Russian Roulette With Your Life Insurance – What They Never Told You (Ep. 350)

"I got into a discussion — not an argument, I was discussing. The other person did not sound like they were discussing. Some guy was trying to tell me that it didn't matter what the universal life policy showed at 80, because the insured will be dead, so who cares. Who cares? I care. I care that I'm selling a product that's going to be there forever. It's just crazy to me, the amount of agents out there selling stuff, the amount of people misunderstanding stuff, because nobody's educating. And so I'm just coming here using this as an education tool so that you guys can see what to look for."

Hello, hello, hello, and welcome back to the podcast. Thank you very much for being here. A different location today. I'm coming to you because I have some things to share with you on the screen.

And you know, I talk about universal life, variable life, indexed universal life, and why it is bad. And I talk about it all the time. All the time. And I go on rants, and I want to provide more proof, because I've got some good ones for you.

Now, is every policy like this? Yeah, pretty much. Let me tell you guys, in 16 years I've seen what I believe is five — now I'm gonna say five, 'cause I know three for sure, but let's just say five — decent universal life policies that were not going to collapse before someone died.

But today I want to share with you some policies that I got from some clients who are paying on a policy for dad. They have been paying on these policies for 30 years. This was going to be their death benefit on Dad when they took over the farm. Now, I do this kind of stuff all the time. I am constantly telling a young person, buy a life insurance policy on mom or dad. So when they pass away, we have death benefit. It is a great strategy when it is done with the correct type of insurance.

So before I get into just the numbers and show this to you — and they did give me permission to do that, so that is fantastic, because they're angry. They're upset, they're frustrated, because they did not know this was going to happen. And now we are in this situation where we're having to play Russian roulette with dad's life. Do we keep paying the premium? Do we not pay the premium? He's healthy. What do we do?

Before I get into that, I really just want to kind of explain in a nutshell — and if you're watching this, it'll probably make more sense — that permanent life insurance is an umbrella. Okay? So permanent insurance is insurance that is supposed to go until you are a hundred or 121. Really old policies were 95. So think of that as your umbrella.

Underneath your umbrella, there is whole life, universal life, variable life, indexed universal life. Okay? Whole life is the only one that is guaranteed by contract. Fees and charges aren't gonna go up. Premium is guaranteed by contract — that's not gonna go up. It will be there until you're 121.

What's not guaranteed is the universal life products. They still fall under permanent insurance, so people call them whole life, but they're not whole life. They are permanent products that are universal life, variable life, indexed universal.

What happens inside of those three — any type of universal policy, there's many different names — but what happens inside of those is there are fees and charges that are not set. Those fees and charges go up every single year, because it's built on a term chassis. So the older you get, the more expensive that cost of insurance gets. Eventually they start taking cash value, and then it depletes the death benefit.

So I wanna show you exactly what I'm talking about. So let me share my screen.

Okay, on here you are going to see — I've blacked everything out, obviously, so you can't see it, 'cause that's none of your business. Okay. What you are seeing, though, is that this individual is 90.

Now, I don't even wanna hear somebody say, wow, who cares, if he had died at 80, which is normal, there would've been death benefit. Yeah, there would've been, genius. But he didn't die at 80, because people live to a hundred. So how do we know who that's going to be? We don't.

This gentleman is 90. I said, hey, is he still healthy? And they're like, yeah, he could easily go to 95. So here lies the problem.

We have, as you can see in the cash surrender value and accumulation value columns, the guaranteed value right here that says 3%. As you can see, this first column, there's no guaranteed or surrender value. So what that means is, if this policy makes a return of 3%, then all the cash value is gone. If this policy makes a rate of return of 3.45, now we have a little bit of cash value still till the end of the year.

But even if we make a rate of return of 3.45 the following year — next year, when he is 91, we're gonna pay $9,900 in premium. $9,949. There is no cash value. We have paid into this thing for 30 years now.

Left side of the illustration, it shows year 18. So I said, oh, you've only paid in for 18 years. They said, no, no, this policy was moved along the way somehow. And that does not include all the years we've paid prior. So if we look at 30 years at $10,000 a year, we're at $300,000 already.

Next year, death benefit is $340,000. No cash value. The death benefit is staying the same. That's the other thing that happens with these universal life policies — the death benefit stays level and it doesn't grow like it does in whole life.

So now there's no cash value. But there is still death benefit until he turns 97. Okay. Do you guys see here where at 98 years old it's all zeros across the board? So if this gentleman lives until 98, we don't have any death benefit. And at that point we've paid in more than $340,000.

