How Life Insurance Policy Loans Work | 5 Steps

Do you want cash at your fingertips without breaking the bank, without having to run your credit, or say, mother may I? Well, today we're going to talk about how life insurance policy loans work, the five steps to getting a loan. Okay, we're going to talk about life insurance policy according to Investopedia. Life insurance is a contract between a life insurance company and a policy owner. A life insurance policy guarantees the insurer pays a sum of money to one or more named beneficiaries when the insured person passes away in the exchange for premiums paid by the policy holder during their lifetime. Key takeaways. Life insurance is a legally binding contract that pays a death benefit to the policy owner when the insured person passes away. For a life insurance policy to remain in force, the policy holder must pay a single premium up front or make regular payments over time. When the insured person passes away, the policy's named beneficiary will receive the policy's face value or death benefit. Term insurance policies expire after a certain number of years. Permanent life insurance policies remain active until the insured passes away. Stop paying premiums or surrenders the policy. A life insurance policy is only as good as the financial strength of the life insurance company that issues. State guaranteed funds may pay claims if the issuer can. So let's talk about this. You know, we're hearing about, hey, the beneficiary gets money once the insured person passes away. I like to say shuffle off this mortal coil. But folks, just understand this. If you have term insurance, it has a certain lifespan. If you have permanent whole life insurance and if you structure it the right way, you could stop paying that at some point. And it'll still be active until the person passes away. The death benefit will go to the heirs or whoever the beneficiaries are. It's important to understand the difference of how these things work. So stay tuned. We'll get into some particulars. And at the end, there's going to be a special bonus. So now it comes down to number one policy selection. I believe it doesn't have to be end or it could be end end. So let's get into this. Choose the right type of life insurance term, whole life, universal, et cetera, that suits your needs and financial goals. And remember, we don't want to meet your needs. We want to exceed your wants at all times. But let's get into what term life insurance is. Think of it as a renter. Term life insurance coverage for a specific period with a death benefit, no cash value accumulation for the most part. Whole life insurance, lifelong coverage with a guaranteed death benefit and a growing cash value component. Think about this. No one knows when they're going to die. So having whole life is a much more, I would say, play when it comes to how to exercise all your other dollars, knowing that this death benefit can replace whatever you spend in life. Last but not least, universal life insurance, flexible permanent coverage with adjustable premiums and death benefits plus a variable cash value. Now, always remember when you get information, if you just get like, you know, 5% of the overall information, be careful with universal life because a lot of folks make it much bigger than what it really is. It's permanent. It's a variation of permanent, but also term insurance. Remember, the cost of insurance inside here goes higher every year and can eat away at the cash value over time, whereas whole life, the cost actually goes down, which can be expensive up front. Stay with me, folks. Can be expensive up front, but you're really moving money from one side of the balance sheet to the other. Word to your mother. Number two, application and underwriting. Folks, real important that you get with an agent that knows how to fill out an application the right way because if they don't, they put you in front of an underwriter. It could cause you years of harm in order to fix that because once this thing is signed and you fill it out and the information is improper, you could be running these looking for a sunset, but check it out. Complete an application providing personal and health information, undergo underwriting to determine your premium based on risk factors. What does that mean? Number three, premium payments. The amount depends on the policy type, coverage amount, and your risk profile. So here we go. By the way, the screen you're looking at is a bunch of term insurance. We call these termites. We call this renter's insurance. No offense. We like to blend term in and obviously if it's your first policy and you want to be able to cover the mortgage, that's okay, but check this out. 25-year-old female, $250,000 worth of coverage. It's going to be $14 a month. For 500, it's $21. For a million, it's $34 a month. You could see the whole list go down. Anything with term expires at some point. Just remember that. Number four, beneficiary designation. Designate beneficiaries who will receive the death benefit in the event of your passing. As you look at this screen, you're going to see diarrhea divided by vomit as I read through what this is, folks. I know it sounds crazy. Bear with me. But basically what it simply says is you could have a trust as a beneficiary. You could have humans as beneficiary. You could calculate it where a little bit goes into a trust, a little bit goes into a human. It could go into a charity. Whatever the case may be, you could have as many beneficiaries as you want. But remember, for minors, designate a trust or a legal guardian so that you control how the money is distributed to them. In other words, if I have three kids that are under 18, I want to make sure they get money when they're 25, 30, and 35. So just understand that there's a lot of things that are real important when it comes to beneficiary stuff. And if you get that and you're with the right agent, with the right estate attorney, then you'll be in a position to make the right decision. Number five, death benefit payout. Upon the policyholder's death, beneficiaries file a claim and once verified, the insurer disperses the death benefit. Remember about five minutes ago when I said you got to fill out the application the right way? You better believe when you pass away, there's an investigation on how you passed away, what caused it, and if it isn't lined up with that application, if there was something there that wasn't disclosed, especially if it's a big death benefit, they will fight tooth and nail to not pay that out except for the money that you put into the policy if, in fact, it was a violation. So no matter what, if an agent tells you, don't worry about this, do this, don't worry about that, you need to fill out the application the right way because when that money gets dispersed, it'll get dispersed cleanly and quickly if, in fact, all the information is on there. Withholding could be very dangerous to your family. Bonus, the secret way to use a policy loan. Listen, I have 12 policies, one of them is with a carrier, I'm not going to mention the name, that I got to call India in order to get access to my money. It is so, not that India is bad, but to call India to get my money, it's so suboptimal and then it takes about a month to get it. So here's what's important that you understand. Number one, you want to not only overfund your policy and build up cash value, but before you take the money, don't take it out for a European trip, make sure you're taking it out because you want to use it for, if it's an emergency, that's one thing, but a business use. So you have to have a very good relationship with your agent who, by the way, could expedite the process with the mothership, the carrier, in order to get the money back into your hands so you can make the decision. I'm going to give you a quick example. Whole Life Insurance, when we overfund Whole Life Insurance and people want to borrow to buy real estate, to buy other businesses, to finance their own debt, we want to make sure that, hey, Mary, Joe, Mike, if you borrow this $100,000, it's going to still earn a rate of return of the policy, but let's get back, let's get you the money and create a schedule on how you're going to pay it back. Even if it's automated on a monthly basis, you get to decide the time and the amount. It's not subjected to like a credit where you have to pay everything back on time. So just understand, if you're on your own and have the discipline to pay it back on time and you understand what you're using it for, and then you get to be able to build out other assets through this money, and as that gets into rotation and now you're a renter and your real estate is paying your policy back, well, guess what? You can rinse and repeat the model over and over again, and that is how you turbocharge your wealth over time. So thank you for spending time on really understanding policy loans, how to borrow money from a policy, understanding the importance of beneficiaries. Go ahead and click the link below. One of the members here at Epic will not only take you through that process, answer, you may have policies right now you have questions on that you want to be able to learn about, that you need to know, hey, can I borrow this money? What's the best way I could do it? We are here for you. There's no obligation at all. Thank you for liking and subscribing and sharing our video and continue to follow. We're dropping new content on a daily basis that could give you good information to make good, solid decisions.