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Is
Cash Value Life Insurance
If you need the life insurance protection for your family, is cash value life insurance a good savings vehicle for you?
It's the question of the ages!
Over the past 40 years or more there
has been a lot of questions, discussions and heated debates as to
whether or not buying permanent life insurance makes sense. The primary argument generally revolves around whether you'll have more money when buying permanent life insurance, compared to using some other investment vehicle? However, there is a lot more involved then just how much money you'll have... How long will you need the insurance protection? What do you want the money for? How long before you will need the money? What income tax bracket will you be in when you retire, and more?
In this brief article we're only going to focus on what seems to be the primary issue for most people... whether or not you'll have more money when buying permanent life insurance, compared to other investment vehicles?
So, the first question is... What are you comparing the cash accumulation in the cash value life insurance to? Are you buying term and investing the difference in; mutual funds, stocks, qualified plans, non-qualified plans, municipal bonds, corporate bonds, government bonds, treasury certificates, mortgage notes, CDs, etc?
Most people are being mislead into believing that by investing in the stock market or mutual funds they can earn an average annual return of 10% and that cash value life insurance will only average around 4-5%. Logically an investment that averages 10% is going to accumulate a lot more money than something earning only 4-6%.
Unfortunately, the comparison of investment returns isn't that simple. There is a lot of misinformation, grandiose claims and important information to sort through and consider... such as actual realistic investment returns, annual fees and expenses, withdrawal penalties, income taxes, tax deferral, tax free income, cost of insurance, internal rates of return, ages, health rating, smoker, non-smoker, male, female, etc. These are all extremely important points for you to consider when determining if buying permanent life insurance makes sense for you.
Let's assume you are male age 45. You need and want $250,000 of life insurance. You are a non-smoker, in good health. And you have $6,000 to spend each year for the next 20 years.
If 20 years ago you had purchased a 20 year term policy, with $250,000 of death benefits, the policy would have cost you about $760 per year. That would have left you about $5,240 to invest each year. The question is where would you have invested that money?
How about if you had invested in growth mutual funds, inside of a 401k or IRA, like most people did...
Let’s take a look at the past 48 years to put investing in growth mutual funds into its proper perspective.
In the 60’s the S&P 500 Index had an average annual return of 4.39% over those 10 years.
In the 70’s the S&P 500 Index had an average annual return of 1.60% over those 10 years.
In the 80’s the S&P 500 Index had an average annual return of 12.59% over those 10 years.
In the 90’s, we had one of the best times in the history for the U.S. stock market. The S&P 500 Index had an average annual return of 15.31%.
If you had actually received annual returns comparable to those of the S&P 500 Index during those 40 years (1960 though 2000) you would have averaged 8.33% per year.
However, when you consider that the vast majority of mutual funds didn’t even come close to matching the S&P 500 Index over those 40 years, and then you subtract the annual fees of 2.5-4.05%, it gives you an entirely different view of the validity and benefits of investing in mutual funds.
And, we haven’t even considered that from the beginning of 2000 through 2008, the S&P 500 Index had a total loss of (-38.53%)… or average annual loss of (-5.90%) over those 8 years.
If you add in the last 8 years, the average return for the S&P 500 Index over the past 48 years is only 5.82%. Now, subtract average expenses of 3.0% and your net return is only 2.82%. And, that’s only if you were lucky enough to have found a mutual fund that performed as well as the S&P 500 Index during those 48 years.
The '2007 Dalbar Report' tracked investor's behavior in chasing market returns. This report showed that over a twenty-year period (1987-2006), the average investor only earned 4.3% during a period where the S&P 500 yielded 11.8%. And, remember that was in one of the best times in history for the stock market! And, it doesn't include the recent stock market downturn in 2008.
So, if you had purchased a $250,000, 20 year term policy, at $760 per year and then invested the difference of $5,240 annually into a 401k, (No Match) or IRA, with an average annual return of 4.3%, (From The Dalbar Report) during those 20 years (1987-2006) you would have had $167,909. And, all of the income you'd take would be taxable. If you were to withdraw $8,395 per year, based on a 33% income tax bracket (state and federal) you would get to spend only $5,625. _________________________________
However, if you had purchased a good $250,000 traditional universal life or whole life back then, and invested the entire $6,000 a year into a policy earning 6% you'd have $166,059. Even though you'd have slightly less money, you could take $8,303 of income each year... income tax free! That’s about 68% more money for you to spend!
And, if you could have purchased a $250,000 index universal life back then, and you had invested the entire $6,000 each year into the policy at a rate of 7.55% you'd have $208,608. You could take $10,430 of income each year... income tax free! That’s almost double the amount of spendable income you’d have, compared to investing in a 401k or IRA!
Just based on the numbers, it appears cash value life insurance can make a lot of sense for most people.
And, that doesn't consider the many other unique advantages of cash value life insurance...