So do we continue to pay the premium and maybe get back what we put in if he dies by 97?

Here was my question to them. What is keeping that death benefit going? Because there is no cash value to take to pay for some of this excess premium and fees. So what is keeping that going? Is there a guaranteed death benefit rider on this policy? If there is, then we need to know the terms of that rider, because there are things that will make that rider void. And so, have we ever paid premium late? What are those things that may void that rider?

What happens? Because the $10,000 — it's evident, it goes to zero. So they're paying $10,000 this year. It doesn't show that on the illustration, 'cause they're paying it quarterly and this was run mid-quarter. Okay. So they're gonna pay their $10,000 essentially — $9,949. They're gonna pay that this year. But the cash value still goes to zero. They've been paying it the whole time. So there's fees and charges. How are they going to get paid, and why is that death benefit gonna keep going?

We need answers. Guess what? Surprise, they're not getting answers from the agent. They contacted the agent, they drove two hours, one direction, to see the agent, who said, oh, I can't give that to you, 'cause my secretary's out for the day.

They emailed me. I said, call the company. Go directly to the company, skip over the agent. So they skipped over the agent, went directly to the company, got this, and then they called the agent and said, you will be meeting with us. And he didn't have much to say, right?

Unfortunately, this agent was not the one that sold them the policies. However, this agent has been there since he first started his career, which was probably 30, 40 years ago. So he manages all the rest of their family money. Why would he not sit down and go, oh, you know what, I've seen this happen over the years, we should probably look at this policy? He gave them no solutions to what they can do.

Now, there are things they can do here. They could pay more premium to keep that death benefit going longer. But he didn't give 'em any of those solutions.

So let's look at another one. This one is the same family, okay? And another policy with the same agent. And we have no more premium due. It shows no more premium is due. This one is supposedly paid up.

There's cash value at the 3.45 column. There's a little bit of cash value at the 3% rate of return column. Next year, the 3% goes away. In two, three years, the 3.45 return column, we are also out of cash value.

The death benefit on this one, though, goes until he is 111. So this one will most likely pay out. But again, is there a guaranteed death benefit rider on this policy? Or are we going to get some random letter in the mail that says, hey, we need more premium if you wanna keep this $260,000?

When I say we're playing Russian roulette with this guy's life, I literally mean we are playing Russian roulette. Is he going to die — especially on that last policy I showed you — is he going to die before this policy collapses and everything ends up at zero, or is he going to outlive it?

Now, this happened to another client of mine. We looked at this policy and he said, Mary Jo, what do I do? Dad's on oxygen. He is not doing well. But they sent us a letter that said, if we wanna keep this policy going, we have to pay X amount of premium. I don't remember what it was, but it was extreme. It was a lot.

And I said, well, okay. I had met the dad, and I said, he's kind of ornery. He's been on oxygen for a long time. How is he doing? Are we expecting him to go another five years? Because at this point, what we have to do is math. And if we pay more premium, how much more premium do we pay before it equals or exceeds the death benefit?

If he dies when it equals the death benefit, then we basically get all of our money back. It acts like a return of premium for term insurance. If he dies a year or two over, then we don't get all of it back. Well, at least we get some of it back.

They paid the premium and he did pass away a couple months later. Playing Russian roulette. Are we gonna win or not? What are we gonna do? Why are we gambling on somebody's life? What a horrible position to be in.

These new clients are the same way. What are we going to do? The difference is, dad is 90 and he's healthy. He could very easily live to a hundred.

People think that people are dying sooner. Based on what I am seeing on social media, hearing from friends, seeing all the people dying of cancer lately, I would tend to agree that people are dying sooner. I actually reached out to the insurance company, to the actuary, and said, why am I seeing that people are dying sooner — and everything we read, people are dying sooner — but yet you guys are extending life insurance policies until they're 121? I don't understand.

And she had the perfect answer. Of course she should, it's her job. She said, because when we underwrite people, we're underwriting the healthiest of the healthy. They look through medical records, they do blood work, they look at driving record. They're looking at everything, and they are saying, based on today, with your health and your health records, you should live to X, Y, and Z. And so they will definitely be insuring people that live to 121.

So people are living to 95, no problem. A hundred, no problem. This is why insurance companies continue to move out the death number — make sure there's coverage there so people don't outlive their policy. The insurance company doesn't want them to outlive the policy. They want to be able to — 'cause they gotta pay it out anyway. They're either gonna pay it out in a death benefit, or if you outlive your policy, they pay you out. They don't just keep the money 'cause you outlive the policy. But if you outlive the policy, it's taxable. So they wanna make sure that you are not gonna outlive that policy, and that they're gonna have coverage for you forever.

