69: How NOT to Buy Life Insurance

069 How Not To Buy Life Insurance

[00:00:00] Hello everyone. This is John Montoya, and this is John Perrings. We are Infinite Banking authorized practitioners and hosts of the fifth Edition.

John Montoya: Episode 69: How Not to Buy Life Insurance.

In this episode, we're gonna talk about how the average everyday American goes about buying life insurance and how it's really not the best way to approach protecting your family and also to building a foundation for wealth. So John let's go ahead and jump in.

John Perrings: Yeah. This is a good idea. So John and I were talking before the show, and he's been working on this based on something that happened with you, right? Where you had a conversation with sort of a life insurance sales system guy. And and I think that probably, we could probably just say that and everybody will know what that's all about.

But I think this will be good to talk about. And before you tell your story let me just say that [00:01:00] when we say how not to buy life insurance, of course it's a little bit tongue in cheek. We're gonna talk about like how some of these super cheap online life insurance products are. Lemme say this.

It's great that people have life insurance. Let's just say that right up front. If they get life insurance, that's a great step. You know what I mean? However, Life insurance is such a robust product, especially whole life insurance that people, if people looked at it a little bit differently instead of just the cost of the premium or the price of the premium, they could take it so much further.

And I just wanted to say that, we're not shaming anyone for buying cheap term insurance. If you buy it, that's good. That's good. If you have term insurance it's good if you have cheap term insurance. It could probably be better if you have a different way of looking at it.

And so I think I'll just turn it over to Montoya here and he can talk about what he, the person he talked to, and [00:02:00] I think that'll shed some light on where we're going with this.

John Montoya: Yeah, so the way this came about is I was approached for an appointment where this company could display, run a demo for me, how they would have this, I.

Essentially a life insurance quote calculator for the general public and as the general consumer. You would, this would essentially be like a McDonald's drive through menu. How much life insurance would you like for how many years put in your information, all that information's gathered into a CRM, which would come to me on your end as.

The consumer, you would get a quote and magically, all your life insurance needs or wants are satisfied. There. There's no education about life insurance really at all, especially nothing about whole life [00:03:00] and the benefits of permanent cash value. Th this was very much a commodity based system to help.

Consumers of life insurance, people who wanna buy life insurance, just make it as convenient and easy as possible. And I sat through this appointment and I'm thinking, my God thi this personally has no interest because it goes against everything. With how I teach life insurance, like the, there, there's really, for me, there, there's very little value to this.

I would never use this and it's because John, you and I see life insurance completely different than how people are conditioned. To understand life insurance or what they think they know about life insurance and therefore how they buy life insurance. And I thought to myself, man, this is the worst way to buy life insurance.

And I. [00:04:00] There, there's no way I'm gonna go for this. And I thank them for their time and I was very honest with them. And what was funny is that when they were done, they were asking me questions about, why I didn't see this as a fit. And I explained to them what I do to help my clients is not a commodity based solution.

I'm not just helping them to secure a death benefit for a limited amount of time. There, there's so much more power that is within that death benefit. But the problem with this system and the way that people buy life insurance in general, is that, All they do all they see is life insurance as a commodity.

That death benefit for a limited amount of time and they have no idea. All the incredible value that. Is inherent in a permanent cash value vehicle, like whole life insurance. They have no idea how they can use it to stack other [00:05:00] assets, how they can use it to create additional retirement income options.

There's so much more, and this is why we have this podcast to teach people, but. The challenge for us, of course, is how do we convey all these benefits, right? And unfortunately, the system that was proposed to me, and this is generally what we've seen out there in the marketplace, I is that, people they're missing the forest.

For the trees because they don't have the education to, they're not getting the education anywhere to, to see the full value of whole life. Really wanted to share this with all of you because if you're here, hopefully, you're taking the next steps and you're discovering what it is about whole life.

That gives you more ownership and control and so much more power in your financial lives and. When it comes to buying life insurance[00:06:00] I think you'll hit on this, John, you were talking about price and cost, so maybe go there next. But how not to buy life insurance is certainly not through a McDonald's drive-through menu.

That, that's absolutely the worst approach, in my opinion to go about securing a death benefit for a family.

John Perrings: Yeah, it reminds me of for all the, we're here in the Bay Area, near Silicon Valley during the, so we're all familiar with like the.com boom stuff, and it reminds me of the old computer Associates commercial where the cardboard cutout would sneak under the office door and it'd be like, how much software would you like to buy?

