Indexed Universal Vs Whole Life Insurance

Hey, what's up, folks? Today, we're going to go into the tail of the tape, and we're going to speak about the pros and cons and differences between an indexed universal life and a whole life policy. Stay tuned. This is a must-see. Hey, what's up, folks? Remember, I told you we're going to talk about the difference between indexed universal life and whole life, the tail of the tape. All of the information, or at least most of it, that I'm going to share with you is from Investopedia, so you, as you go through this process and begin to ask yourself questions, can eventually get to a place where you make decisions where these or the differences in these policies sit and fit for your financial mosaic and for what your financial future is going to look like. Okay, so like everything else, there's a bunch of different products, and even within the insurance space, we have many flavors of permanent life insurance. Whole life insurance policies are one type of permanent life insurance. Universal life, indexed universal life, and variable universal life are others. Whole life insurance is the original life insurance policy. We'll call it the OG. But recently, other types have begun to rise in popularity. Let's get into the details of what that looks like. Check it out. A whole life insurance policy, it's known as traditional life insurance, provides a permanent death benefit, coverage for the life of the insured. In addition to paying a death benefit, whole life insurance contains a savings component, in which case, cash value may accumulate, interest accrues at a fixed rate, and on a tax deferred basis, meaning FIFO method of taxation, what you put in there up to basis is tax free to maintain that tax free status you would borrow for the policy. Some of the pros of whole life would be a guaranteed death benefit. It's fixed premiums that don't increase with age. That's very important. Option to pay up face value in 10, 20, or even age 65, as long as age 99, you get to decide on how you're going to pay it. Option to borrow against cash value if needed later on in life. It's a great supplement as far as income distributions or withdrawals from the policy that could supplement your qualified money as well as your social security. Interest and cash disbursements may be income tax free. Remember, it goes up to basis and borrow from beyond to keep that going in your favor. So a whole life con, and listen, I'm not going to give my opinion. I'm going to give the straight information here. Dividends are not guaranteed, although there is a minimum guaranteed rate. Two separate things, right? And at the end of the day, potential opportunity costs with low relative interest and premiums are not flexible, must be paid consistently. All right, folks, well, check it out. There's a lot that I just gave you, so I'm going to break it down to simple little nuggets. What is opportunity cost? Okay, what they're saying here is the interest rate is so low, you may be able to take that same money and put it into another investment that earns a better rate of return than the rate of return inside the policy. But as you folks know, when it comes down to banking strategies where you get multiple uses of your money, it's not necessarily the rate of return of the policy that we're after, but it's leveraging that policy while still earning that rate of return. So indexed universal, these things came on the scene in the late 90s, about nine years after Chub Rock, which was 1990. Indexed universal life insurance policies are relatively new. As their name implies, their earnings potential is tied to an equity index. In general, these policies are riskier and more complex. So here's some of the pros on these IULs. You get guaranteed benefits. The premiums are flexible, potential for higher interest rate earnings, which we'll get into. Option to borrow against the policy later on in life. Some of the cons, and we'll dig deep into this. So let's get our pen and paper, and you may want to play this back twice. Earnings depend on equity performance, and we'll get into that a little bit deeper. If the index does fall, returns can be inferior, although there are often floors to prevent extreme losses. At the end of the day, this could potentially increase your premiums later on in time as the price of insurance increases within your contract. Okay, folks, well, check this out. When you buy an IUL and you're making your payments every month, it doesn't go into an index itself. It goes into the general account of the insurance carrier. That insurance company then has a complex derivative investment strategy that is tied to that index. So for example, if the index doesn't perform in any given year, let's say it actually loses money that year, what could potentially happen because of this complex investment strategy, the expenses could become higher. They don't take on the expenses. They pass it on to the policyholders. The death benefit may be reduced or forfeited if the premium payments lag behind in performance, meaning for 5 or 10 years, you may be paying a certain amount, but from year 15 to 25, because of what I just described, there could be an increase in premiums, and at that point, if it's eating away at your cash accumulation, it could prevent the policy from staying in force because there's no more money to pay the premiums. Once again, these are deeper, very more complex conversations. I'm just kind of sharing on a high level what that looks like. All right, so check it out. Listen, IUL fans, I'm not trying to get you triggered. I'm just kind of playing within the game. And if you've been doing this for the last 15 years, you really haven't seen a market correct. So you only know the market one way. With that being said, the bottom line is while IUL policies provide an interesting retirement planning vehicle with greater upside potential and tax advantages, WHOLE Life is considered the safest option for those looking to provide for their family after death. Remember that in addition to paying a death benefit, WHOLE Life insurance also contains a savings component in which cash value may accumulate on a tax advantage basis. Now, if you're in the game of entrepreneur creating multiple uses in different asset classes, this is where WHOLE Life becomes even more powerful than what I just described. Just want to give you a little bit of nuggets on what's going on here. And at the end of the day, it's important to understand when you speak with your agent, he or she asks them the right questions and make sure that the information they're giving you is on point, that is sitting and fitting with exactly what you're looking to accomplish. Go ahead and click the link below to get a consultation from one of our team members to really dig in to exactly what I just described in the last 10 minutes. It's important to understand what that looks like. And remember, at the end of the day, when we talk about a financial mosaic, and when we talk about diversifying within and amongst different asset classes, it's important to understand not only what you want to do today, especially if you're an entrepreneur and you're really looking to take that money out of the policy for other investments, but also understanding what that looks like 10, 20, and 30 years later. And by clicking the link below, one of the Epic team members is geared to sit down with you, not in a cookie cutter fashion, but be able to go through with you the process of discovery on exactly what you're looking to accomplish. We look forward to hearing from you soon. Hey, thank you so much for checking out this video. Listen, my name isn't Joey. I'm not from Brooklyn. I'm an Irish guy from New Jersey. Go ahead and hit that subscribe button. And at the end of the day, when a new video comes out, you'll be able to hear it, see it. And if you thought this video was really, really informative, wait till you see this next video.