Hi, I'm Billy Gwaltney and this is the CYA podcast. This show is for the physician who understands the importance of protecting everything you've worked so hard to achieve. Each week I'll bring you tips and advice to help you cut through the clutter and misinformation and show you exactly what you need to preserve your income and way of life. If you're ready to achieve the peace of mind that only financial security can bring. Let's get started.
Welcome to today's episode of the cover your assets podcast. The title of today's program is as a physician, is it ever wise to consider purchasing a whole life insurance policy? Excellent question. The short answer is yes as wise to consider at least some whole life insurance. I'll give some big picture reasons why it's important to at least consider this as you plan your and your family's economic future. Just a caveat right quick.
(00:57): This is not a comprehensive analysis. I'd be happy to discuss your specific situation directly anytime. I'll provide my contact information at the end if you don't have it already. Well, let's start by defining whole life insurance. What is it? Permanent life insurance designed to guarantee a death benefit for your entire lifetime. Over time, the policy builds a cash value equity account that grows. Again, the longer you have the policy, the larger that account could become. Dividends are paid into the policy. If the policy is with a mutual insurance company, which is highly advisable for these types of policies. I can discuss that in more detail as well if and when you'd like to talk offline, but just in detail you'd want to make sure of. And if the insurance company makes profits, then dividends would be paid into the policy and it would just compound on itself over time.
(02:02): So we contrast this with term life insurance. Previous podcast, we talked about this I owned some term insurance. It certainly has. Its place is good for a lot of circumstances to provide maximum death benefit protection at the lowest possible cost for a select period of time. And so a term insurance will cover you for let's say 20 years or 30 years and a guaranteed death benefit and a guaranteed premium. And if you outlive the term, the policy either goes away or becomes prohibitively expensive so that you will get rid of it and not continue to keep it. So over that term period, the insurance company's on the hook. But if you go through underwriting and you're approved and they give you this policy for such a cheap cost, that typically means you're going to outlive the term whole life insurance costs more. It costs more because it's designed to actually pay the death benefit and then when you're most likely to die.
(03:02): Well that makes sense, right? But because of this cost, conventional wisdom often says that you should just get a term insurance policy, invest the difference and self-insure the rest after the term period ends. And as I mentioned, term insurance has, it certainly has its place. Term insurance is a vehicle. It's a tool, kind of like a medication is a tool that if utilized in the right way, you can do a lot of good, but if not used in the right way, it can do some harm. And so the tool is not necessarily right for every situation. In my professional opinion and in my experience, it's reckless to say that everyone should just buy term and self-insure when the term policy ends because the plans that people lay out in their thirties often don't work out as expected. Things change, desires change, goals change what we care about, change, affections change.
(04:02): So many things change. And so the question for you and for me, for all of us to answer is, is it wise to consider having at least some life insurance death benefit that will actually pay out at your death? So I'll ask that again. Is it wise to consider having at least some life insurance that will pay out death benefit when you will most likely die? Okay, so at the time you're most likely to die, whether that's 80, 90 a hundred, whenever that is, is it wise to consider that the answer's yes. I believe it is economically is just a smart thing to think about. So what do we do about this cost? The higher cost? What about that? This is primary and usually the only negative to a whole life insurance policy. And this is why those who rail against whole life do so they look at the cost and decide it's too high a period.
(05:00): That's the end of the discussion. Well, let's look at what our whole life is doing. Okay. Why would anybody in their right mind pay that higher cost? I believe there's a right way and a wrong way to structure a whole life. For me and my clients, we structure our whole life with the primary focus being on the cash value, equity accumulation, and minimizing the death benefit. And you say, why? Why not maximize the death benefit? Well, a properly structured whole life policy, isn't it? Excellent. Excellent place to store cash. Okay. Now the vast majority of wealthy people have cash on me. Have cash ready for investment opportunities that come up because these opportunities find the people with the cash. The best opportunities for investments. Find people that have cash on hand, always. And so wealthy people store cash efficiently. They have cash. And so let's take an example.
