Everything You Must Know About Life Insurance and Investing

The investment arena can be complex enough just by itself. Overcomplicating it with introducing the wrong type of life insurance strategy inside of your investment strategy can only serve to muddy the waters even more. And so what we're going to spend some time on is talking about basically everything that you must know about marrying insurance planning and investment. So as I said, the investment arena can be complex by itself. And we don't want to create more complexity by confusing what my insurance policy or strategy is actually doing inside of my investment portfolio. So we're going to spend time talking about different investment strategies with term insurance, as well as permanent insurance. We're going to talk about asset allocation. And then we're also going to talk about how a well-built and appropriate insurance strategy can create maximum leverage for you to make other sound investments or diversified, called alternative strategies, while still keeping rate of return on principle. Often adopted is a strategy called bi-term insurance and invest the difference. I know a lot of you have heard of that. There are some merits to it. So let's spend time talking about it for a moment. If you're a young family and you have a lot to lose in your household, you're looking to accumulate maximum wealth. Term insurance definitely plays a role inside of your holistic financial product household. The reason for it is because most of the time term life insurance doesn't pay a death benefit because people outlive the term. So it's a really, really inexpensive. It's a great thing for insurance companies. They make loads of money on it, but also for the household, it's a great way to create appropriate income protection for your family in the event of a tragedy. But because it's priced the way that it is, it also creates some flexibility inside of your budget so that what you would have been spending on a permanent death benefit for income protection for your family, which would carry a much higher call it price tag or contribution rate. And you can redeploy that into an investment strategy that you feel is going to produce for you a high ROI. Here's why that can work. Because if that high ROI investment strategy over multiple market cycles accelerates rapidly, boom, you just accumulated real wealth while protecting your family at the same time. Here's why that can go against you. If you do not have a conversion strategy, or if you haven't had a conversation about a conversion strategy on your term insurance that you have in force or that you're contemplating in the future, you're costing yourself money. And why? Because the chances are really, really good that you're going to outlive that term policy. Statistics show it. If I didn't have a strategy to have my, call it castle, funding my moat, right, and using money that I'm accumulating to help me to convert my term over to permanent insurance, which is going to be used at a future point in time, but at your current insurability level, what ends up happening is that when that term lapses, I've given away money, right? I rented the insurance policy and they're not giving that back to me. What is the lost opportunity cost on that money that I used during that period of time? The answer is, I don't know. It's hard to calculate, but I know that there is a lost opportunity cost there. So if you're going to use the term and invest a different strategy, first have a conversation about why you're doing it, why it's being structured, be comprehensive, be holistic, and understand the positives and also the negatives of the term. Now let's talk about asset allocation. And here, there's going to be two parts to that. Number one is if we're looking at a whole life insurance policy inside your asset allocation, it's a little bit different of a dialogue than looking at indexed universal life or even variable life inside your asset allocation. And there's specific reasons why. So first, whole life insurance. A lot of people liken whole life insurance in terms of accumulation to the bond market. And whether you subscribe to that or you don't subscribe to that, the one thing about a whole life insurance policy is that there's consistency that gets created inside of your portfolio for rate of return reasons. If your other investments are earmarked or benchmarked and bucketed to create the higher returns, they also come with a little bit more risk. And when the storm comes and risk comes on your household and potentially you have a year where you have bad rate of return in other investments, what you know is that the whole life insurance policy was the center board of your sailboat. It kept some stability. It accumulated during a year where other things lost. That's the premise behind asset allocation, right? Is to not hit a home run every single time with every single investment, but base hits and doubles to create maximum wealth. That's how it's built into, that's how whole life can be built into an asset allocation strategy. One thing around asset allocation that doesn't get talked about enough is overlapping strategies. So if you haven't opened up your economic junk drawer to see whether or not the products that you own are overlapping one another, you're making a mistake. And the reason is because sometimes ships rise and sink with the tide. What do I mean by that? If I'm allocated to specific investments in my 401k, in my brokerage or in my outside world that are similar to the investments that are in my insurance policies, whether it's indexed universal life or variable life, and I have a retreat, well now I'm potentially setting myself up for double loss. So a big mistake that I see all the time is overlapping strategies for growth purposes between your insurance policies and your outside investments. Hey, so if I'm doing a flyby, just hit the comment section down below and say, this is not landing with me. Or if this is really resonating with you, just hit a comment and say, I can understand this and we'll reach out to you and have more dialogue around it. Okay, so now let's talk about leverage, acceleration and collateral. And I'm going to break those three down as far as the insurance component. So let's talk about leverage for a moment. When we want to make strategic investments, one of the things that we need to have is money in order to be able to do it, right? And I see that a lot, whether it's I want to make an investment into crypto or I want to make an investment into real estate or a self storage facility or a commercial property, whatever the case is, where do I get the intelligent leverage? Where do I get the money that I can put into the strategic investment, but also have it work for me at the exact same time? And the answer is a well-built insurance policy. Because if I have a well-built insurance policy and I borrow against that policy to make those strategic investments, the leverage that I use to go into the investment is actually still working for me back in the ranch in the insurance policy. Once again, when it's structured properly. The second thing is acceleration. When you're going to borrow against an insurance policy and make an investment, do your homework. Understand if you're buying a piece of property that's going to produce for you either a massive gain as a result of whatever, flipping it, benchmarking to sell it five or seven years from now, whatever the case is, or if it's going to produce for me an income or a rental stream that is above net expenses and I take that rent or that income and I'm returning it back to my insurance policy, I'm creating even more leverage for myself than what the policy already created. That is how you create wealth acceleration. Hey, what's up everybody? It's Rob Gill at The Money Minute, traveling in the roads of Rumson. Dave Harder is dropping content and knowledge. If you like what you hear, hit that subscribe button so every time he comes out with a new video, you'll get an alert. Last thing is collateral. If I'm looking for liquidity, sometimes I do things like loans, but whether it's an SBA loan or a private loan, whatever it is, a lot of people like to have leverage and liquidity from financial institutions. So if I'm going to get, like as an example, an SBA loan, sometimes what I'm going to need in order to prepare myself to get that loan is going to be collateral. Because nobody's going to lend me money unless they have some sort of collateral note or collateral assignment to know that if they lent you money and it goes bad, they're getting recouped. Insurance policies can be used as what's called a collateral assignment, which means if I'm applying for a loan, I can leverage the death benefit of my policy or even the cash value of my policy, depending on what type of loan that I'm getting, as a collateral assignment for getting that liquidity that I need. Happens all the time. So partnering an insurance strategy with an investment strategy takes a lot of detail. It takes a lot of planning. It takes open conversation, whether it's your asset allocation, being in line, whether it's creating leverage for yourself to maximize and accelerate your wealth, whether it's talking about collateral or whether it's simply I'm starting out and should I look at buying a term policy and also creating an investment portfolio on the side. Whatever it is, you need education and you need to have a conversation. We are equipped to help. Click the link below. A member of my team or myself would be very, very happy to have a conversation to put you in line with investing and insurance.