How Insurance Works

Did you know Life Insurance can be used as Investment? (Life Insurance Explained Part 2)

Did you know life insurance could be used
as a Tax sheltered investment? Lets talk about that Hello viewers, welcome to another episode of Let’s wake you up
if you have not seen my last video on life insurance,
I have provided a link below in the description so make sure you watch it first, before jumping
into this video In today’s episode, I am going to talk about
permanent life policies In simple terms, permanent life is an investment
product sold by only a few reputed insurance companies
in Canada which can continue until the year you turn
100 such policies, not only comes with life insurance,
to protect the investors It also comes with Investment accounts to
accumulate cash values as times goes by Again permanent life policies can be further
classified into two types whole life and universal life
In whole life policies, the monthly or annual premiums are fixed
which gives the client with a basic coverage and as the time passes both his cash value
and death benefit grows after a certain period of time, if the client
withdraws the cash value, the policy gets cancelled
and the client will no longer have protection let me show you a quick example of
how whole life policy works lets take an example of a age 35 male who
is non-smoker and he is paying $300 per month for the next
20 years now at age 55, which is at the end of 20th
year the payment stops upto this point he has paid a total amount
of $72,000 the best thing is that he has death benefit
from day 1 which means he is being protected from day
1 with $130,000 so now at the age of 55, he has a death benefit
of $240K which increases to $800K at the age 100
Now as I said before, whole life policies also accumulate Cash equity known as cash
value so at the end of 20 years, he has a cash value
accumulated of $99,000 against the total payment of $72,000
In this case, remember the orange line indicates Death benefit, and the green line indicates
the cash value lets look at what happens at age 65
so at age 65, if the client is planning to retire
he would have a cash value of $187,000 on top of it, he will have a death benefit
of $341,000 remember he has only paid $72,000 and against
that at retirement he is getting benefit of $187,000 in cash value
Now at the age of 85, lets say that the client died at the age of 85, he has a cash value
of $475,000 and a death benefit of $577,000
So if the client dies, the beneficiary gets the death benefit of $577,000
Let’s say that the client decides at the age 79, he wants to take out the cash value of
$370,000 the policy gets cancelled and that the client
will no longer have any death benefit so the best idea in this case would be to
take a co-lateral loan against the cash value instead of cancelling the policy
On the other hand in Universal Life, which is one of the most flexible policy
where the client can increase or decrease the premium up to a certain level
choose different types of investment option and also increase or decrease the death benefit
to a certain extent the best thing about Universal life is that
you can still have the insurance policy active while you withdraw the cash value or convert
it into a payout annuity during retirement without affecting your benefits at retirement
lets look at the universal life policy where you also have the death benefit and the cash
value now for the same client age 35 male non-smoker
he is paying the same $300 per month for next 20 years
at age 79, he accumulates $212,000 of cash value
whereas his death benefit is $630,000 so at the age of 79, if he dies, his family
will get not only the death benefit but they will also
get the same time the cash value
now here at age 79, if the client decides to take out the cash value, he can just withdraw
the cash value and use it for his retirement income
whereas his death benefit still continues to grow
the best thing about permanent life is that it can be combined with term insurance to
cover for responsibilities up to a certain age and also
it can be designed to pay off the policy with in
20 years or even less without being a burden on the client
In my next video, I will be showing you, How you can create, Generational Wealth using
Permanent Life Policies So dont forget to watch my next video
If you have liked this video Dont forget to subscribe to my channel for
more videos thanks for watching, see you next time

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