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As you work to implement the infinite banking concept in your life, you want to make sure, number one, that you have the personal discipline to build wealth.

That's very important.

All right.

And #2, of course you want to make sure you get an understanding of what's going on so you know what to do.

And this is where coach can help you.

So make sure that you have a good coach that understands the process of building wealth with the infinite banking concept.

Finally, #3, make sure you have the right kind of life insurance with a mutual company and that the policy is properly designed to help you build wealth in an efficient manner.

And a good coach can help you here as well.

But you should have a basic understanding of the types of life insurance yourself so that you understand what's going on.

Well, let's look at the different kinds of life insurance together.

Basically, there's two types of insurance, term and single premium.

And you see these represented on the different sides of the scale here, term insurance on the right hand side and single premium insurance on the left.

Term insurance is essentially renting life insurance coverage Based on the mortality tables and the calculations made by the actuaries of the life insurance company, they know how much they need to charge you in order to provide a death benefit to your heirs in the event that you die within a specified time frame.

Well, generally speaking each year you live you're more likely to die.

So what's happens every year to the premium on a one year term policy?

That's right, it increases every year.

You can see that by the red stair steps here.

Now paying the yearly increasing premium isn't real fun.

So insurance companies usually offer level term policies which are just that level premium payments that are guaranteed not to rise during a specified period of time, usually 10 to 30 years.

So right here you see a representation of that here in the orange.

Essentially the insurance company is saying instead of facing these ever increasing premiums, you can pay a little bit more than you would have to pay for one year coverage.

Right now you can see that by the orange area, it's higher than what the red would be to start out with and we'll use this extra to offset the higher premiums that would be due as you get older.

So you can see that the orange then can dip below the red as you get older and just keep you with a level premium for those years.

Problem comes when the orange line ends, now your premium jumps back up to the red.

So that's what term insurance is all about.

Now before we cover single premium insurance that the single premiums over here on the left, let's take a look at some types of insurance that are based on term insurance.

First of all, there's universal life insurance.

The universal life insurance is essentially one year term insurance over here on the left and a cash fund.

All right, This means that you pay premiums for your term insurance plus whatever more you want to pay in a premium in a given year goes to your cash fund which earns a rate of interest and this rate fluctuates.

But sometimes the insurance company will provide a minimum guaranteed interest rate.

Many insurance agents will tell you that the benefit of universal life insurance is that when you die, your heirs will get both the cash value and the death benefit.

This is because universal life cash values are completely different than cash values in a traditional whole life insurance policy.

We'll discuss this a little bit more later, but in my opinion they should come up with a different term for universal life cash values.

Universal life insurance was put together in the 1980s when interest rates were high.

And so it looked good because you could earn high rates of interest on this cash fund.

And the growth of the cash fund then was designed to offset the ever increasing cost of the term insurance as you got older.

But Even so, you know interest rates are a lot lower than they were in the 80s.

But even with them being high back then, R Nelson Nash says when he first saw the universal life policy, he ran some illustrations.

They kept falling apart when the insured attained age 65 to 70, he says.

The cost of the one year term became prohibitive at the advanced ages and ate up the cash fund from that point forward.

So when these people got older, their cash funds started going down.

Not something you really want at that age.

Now there's some variations of universal life, notably variable universal life and equity index universal life.

With variable universal life, you still have the one year term insurance here and the cash fund over here.

But the policy owner can choose between some options provided by the insurance company as to where the monies in the cash fund are invested.

And these choices usually include stocks, mutual funds, which are assumed to offer a higher potential for return, but they also offer a higher potential for loss.

So when 2008 came along, we saw many people that lost a huge chunk of their universal life cash values overnight.

Some had to pay extra premiums to keep their death benefit on the term insurance from dropping.

Not Very Fun.

Now Equity index, universal life insurance, another kind of universal life insurance.

It's actually pretty close to variable universal life insurance, but instead of investing the cash fund directly in stocks and mutual funds, they invested in the index of those stocks.

So there's not a huge difference there.

Well, the insurance company will sometimes offer guarantees such as a minimum interest rate with this type of a policy, but they also cap the profits you can earn.

And there are several strict conditions such as if a premium payments late then you can lose the minimum guaranteed interest rate etcetera.

So basically Universal life insurance is an all in one BI term and invest the difference vehicle.

And For more information on this, you can watch the videos regarding BI term and invest the difference on our website.

But is Universal life insurance a vehicle you really want to depend on as you build wealth?

And based on what we've just covered, the answer is no.

Now let's go back to our.

Transcribed by transkriptor.com