, but with a larger funding example 100,000 per year. So when we hear the negativity, stay away from that stuff, right? Why would you ever put your money here 100 k per year takes between 10 and 11 years just to get your money back. Then you’ve got the same thing. 188% right off the bat positive between years three and four. Annual internal rate of return represents what he is growing by each year. First year is negative. Yeah, which we can get you information on. Exactly why it’s negative in the early years. How premiums working such but continues to grow again. Remember the core benefits to a cash value life insurance policy. Safe, liquid, tax free, tax free. If we do everything right, that means this performance here. I don’t have to deal with taxes if I don’t trigger a taxable event. I always want to be clear there, but very attractive. No market exposure, nothing like that. I will never see the values go down in a whole life insurance policy. That’s the most important thing. Cash value buildup continues, right? A lump sum example. Hey, I have to pay pay premiums for my entire life. Here’s an example. Had a million bucks moved it into a policy over a very short period of time.
After cash value crossing over between years three and four, when he gets his money back, buildup continues. The guarantees should always be reviewed and those will look horrible. Same product, same design, same individual. All we did was stripped the policy down to the pure guarantees. Cash value in absolute worst case scenario. Crossing over between five and six. Annual internal rate of internal rate of return a little over 3.3%. Again, that’s a tax free yield as well. Right where a lot of people have viewed have expressed to me over time when we’re going over products like, Hey, this is like in a way of you and I have the life insurance.
I’ve got the death benefit protection, but at the same time, it’s kind of like a nice alternative to position some of my savings. It’s an alternative to a bank in a lot of ways, because I actually see it grow over time. Or a bank account might pay me 0.34% as opposed to a guaranteed 3.34% year over year. Just to clarify here, I could make income from it, like I see in this example, so ah, lot of it has to do with the design how we set the policy up. But really, when we get back to the topic here, how toe sell cash value. Life insurance is really we want to focus on the core, benefits here and be upfront with people. Show them how it works. Remember, people are going to believe what they could see, not just what they hear. So we wanna make sure we show it to them, not just talk about it and avoid the negativity.
This is what everyone is used thio in terms of competition with cash value, life insurance, even among insurance agents and financial professionals. Right? Perhaps you’re going up against other agents that promote of the company’s. Instead of promoting their product, they will instead say, Don’t go with these companies. Yeah, that option is not going to be accommodating and beat up the competitors. Don’t take that approach right again. Amazon Apple, if you’re just looking at stocks independently, could do it all on your own attempt to give people that same experience where you provide all the information very transparent are always a resource to them. This way they see exactly how it works. They can copy the big players, which everyone wants to dio, and then all of a sudden you’ll sell more cash value. Life insurance is extremely. It’s extremely effective.