24 Replies to “What is Whole Life Insurance? How does Whole Life Insurance work?”

  1. The only thing i remember about life insurance is that i bought term and i cancelled year later i didn't gwt any monwy back. My mom boufht whole she called and recieved money back. I rather recieve money back

  2. After listening to this, google search how much banks own of WL policies! Mind blown billions billions billions!!! Search Barry James Dyke!

  3. @10:00 minutes you say: The death benefit rises with inflation, the death benefit is going to rise as you pay your premium over time, that should keep up with or better inflation. If you buy a life insurance today for 500,000 is a lot more than what 500,000 dollars would be in 20, 30, 40 years. "

    If the death benefit is a guaranteed 500,000, then when you die the insurance company will pay your beneficiary the 500,000 death benefit right? Does the insurance company increase the death benefit to compensate for inflation? Let's say you take out a life insurance policy for 500,000 dollars that ends up paying out in 30 years at 3% annual inflation. 500,000(1.03)^30 = $1,213,631.00 . So in 30 years 500,000 dollars now will be the equivalent of 1.2 million dollars. Will the insurance company payout 1.2 million dollars? Or will the just pay you the $500,000 dollar death benefit which is worth significantly less money. I think it comes out to 206,000 if you use 500,000/1.03^30

  4. 5:50 to 6:30 sounds like you just said – They will give me (a policy holder) a loan from the insurance companies general funds and use my actual cash value as collateral (meaning I'm not borrowing fro myself). Therefore I DO NOT REDUCE my cash value AND I receive a dividend on that Actual Cash Value amount (regardless of the outstanding loan amount)…

    Using your numbers – if I had $10,000 Actual Cash Value and the dividend were 3% – I'd see a $300 dividend for that year … and in the same year – if I took a $2,000 loan at a 5% interest rate (paid over 12 months) – I'd theoretically have access to control $2,000 and only pay back $55 in interest – essentially ending in a NET $245 position all the while maintaining my benefits under the insurance policy.

    I would NOT have to pay IRS taxes on the dividend NOR would I have to pay taxes or penalty on the loan disbursement!

    Is this real?

  5. @7:00 minutes you talk about arbitrage and you give the example of a 5% dividend on your 10,000 and a 3% loan interest on the 2,000 dollars. That gives you a 2% arbitrage. My question is, how common is it to have the dividend interest greater than the loan interest? I have read that a lot of insurance companies charge 8% loan interest. So if you are making 5% on the dividend but losing 8% on the loan interest then you are in a negative arbitrage. Can someone chime in and help me out?

  6. If you liquidate the cash value and the policy collapses. What are the tax consequences? If the loans are treated as distributions?
    What is are the overall mechanics of this happening if nothing is paid back towards premiums or the loans?

  7. Whole Life insurance should have a level death benefit, it does not increase over time. This is one of the key aspects of whole life. I assume since Jim Evans says that the death benefit increases over time with whole life, he is referring to that held with mutual / participating companies. And, that would only happen if dividends are used to increase the death benefit via paid-up additions.

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  9. EVERY single whole life policy that I have come across have 3 things in common. THESE ARE SO IMPORTANT!!!!!

    1. No money is accumulated for the first 1-5 in the cash value savings account. (I've seen 1 that was 20 years) Would you put money in a bank and come back 4 years down the road with no money in it and be content?

    2. If you decide you NEED to take money from your cash value account you have to pay it back to the company with a 5-8 percent interest rate. (On YOUR own money!) Does it make sense to borrow your own money!?

    3. If you DIE you LOSE your cash value! The company gets to pocket all of that money! They will ONLY pay the death benefit! If you were paying for 2 things your entire life and you only got 1 at the end what would you call that?

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