And so it's the, it's a race to the bottom type of mindset that is unfortunately perpetuating. This idea that, cheaper is better. And again, like I said before, like sometimes cheap term insurance could be the right decision, right? Maybe in a divorce settlement, you're forced to buy some, term insurance on yourself.

The death benefit's [00:07:00] gonna go to your ex-spouse, something like that. Maybe that would be a good reason to buy some super cheap term insurance. That's just one example. So we're not saying it's the, never the right decision, but I think the problem is, I. It's the, it's perpetuating the typical financial mindset where we minimize our insurance and try to, and take on the maximum amount of risk to, to try to get a high rate of return.

It's that buy term, invest the difference mindset. It's, and everyone. It also perpetuates the idea that premiums are a cost. So when we, if you're only looking at the cost to buy a certain amount of death benefit again, that could be the right way to do it if you know whatever the circumstances are.

But mo, more often than not what you should be looking at is the price of the premium. And what that means is the net compound cost of, say, term insurance versus permanent insurance [00:08:00] is totally different. It's the premium is not the cost, the premium is the price, and I. If you run, some future value calculations or net present value calculations and compare term insurance premiums to whole life insurance premiums, which have a cash value, which have a guaranteed death benefit at the end of the policy, as long as you pay the premiums, that death benefit's going to pay out.

Not only that, but you can, just take it one. Level further. And what would be the net present value if you could leverage that cash value to buy other assets all along the way, it blows term insurance out of the water. It's it doesn't even, from a financial perspective or I'll just go back to cost.

From a cost perspective, term insurance is the most expensive insurance you can buy. Okay. Again, we sell term insurance. It's a good thing to have if you just need to protect your total human life value or your hu or your human economic value, there's nothing wrong with it. But if you're only looking [00:09:00] at it from a cost for per death benefit filter Man, you're really missing the boat on everything.

Life insurance can do it. Life insurance is so powerful. You have to qualify for it. What else? Anything else you do? Gimme your money. Gimme your money and we'll try to create a high rate of return for you. Gimme your money, not insurance. Give first qualify, and then we can talk about the price of the premium.

John Montoya: And one of the things I, I hear you talking about is mindset and I think that goes back to this commodity based way of buying life insurance. Yeah. When people are shopping for the, what they see as the lowest price of death benefit. They're making a high time preference decision. What is the lowest cost I can get today?

They're not thinking 20, 30, 40 years from today. That's right. And the future value of having a [00:10:00] permanent death benefit, they just can't see it. And this is part of a industry-wide problem. Where people for what, whatever, for whatever reason. And there, there's this saying that, people's understanding of life insurance is based off someone else's misunderstanding.

So you have all those misunderstandings and myths about life insurance. And if you think about what a myth is, these are stories that get told and retold. Over and over again to the point where people no longer question them, they just believe it to be true. And so we have this situation when it comes to life insurance where people automatically believe it's a horrible place for money.

That term insurance. Is the only type of insurance that you can buy. And it's not even questioned because again, the story gets told and retold and it's this absolute myth. Yeah. That, that, you and I I think it's part of our mission to help people [00:11:00] to, really tear down that wall of misconceptions and lies about life insurance.

And if you have a low time preference and you start to see 20, 30, 40 years out, you're gonna start to realize maybe you got started with a term policy. And like you said, John, that's good, But I'll add That's good for right now, but what about later? Yeah. And if you start thinking about later and you start get, getting serious about your finances and you go down the rabbit hole and you start questioning, you start searching for wisdom.

And questioning the stories that have been told. And you hopefully will get to this conclusion that maybe what you were told isn't a hundred percent true. I. And that'll lead you down this rabbit hole [00:12:00] where you start to learn more about the value of permanent insurance. And even beyond that too, a, I think a lot of the conversations I know that I've been having lately is in regards to convertible term because, you may be in a situation where your, term, fits based on your budget. But, If you educate yourself a little bit more about the option to convert it to a permanent policy and you start looking at the different options that are available for convertible term you're gonna start to narrow it down even further to say I don't want to convert my term into a Universal policy.

'cause you understand the difference between Universal and whole life. You're gonna start to look for term policies that have a conversion option. To whole life. Because that's going to give you the benefit of having what we call, what we say is the one and only true type of permanent cash value policy, which is a whole life.

And the reason why we say that is because [00:13:00] a whole life is the only type of policy that is guaranteed to endow, meaning that the cash value is ultimately guaranteed to equal the death benefit at a future date. Yeah. There, there's no other type of policy that has that guarantee. And if you're buying life insurance what are you essentially buying?

