I confessed last week that I may have finally found something less than dreadful to say about whole life insurance. This day that no one ever saw coming, came through the back door a few weeks ago when I got a call asking specifically for a quote on a participating whole life insurance policy.
I honestly thought it could be a set up by one of my competitors to see if I would actually sell a product that I had taken to task too many times to count. Not one to roll over on my convictions just for the sake of a sale, I asked “why whole life and why participating whole life?”
The client told me that they wanted a life insurance policy that they could use to get started in the “infinite banking concept”, and that the recommended product was par whole life. The client was ready for me, homework done and ready to take on a doubter. To my questions they made it clear that they had researched the concept in depth, had talked with several of the leading experts on it, had been to a seminar, and being a mathematics professor, was convinced that it had merit. Still not convinced that it was a good idea I obtained all of the information I needed to get an illustration together and told her I would be back in touch within a day with some options for her and me to review. I was convinced that when she saw the real numbers she would bag the whole idea.
Finding the most competitive par whole life policy for this client wasn’t a problem and I put together several illustrations from a simple pay all years policy to a short pay policy with an excess cash accumulation vehicle built in to make cash value grow quicker. I ran her options all the way up to the MEC (modified endowment contract) limit.
One of the illustrations really got my attention when I started evaluating the impact of the excess cash, the dividends that purchased paid up additions (more par whole life insurance). Let me say that one issue I’ve had with whole life forever is that yes, it’s overpriced, and also it just really doesn’t build cash value quick enough. What caught my attention with this particular illustration was that the guaranteed cash value after just 5 years was just shy of what had been paid in and at the end of 20 years it was more than had been paid in and the death benefit of the policy had almost doubled.
The price clearly made it something that I wasn’t convinced my average customer could benefit from, but I was beginning to see that this new client, the source of my discomfort just might not be crazy. The client made plenty of money and had excess income with which to over fund this type of policy without busting the budget (and you all know how I feel about budget busting). A day was taken to review the illustrations and run them by an adviser and I was told which one we were going to use. Coincidence or dumb luck, the very illustration that had caught my eye was the one chosen.
OK, so now I’m really out of my comfort zone so I used Nelson Nash’s website to find a Colorado agent who was on his go to list of infinite banking experts. Why I’m more comfortable talking to a Colorado agent when I do business in all 50 states and all over the world is beyond me, but I call Kate Gardner and confessed that I was about to do something that I knew almost nothing about and would she please help me help the client do the right thing.
Now, I have to tell you that when it comes to knowing what questions to ask to make sure a life insurance need is taken care of, I’m pretty good. It quickly became apparent that while knowing life insurance would help, using whole life insurance as a financial vehicle entails a whole different mindset and whole different set of questions. I quickly took the easy way out and asked Kate if she would mind doing a conference call with me and the client to see if my client was on the right track and to offer any suggestions that would make my client more successful. She did, and while sitting in on the phone call was a bit like being the only English only speaking person on a conference call, they both worked well together and gave some purpose and direction to it all.
I still maintain that by far the majority of life insurance needs are term insurance needs, but I am also convinced that if I don’t get to the bottom of this concept I may be doing an injustice to clients I haven’t talked to before. There are more and more people implementing this financial tool everyday and just like I’ve said about impaired risk life insurance, if you happen to use the wrong agent who uses the wrong company, the outcome won’t be pretty.
Bottom line. Maybe, just maybe, being one of the best impaired risk life insurance agents in the country will serve clients well who might otherwise spend too much on the life insurance cost of their infinite bank. Who knows? I might even team up with one of the best whole life financial tool experts and the effect would be compoundingly interesting. Stay tuned and please call or email me directly if you have any questions.
Some time ago I advised that anyone involved in the life insurance industry should read Douglas Andrew’s book Missed Fortune 101, if not for its merit then just for knowledge of what the approach is. It is very similar to the whole life approach in Infinite Banking, except that Andrew recommends carefully picked UL contracts. I think his reasoning is that while traditional whole life policies may allow you to load heavily in early years, they still demand a constant premium in later years. Now with some of the newer custom whole life products, I suppose they can be tailored like a UL premium plan and still allow participation for dividends.
Enjoy your blog. May be a good idea for us to talk one day. I use participating whole life and term blends based on a holistic view of the client and optinal retirement income strategies for down the road.
Never use VL, VUL, UL, or EIUL… Can explain why sometime. Use UL with Secondar Guarantees in rare estate planning scenarios.
But my average case is probably $30K in annual premium. Let me know if interested in talking sometime.
P.S. Web site is a work in progress.