Common Questions about Insurance
Why should I use insurance for my retirement or investment money?
Many investors in America don’t realize that many major life insurance companies are not much different from a conservative mutual fund type of asset management company. Insurance companies are experts in managing risks. As they bank and hold money set aside for future needs, they are responsible for investing that money wisely to achieve a safe rate of return
Why do you recommend a maximum funded insurance contract for the Missed Fortune strategies?
Properly structured insurance contract (maximum funded) can be the best retirement vehicles for providing liquidity, safety, and tax-favored rates of return. Because of the tax-free accessibility of cash values that can be used for retirement income, these types of insurance contacts can far outperform alternatives like IRAs, 401(k)s, annuities, and mutual funds.
What a typical rate of return of an insurance company portfolio?
Annual reports and financial statements of many insurance companies reveal they are structured similarly to conservative, income-oriented mutual funds with some growth potential. Most insurance company portfolios earn from 7 to 9 percent.
How stable are insurance companies and what is their history?
The insurance industry in America is a trillion-dollar industry and is probably one of the most stable factors in the American economy. During the Great Depression of the 1930s, for instance, a large percentage of banks failed and never opened their doors again. Even some real estate dropped as much as 80 percent in value. Many stocks took a long time to recover, if they did at all. However, some of the most stable and safe funds during that time were in life insurance contracts.
What is the difference between term and cash-value insurance?
Term insurance premiums generally increase with age. Term insurance may be a good way to meet specific, short-term needs, but it has no cash accumulation value or living benefits. Coverage will lapse or expire the moment premiums are no longer paid into the policy.
Cash-value life insurance, on the other hand, was designed to accommodate an overpayment of insurance premiums during the early years, thus allowing an underpayment of premiums in later years. The excess premium paid over and above the mortality and administration expenses creates equity in the policy. The excess money accumulates with interest, then begins to accrue the cash values that can be used for living benefits.
Why do the Missed Fortune strategies call for cash-value life insurance?
Modern cash-value life insurance can be designed to accumulate and store
cash safely and provide tax-favored living benefits, as well as income-tax-free
death benefits, while maintaining liquidity and safety and achieving an
attractive rate of return.
What additional benefits does cash-value insurance offer?
Cash-value insurance also provides equity buildup inside the policy, which provides a liquid fund that can be used at will – in the event of an emergency, for investment opportunities, or to supplement retirement income.
Does it matter how a cash-value insurance contract is structured?
Absolutely! Properly structured life insurance contracts can be used for tax-favored capital accumulation and tax-advantaged retirement income as living benefits, in addition to providing income-tax free death benefits.
What is a maximum funded cash-value insurance contract?
First, we determine how much the client wants to contribute (how much he is going to reposition over a given time period) into the policy. Then based on government guidelines (TEFRA and DEFRA) we can determine what the minimum death benefit should be. Most insurance contracts are sold for death benefit not the living benefit. A maximum funded contract however, has the lowest possible death benefit so that expenses (that pay for the insurance) are minimized and cash value accumulation is maximized.
What else should I know about a maximum funded insurance contract?
This kind of policy is not free of costs. The costs associated with a universal life policy most closely resemble those for term insurance, but with a significant difference: If premiums are paid that are far greater than the actual pure term insurance premiums, the policy accumulates an excess cash value. Over time, the interest and compounding of that cash can more than compensate for the continuing costs of owning that policy. These costs, which allow the investment to qualify under the definition of life insurance and, therefore, remain tax-free, are an absolutely critical component for achieving the most attractive results.
Which insurance companies do you use with these strategies?
There are a variety of companies whose products might be right for your situation. Part of the process in creating your own Missed Fortune insurance contract is determining which product and company meet you at the level of your need.
Do all financial professionals understand how to properly structure a maximum funded life insurance contract?
No! Please understand that not all financial professionals understand how
to structure these insurance contracts correctly. Ask your financial professional
if they have been TEAM trained and are a current member of Missed Fortune Associates.
What are some of the benefit of using the Missed Fortune
concepts for my estate?
When people die, they usually leave behind some assets that were earmarked to sustain them had they lived longer. Those assets may include bank accounts, CDs, money markets, stocks, bonds, real estate, or cash values of life insurance. Life insurance is the only asset that instantaneously blossoms from the cash values previously used for living benefits into tax-advantaged death benefits.
How do I access my money that is in an insurance contract?
The advantage of these kinds of insurance contracts is that when you withdraw your money, it is treated with FIFO taxation (first in , first out), so your withdrawals are tax-free up to the basis. The dumb way to access money from your contract would be to continue “withdrawing” your money after you have recovered your basis (the amount you have put in), because it would trigger unnecessary tax. The smart way to access money is to withdraw your money up to the basis (the amount you have put in), then change the “withdrawal” to a “loan” – simply a change in nomenclature. Loan proceeds are not deemed earned, passive, or portfolio income. Additionally, if you were to pass away, the death benefit can provide an incredibly high return based on premium dollars. We call this the SAD way to access your money.
When do I have to pay back my policy loan?
Loans on insurance contracts can be open until death, at which time the loan balance is deducted from the death benefit automatically. These types of preferred loans were created specifically for retirement income.
What type of cash-value life insurance on the market should I use?
Generally, there are five types of cash-value life insurance on the market:
whole life, variable life, and three kinds of universal life – fixed, variable,
and equity-indexed. Universal life was created with flexibility in mind – both
premium payments and insurance death benefits may be varied. Home equity
should not be invested in variable contracts because they are vulnerable to market
downturns and loss of principal. Equity-indexed universal life was designed to
help cash values with insurance contracts have a guaranteed floor on the
minimum rate credited on their ash values and yet have the potential to
participate indirectly in the market.
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