You? You're buying protection. You're buying a guarantee that you're gonna be made whole or if not you your family. So I. Whole life is absolutely the way to go. But you have to have a low time preference and you have to understand the difference between low time preference thinking long term versus unfortunately, everyone I.

For the most part is stuck in the rat race and making these high time frame decisions. And this is what we get. We get commodity based selling and completely missing the bigger picture on perhaps the best financial vehicle. I. That's hiding in plain sight.

John Perrings: That's it. And [00:14:00] just real quick, when John Montoya is talking about high time preference and low time preference, that's an economic concept where low time preference means you value something now and you're willing to pay for it now.

And low time preference means you don't need something now, and you're willing to forego the use of that to create something bigger in the future. And That, that's Austrian economics. It's a huge, it's a huge point. The time preference thing is a huge point because it gets back to the perceived cost, right?

And if if people understood the true cost of. Term insurance versus whole life insurance. I think that could that could change some things. And I think also if people better understood the risk and the lack of control that they have with the typical financial planning advice those things could change as well.

Because low time preference, or excuse me, high time preference decisions. Meaning you want something now, like you've got, it's basically the economic fomo where you want [00:15:00] something now. You're trying to get that high rate of return now. And it, what happens is if you don't set up the proper structure, meaning you don't have your protection and the foundation of your financial system set up you, you really are gonna have, I.

There's a likelihood that you'll have some problems down the road because if you, if something happens, you're gonna have to liquidate all those high time preference decisions. Anyway I just had a conversation with a client yesterday, started having trouble coming up with the full premium, the PUA portion of his scheduled premium.

And through the discussion, he mentioned that, he had a bunch of cash sitting because he was waiting to do a real estate investment. And so I just made the suggestion, hey maybe you're putting the cart before the horse here. You're not paying the PUA on your, on the product, the financial tool, life insurance that's supposed to help you strategically capitalize.

So you're like you. You bought whole life to strategically capitalize, but you're not capitalizing it. And now you're just directly putting cash into [00:16:00] an investment. So you're losing all this, all the strategy is going away, the strategic part's going away. So you've gotta, you've gotta do things in the proper order in order to.

Make sure everything works out. And sometimes that feels like you're slowing down and you are. But if you have a, if you have a long range mindset, it makes up for it in spades in the long run. And you never have to worry about. Anyone you love, your family your kids, you don't ever have to worry about them having to change their lifestyle because you set up because you didn't set up the structure correctly.

Meaning if you don't have your foundation set up and something happens, Especially if you die or become disabled, your whole family suffers. But if you do, you never have to worry about that. So Montoya says it all the time. It's a, it's like a peaceful existence when you have everything set up correctly.

I.

John Montoya: Yeah. And I get that from Nelson [00:17:00] because he used to really expound upon that all the time at all the conferences. It's a easy and peaceful way of living, he used to say, and it's 100% true. In fact I forget who I was talking to this past week, but we're having a kind of a giddy laugh because with all the turmoil going around the world, and not that's funny, but.

I wake up in the morning and I'm not checking my phone to see what the market did. I don't go to sleep worrying about, what the market's gonna do tomorrow. It's a really peaceful way of living. And one, one thing I wanted to share in this episode two is something that I heard recently that all human learning is error correction.

I heard that recently and I thought about it, and the way we learn we learn best through making mistakes, right? And if you're listening to [00:18:00] this show and you have already purchased life insurance, just examine what type of life insurance you have and ask yourself. Does it fit with what I'm trying to accomplish?

And if it doesn't, then you need to error. Correct. And the best time to error correct is now. Because like you said, John, life Insurance, you don't buy it, you have to qualify for it and for whatever reason, I know we just did a episode on 10 35 exchanges, but it seems to be episode 68, right? Yeah.

The one right before this one. It seems to be a hot button topic now because I'm talking to people in their forties, fifties who purchased term insurance with no conversion option. Yeah. Or they have Universal Life policies, VULs, IULs, and they've come to the realization that what they thought they had,

John Perrings: It's not gonna [00:19:00] make it?

John Montoya: Yeah. Pretty much. Yeah. Pretty much. So error correction. And we're going through the process now to see what is going to be a better low time preference solution for them, a better long range option for the, for themself and their families. And so that, that

John Perrings: really, just real quick on that, it's like when, people in their fifties and even sixties, like they, they think they're almost done with like their financial plans for lack of a better term. And it's no, you're not, if you're 50 years old, you've got another 30 years to go. You know what I mean? It's or if you're 60, you've got another 20, maybe 30 years. Like my, one of my best friends from home, his grandma moved into a, retirement community at like age.