If you need life insurance and can get similar returns to the stock market without the risks, more guarantees, tax free income, plus many more benefits, then why wouldn't you buy cash value life insurance?
Yours In Success, ____________________________
Message to Financial Advisors… You have a great opportunity to really help your prospects to weather this last financial storm and help them to enjoy a rich life now and in the future. People need and want your help to achieve the financial security they’ve been dreaming about and deserve. Aren’t life insurance and annuities a way for us to give these middle-income families the safety, guarantees and growth they are looking for? When are you going to get back to the basics and start actually helping people, instead of just trying to make a sale? Jeremy and Lew Nason
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Sales Tips...
Are You Missing The Sale?
Wouldn't it be great if every prospect
you met with would come right out and tell you... "Here's what's
most important to me and my family - and here's what I need your
product to do for me"? Wouldn’t that definitely increase your
closing ratio? Usually however,
A hot button is anything that's of
major importance to your prospect. To one prospect, it might
be saving for their children’s college education; to another, it
might be eliminating their credit card debt. If you approached
both of those prospects with the same That's why when you meet with your prospect, you need to ask questions to seek out every customer's key needs and wants, and then tailor your presentations accordingly.
Click On Book To Order If you want to improve your attitude, sales and income in 2009 visit our
And Read One Hour
"It's
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Success Tips… Build A Strong Foundation!
If a person makes something look really easy, you can bet there was a great deal of work behind that person's performance. When you immerse yourself in your work and obtain deeper knowledge of your business, it builds excitement and confidence, which impacts your performance.
When you start to stretch and struggle to reach greater heights, it helps you build a strong foundation.
"The work will teach you how to do it."
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If you want to improve your attitude, sales and income in 2009 visit our
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"Success isn't a matter of chance!
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An
Insurance Pro Shop®
Exclusive Forrest Wallace Cato Discusses...
HOW FINDING GOOD
Click Here To Read This Exclusive Interview |
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Prospecting Update…
The Power of
Testimonials
According to marketing guru Dan
Kennedy, "What others say about you and your product, service or
business is at least 1000% more convincing than what you say, even
if you are 1000% more eloquent." The reason is obvious. Customers doubt what we say about ourselves, but believe other customers. And the more customers who say good things about us, the more prospective customers will believe them.
So when you send a sales letter,
include as many testimonials as possible. The testimonials are
more likely to make the sale than your letter. When you make a
sales presentation, have a supply of testimonial letters. If
possible, get audio tapes and video tapes with testimonials.
Include testimonials in your advertisements. I n some cases, an
entire advertising How can you get testimonials? First, you must provide an outstanding product and service. Then, ask your customers for help. Interview your customers about what they really like about your product and the service you provide. What do they especially like about working with you and your company? Ask if they would write what they told you in a letter, or if you can write it for them for their approval. Ask if you can tape record or video record your interview.
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Real Advisor Testimonials
& Success Stories… "Mr. Nason, I am so overwhelmed by your act of philanthropy in sharing such vital information. As a young sales rep I need all sales skills possible to be successful. I've learnt so much from your site!!" Heather Quest "If there is anyone out there that is wondering if it's worth the trip and the money to come and see Lew and Jeremy, I have to tell you my opinion on this: YOU'RE NUTS IF YOU DON'T!" "In December I attended a (Found
Money Management™) boot camp Lew was hosting, and it
focused a lot on the fact finding and presentation process. Well,
about a few days after I returned home I set up an appointment to
see a client. I'm not going to tell you that everything went smooth
because this was my first attempt at doing what Lew calls a
"good fact-find". But, tonight
I was able
to close that case for a $9,600 target premium,
which I doubt very much I could have done without the training."
"I'm a newcomer to your
coaching service, but have been in the industry for over 15 years. I
am so impressed with how much you have been able help me and our
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International Association of Registered Financial Consultants
Founded in 1984, the IARFC is a non-profit professional association dedicated to educate, train and support financial advisors who are helping people spend, save, insure, invest and plan for the future. |
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Well, that's it for this weeks Insurance Marketing and Sales Tips Mastery Newsletter. I hope you found the information interesting and helpful in your efforts to grow your business.
Lew and Jeremy Nason
P.S. Do you have a friend or associate who is struggling in this business and needs help? Why not tell them about our Web site or better yet, forward this newsletter to them. They'll thank you!
© 2009,
Insurance Pro Shop®
- All rights reserved and the creators of the Found Money Management™ Advanced Life Insurance Sales System the most endorsed and successful Life Insurance prospecting and sales system available for today’s insurance professional! Lew has been helping agents and advisors to achieve long-term success in financial services industry for over two decades. His unique perspective, on how to truly help clients, has enabled scores of agents and advisors reach the top levels of their profession. Visit his web site at http://www.insuranceproshop.com/ or call 877-297-4608.
Helping Insurance Agents and Financial Advisors create endless
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