Speaker 1 (06:03):
Not just people, but companies do the same thing. Where do banks store cash? Okay, let's answer that question. Where do banks store their cash? Did they store it in their savings accounts or in their money market accounts? Not if they can help it. What if I told you that banks buy as much whole life insurance as the law will allow them to purchase? They buy it on their key executives is called bank owned life insurance BOLI and the focus of this whole life insurance is essentially one thing and that's storing cash as efficiently as possible and please keep in mind that whole life is not meant to compare to other investments as we define investments. It's not meant to compare to other things. You can put your money into that. You have a higher risk reward kind of correlation like a mutual fund or a stock, things that you would invest your 401k in whole life is not an investment vehicle is just an efficient savings vehicle and efficient place to store cash.
(07:13): In my experience in, in our, in the calculations we've run is the most efficient place to store cash that would otherwise sit in a savings account earning next to nothing and being taxed or would basically remove anybody. Keeping cash and therefore they would tend to invest it in things that would be unnecessarily risky because storing cash is so inefficient. Well, if you had an efficient place to store cash, then store in cash wouldn't be so bad, right, and then we would have cash on hand to take advantage of investment opportunities that come along down the road. There are also significant tax advantages to life. The death benefit is paid out income tax free. It's usually paid in a lump sum. In addition, the cash value equity accumulates without tax as well, so you don't pay taxes. The cash value account grows and you can also access that cash value without tax if you do it properly, and again, we can discuss how you do that in more detail if you would like to know more for your particular circumstances.
(08:21): Also, depending on what state you live in, and this is big for physicians, there can be a significant credit or protection element to your policy in a lot of States. Again, that we would look at your particular situation in detail. The policy values would be protected from creditors, from lawsuits, whether professional or personal doesn't matter, is fully protected. That's a big deal. The policy can also provide significant long term care benefits, chronic care benefits, critical care benefits, and a lot of times these are accessible from the death benefit. And so what insurance companies are doing is saying, Hey, if you need to access this death benefit while you're alive to pay for long term care expenses, you can do so well that can completely remove the need for long term care insurance in the future. If you're young, you're probably not thinking about long term care insurance, but talk to a colleague that's in their fifties or sixties talk to someone you know and trust me, they're thinking about how they're going to pay for healthcare, for critical illness, for chronic illness, if they need nursing home care or if they need assisted living care.
(09:31): What happens in those situations? That's what it can quickly erode a nest egg that's been built up. Well, if you can access it through a permanent policy and a death benefit, that's, that's a very important feature. And lastly there can be significant flexibility on how long premiums are required. A lot of our clients have policies that are paid up and seven years, 10 years. Once they see the cash value growth and the accumulation that continues to increase over time, they want to continue to contribute and most people don't know this, but the expenses inside of a properly structured whole life policy actually go down over time, not up. Okay. The cost of the life insurance in a whole life policy actually decreased over time. So your cash value continues to grow and compound while the expenses go down. The most inexpensive form of life insurance is actually a properly structured whole life policy.
(10:36): Okay. And that goes totally against conventional wisdom and what you're going to read on your average blog. The details of this matter and I'm happy to discuss that with you for your particular situation. For what it's worth, I'll end this by saying I am, my family owned a lot of whole life insurance. As I mentioned, I also own term insurance but the focus of the term insurance is to cover for a shorter period of time and me and my family own just more and more whole life insurance. This focused on cash value accumulation and this is not the case of the blind leading the blind. I see our values that grow all the time regardless of what the market does, regardless of interest rates up and down, those kinds of swings just don't impact it. It just can. It can impact some of course but not acutely and right away the dividends that are paid out.
(11:33): Just staying the course and having a steady cash accumulation place to store liquid money that we can then access for other things. It works the way it's supposed to. I'm a living example of that so again, I'm not saying this is for everyone all the time. I am saying it's wise to explore it with an open mind, explore whole life insurance with an open mind, see if it's a good fit for you. I would be happy to discuss that in more detail if you would like no harm done. If not, please feel free to text me anytime to arrange a conversation or to ask questions. My number is (704) 270-2376 again, that's (704) 270-2376 I love doing this podcast. I love being view. Happy to discuss your situation any time. Until next time, this is Billy Wall. Thank you. As always, for carving out a few minutes. Talk to you soon.
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