75 or something and lived to 105. That's 30 years that she, it was like a whole other, life that [00:20:00] she lived in this, retirement community. So it's it's never it, if you're in this age bracket, you're coming close to like retirement age quote unquote, which we don't even really like that term.

But if you're coming close to that age, you can still have a low time preference. And meaning you can still make long-term decisions because you have, you still have a ways to go. You know what I mean?

Absolutely. And so I was just gonna finish up by saying that. Error correction.

Listening to our show, hopefully in multiple episodes it's taking you to a place where you can start to think long-term. Yeah. And better visualize the type of life that you want for yourself and your, and for your family. And, the to circle back on, on the theme of this show, how not to buy life insurance.

The best way in my opinion, is to seek out [00:21:00] an expert, a professional who can guide you and help you see what you don't see.

That's right. I was thinking about this very thing as we've been recording this and how do you find that? And here's an easy way. The Nelson Nash Institute has a whole bunch of authorized life insurance professionals that are authorized in Infinite Banking who have taken the time to get an entire.

Layer an entire additional layer of training and principles-based approach to using life insurance. Whereas the typical life insurance agent, sorry, they've been trained in the typical financial planning, right? It's one easy way is to look at the Nelson Nash Institute. InfiniteBanking.Org.

They've listed all these great advisors who have, at least done something that, they've trained in something different and [00:22:00] principles that are different than the typical mindset around financial planning.

John Montoya: I guess the only thing I'd add to that is there, there's also a code of ethics with all the practitioners That's right. With the Nelson Nash Institute and it's so hard to, trust people these days and. You know that, that's why, we do mention this website because you can actually go to the website, see who's in good standing.

And David Sterns he's the president of the Nelson Nash Institute. He's really quite amazing. If you happen to just send him a message or call him. He's gonna get back to you. I'm always impressed by how quick, how quickly he responds. And I've had people reach out to me and with questions and I'll say look, don't just take my word for it.

If I realize you're just, reaching out to me and you don't really know me from Sam. But. There's David Sterns. If you don't believe [00:23:00] me, just send him a quick message and I promise you he'll get back to you. He'll, he will confirm what I'm saying now. I

John Perrings: say that hopefully, I'm just imagining David's email inbox is blowing up after this episode.

It's gonna be good. Yeah,

John Montoya: he might have to dedicate a whole thing. You might get a

John Perrings: call from David,

John Montoya: but the point is yeah, the, it's the verification is there. It's, if you need more proof talk to either one of us, but certainly David Sterns Nelson Nash's father-in-law he'll set the record straight and he'll tell you what you need to know too.

Just make sure you go down the rabbit hole because you wanna do what's best for you and your family long term.

John Perrings: Yeah, go down. Go down the right rabbit hole though. Not the YouTube rabbit hole. What you said, actually rem reminded me of if verifying everything, you know what we're talking about, the commoditization, it extends to.[00:24:00]

What on some of the YouTube channels out there, you've got people that have co-opted the term IBC, who are not authorized practitioners. And there's plenty of people out there. They get, they start recording a video, they get out their whiteboard and they start telling you how much base versus how much PUA you should have in your policy.

They basically go into a policy design and tell you what the right policy design is. This is it. It's a, it's a, like a fake, in, in sports or something. There, it's like a fake proof of how you should be designing your life insurance policy. I. However, it completely ignores all the trade-offs that are associated with it.

And by the way, when I'm talking about this, most of them are promoting, trying to get very high PUA ratio PUA to base ratios and But this is really just another commoditization of life insurance where they're giving a very [00:25:00] simple it, and it's not even that simple when they describe it, but they're running you through the numbers to try to show you that this is the right way to do, to buy life insurance And It's good for selling life insurance, just the, this company that you know is promoting the cheap term insurance.

You can have systems that promote the easy sale of life insurance. And that's an easy way to do it because if you. If you just look at the surface level, it looks like the right way to do it, but it's completely missing the bigger picture. And it's completely ignoring significant trade-offs to how a policy should be designed.

And by the way, in most cases, over the long term, it results in a smaller policy, it results in less cash value. Don't be fooled by the wrong rabbit holes, and don't be fooled by the commoditization the discussions that, try to break things down and show you the numbers.

It's not always about the numbers, right? And I, that's hard for some people to understand. I had a conversation the other day, he is I really like to get into [00:26:00] Excel and all this stuff, by the way, I do too. But guess what, it's not actually about the numbers. We can get into numbers, but it's about trade-offs and it's about principles.