For people to say, oh, he'll die soon, he's 90 — says who? I don't even see parties for hundred-year-olds anymore. It's not a big deal now. It's a big deal if you're 105, if you're 110. But even if he lives, in the one illustration, to — I believe it was 111 — if he lives to 111, there is no death benefit.

So when people say, I really hate whole life insurance, we had a family member that it never got paid out, they paid in their whole life and then they never had a policy when they died — unfortunately, it is 99.9% of the chance that they had some sort of universal life policy, that the fees got astronomically expensive, the premium went up. They didn't have whole life, and they didn't have dividend-paying whole life, or the death benefit would also go up.

There's just a lot of examples of why these universal life policies don't work. And because so many people think, oh, all you do is rant and rave about UL, you don't know anything — okay, here's an example.

I got into a discussion, not an argument. I was discussing. The other person did not sound like they were discussing. But I got into a discussion within an IBC group on the Book of Faces, and some guy was trying to tell me that it didn't matter what the universal life policy showed at 80, because the insured will be dead, so who cares.

Who cares? I care. I care that I'm selling a product that's going to be there forever. It's just crazy to me, the amount of agents out there selling stuff, the amount of people misunderstanding stuff, because nobody's educating. And so I'm just coming here using this as an education tool so that you guys can see what to look for.

These clients listen to a ton of my podcasts, so they knew to go to the insurance company and get an in-force illustration. They already knew that something was probably not right, or needing to be looked into, just based on the information that I've been teaching.

How else are we ever going to know who to trust, what to buy, if we don't educate ourself? And I've said it a million times and I'll keep saying it — unfortunately, you guys have to minor in life insurance in order to buy the right product. Even term insurance is not all created equally. There's regular term, there's return of premium term, there's convertible term. Do your due diligence, and don't just be going online or going to a local agent to buy what it is that you need.

I got an email last week, at the time of this recording. Somebody said, hey, I got these life insurance policies, and — it sounded like he maybe read my book first, went to his local agent, bought some whole life policies. They were whole life, they were structured correctly, but the terms were not correct. This person ended it at 65, or in 20 years.

I'm like, why are they doing that? That's very short-term thinking. The thought process behind it was, well, at that age you're gonna be done farming and you're not gonna wanna pay premiums. Who says that? So the goal in life is to go broke at 65? No, we're building our assets so we can have rental income, we can maybe sell our land and have income from land, to continue to have income. What do you mean, like everybody just builds and then ends at 65? Very short thought process.

The dollar devalues on a daily basis. So even if you're paying — you know, think about this couple, $10,000 a year 30 years ago was an astronomical amount of money for somebody that was in their fifties, or that were in their twenties. An astronomical amount of money. They made massive sacrifices to have this death benefit, and now it may not even be there.

The premium is not gonna feel, in 25, 30 years from now, like it does today. We have to put our logical thinking hats on and think long term, and think like a forester. That's why Nelson has that analogy in the book. It's not there just 'cause he was looking for something to write.

So we definitely need to really pay attention and educate ourself on what we're buying, who we're working with, and make sure that they are doing what is the best thing for the whole outlook of what we wanna do right now, generationally, in the future. What does that look like?

So anyway, here's examples. I love it when clients allow me to share stuff. That's fantastic. It's so good for everybody. And it's nice when people say, hey, yes, use this as a teaching tool, because we didn't know. So now we know, and we don't want anybody else to be in that position. So super thankful that they are allowing me to do that.

But if you guys have something like this — if mom and dad say they have life insurance and you don't know what it is, just ask them. Just blame it on me and say, hey, there's this lady that has a podcast, and she's talking about how these things aren't right, and she's actually showing us examples of this. Can we just look at yours, to make sure, in case we need to save it, how we can do that?

So if you guys have something that you need me to look at, or you need John to look at, just email us and we're happy to do that. You can email me, maryjo@withoutthebank.com, or you can email John, john@withoutthebank.com — and John might get back to you a little bit faster. But either one of us can take a look at those illustrations and make sure that they are a good policy. Keep it, save it, worry about it — one of the three things is probably gonna have to happen. And then let us know how we can help.

Get the book, read it, set up an appointment with us, and we are a hundred percent happy to look at your numbers to see what we can do and if we can help you.

All right you guys, I hope that this helped. You have a fantastic rest of your day.