The numbers do pan out, but the ones that use numbers as the way to sell this, it's gonna be, there's always something that, that is not being. Disclosed there, or not being brought to light, I should say, disclosed makes it sound like they're, doing something illegal, which is not true.

But anyway, I just, when we were talking about commoditizing life insurance, that's one of the things I wanted to talk about. That's one way to commoditize it under a pretty wrapper of showing you the numbers. And man, it's missing a lot. Missing a lot.

John Montoya: Yeah. I would say that's the other end of the spectrum, right?

If we can refer to. Buying life insurance the wrong way as a commodity trap? The first commodity trap that we've laid out. Is buying term, using a quote engine that right [00:27:00] is, gives you no insight into how it fits into your long range plan. The second commodity trap is watching a bunch of YouTube videos and thinking, oh 90 10 that, that's the way to go and not having a solution that's actually customized to your particular situation.

The way you wanna buy life insurance is not, again, a McDonald's drive through window. It's not one solution fits all. Life is far more complicated than that. And so is the whole life design.

John Perrings: Yeah. And you touched on the easy application, life insurance, the drive up window. One, one kind of final thing I wanted to bring up I guess we have a couple more things we wanna talk about, but another thing I wanted to bring up is the underwriting process.

The, these cheap online forms to buy life insurance. The, they talk about getting up to whatever, $2 million with no qualification and [00:28:00] what we know in. The, the Infinite Banking Nelson Nash Institute qualify authorized practitioners know is that. We're promoting the use of mutual insurance companies.

And so if that means a policy owner is a part owner of the actual insurance company, so if we're part owners of a company, do we wanna have slack underwriting requirements where, and all the people who buy life insurance They just slide through the underwriting and there's no, we're not critical about, what the true health is of a, of an applicant because that affects all the rest of the policy owners.

If we're, if we start doing that The reason they can do it is because they're a stock based company or maybe just even a private company. And all the growth of the company benefits the owners of that company, not the policy owner. So there's a whole underwriting, discussion to have there as well in terms of the principles that we want to use.

If we're part owner owners of a company, we want. The company to make [00:29:00] good decisions on who they're underwriting. So that's another whole other side of it that sometimes people don't realize. There's I'm buying something from somebody and I want them to, I want, I want a deal.

It's there are no deals. And if you're the owner of the company, you're part owner of the company, do you want everyone to get, you want people to start getting deals or do you want them to be underwritten fairly so that the company, everyone that's the part of the company benefits.

John Montoya: Yeah. The word that comes to mind is integrity.

You want to make sure that the company's gonna be around for a long time, and you, yourself, of course, want to make sure that you're gonna be around a long time to benefit from everything that goes into a whole life policy. And when you're thinking about your financial situation, you, you wanna approach it with the utmost integrity possible.

And I. You know what? What's the best way to do it? Be serious about it. And again, seek out advice from [00:30:00] an experienced advisor who not only knows the differences between term, convertible term the. Various different life insurance policies like Universal and whole life and, the different flavors of uls, but they also walk their own talk.

I think that's the most important thing. That's right. Because so many advisors Your typical financial planners, they really don't walk their own talk. I shared in a previous episode how I met with one financial planner and he referred all his life insurance business out to a dedicated life insurance advisor.

And he couldn't tell the difference between, he couldn't tell me the difference between a whole life policy and a Universal and. If this is the type of person who's giving general financial advice you may wanna go seek out an expert on your own and you know that's what we're here to do is give you the.[00:31:00]

Most thorough advice that we possibly can based off our own experience, and that's what we're providing for all of you. You go through all these episodes that we have on this show you, you're gonna learn far more than you probably ever care to, to know about life insurance and specifically whole life.

But it's going to allow you to make better decisions. About your financial situation. Correct. And at the end of the day, we trade time for money. Invest a little time in yourself and in learning about life insurance and the different products available and you're gonna realize a more fuller financial picture than.

Doing the opposite. So by, by life insurance the right way is basically what I'm trying to get to.

John Perrings: I think that's about the best way to sum it up.[00:32:00]

Great. If any of this is resonating with you we sure would appreciate if you gave us a five star rating in your podcast app. And if you wanna find out how this could apply in your specific situation and in your life, you can just head over to the TheFifthEdition.com and you can schedule a free 30 minute consultation with us.

No obligation. We can talk about you. And and see how this could create some value in your financial life. Good idea and good episode. John Montoya. Glad we talked about it.

John Montoya: Absolutely. Thank you everyone for listening. We'll catch you on the next episode.

John Perrings: Take care.