The 3 Factors That Radically Impact Your Policy Performance

Hey everyone, welcome back to the channel. It's Demetrius, Wealth Strategist and Team Lead here at Better Wealth. And in this video, I want to answer the question of how can you have two different life insurance policies as the same company looks so completely different. And the reason I bring up this question is simply because we all expect different companies to produce different results. That just kind of makes sense, right? There's different fees, there's different dividend rates, there's different products, all of that, right? It just makes sense. But what most people don't realize, or maybe we just don't expect, is that two policies at the same exact company can look literally nothing alike. even if you're showing the exact same premium. Like I've had clients say something to the effect that, wait, my friend showed me their pen mutual policy or their mass mutual policy, their guardian policy, whatever it may be. And it looked amazing. But then when I look at mine, for whatever reason, my numbers don't look nearly as good. Like clients can kind of compare themselves to other people's policies. And that really shouldn't be the case because whenever they do that, what's happening is you're not comparing apples to apples. It's not that your policy or their policy is broken or right or wrong. It's just that it's really hard to compare apples to apples because of all the variables that are at play. So what we're going to do throughout the rest of this video here is just kind of walk through the variables that make all the difference. So even if you're using the same company, you're using the same premium, you're using the same time horizon, we're going to walk through all of the variables that really make the biggest difference within these policies. So first, we have the policy design. And this was a pretty big one because a policy can be designed to maybe. minimize the cash value and maximize the death benefit. And maybe there's reason behind why you've done that policy could be shown to have a little bit of a balance between cash value and death benefit, right? Or a policy could be optimized for maximum early liquidity, long-term cash value as well. And you can do all of those three types of designs at the same company. The outcome just ends up being radically different simply based on how the policy was engineered. And it really based on. what it is that you were looking to accomplish from the very beginning. Now, the next thing that we want to look at is the age of the person that's getting a policy. And so in this particular case, every single thing is going to be exactly the same. You'll see that both of them are preferred health rating. Both of them are putting in the same amount of money. The only difference here is that the age on this particular policy is just completely different. And I want to just highlight the difference in cash value on the early term and a little bit long term when you look at the difference in age. So the one on the left is for the 35 year old. Both of them, again, are putting in $100,000 per year. And what you're seeing here, end of year cash value for this one, we're looking at $83,525. Whereas when you look at the 55-year-old male, we're seeing that the cash value by the end of the year for this person is $78,647. And then we scroll down a little bit further. You see year 15, $1.5 million had been contributed to this policy. We're seeing that there's about $2.145 million available in cash value by that point. work. Well, over here, we're looking at it. closer to $2 million of cash value by this particular point in time. And then if you take a look at the death benefit, it's significantly different long term, almost $3 million different, where year 15 for this 35-year-old, by the time that they're 50, we're looking at 6.6, almost $6.7 million of death benefit. Whereas over here, we're looking at $3.8 million of death benefit for the 55-year-old who is now 70, 15 years down the line and the reason for that really just boils down to When you take the same premium contribution going into a particular policy in the core of the policy in and of itself, and the fact that a portion of those premium dollars are purchasing death benefit, the cost of insurance for a 55-year-old is simply more than the cost of insurance for a 35-year-old. When you have less of your premiums going to the cost of insurance, more of those dollars can be allocated to paid up additions, which is one of the main drivers of creating a higher level of cash value long-term. Next, I want to kind of compare the difference between all other variables the same. What if you only change the gender? And so in this particular case, we're showing a female on the left and on the right, we're showing a male, both age 40, both contributing $100,000 per year into this particular design. And so again, you'll see early term for both of these policies, you're seeing that there's very similar in terms of their cash value, but the woman, the female is going to squeak out a little bit more cash value. simply because the cost of insurance for a woman is less, especially when all other variables are the same. It really just boils down to mortality tables and the fact that how life insurance companies are looking at it is there's less of a risk to insure a woman than it is to insure a male. And the higher risk there is, the more the cost of insurance will be because of that. It doesn't make anything right or wrong. It's just a matter of the differences that we're seeing there. Okay. And so if we scroll all the way down and we look at year 15, again, $2.1 million for the lady, $2.1 million for the man as well, except it's a little bit more efficient, $2.149 over here for the lady compared to $2.138 for the male over on the right-hand side. And then lastly, we're just going to look at the slight differences that can come with a different health rating. And so in this particular case, both people are males, both people are 45 years old. The only difference is The one on the left, we're looking at the very best health rating of this particular carrier. The one on the right, we're looking at a standard health rating, just kind of middle of the road. And so again, if you look at long-term, you'll see the same amount of premium gone into the policy, 1.5 million. And the one on the left, we're seeing $2.14 million in cash value. Whereas the one on the right over here, just at a standard rating, we're looking at $2.094 million. And so the difference between the two is not necessarily vast, but if there's other health issues and you maybe perhaps got a substandard rating or something like that, the difference between a preferred plus versus maybe like a, what we call a substandard table two or substandard table three or four or whatever may end up having a larger difference, meaning that the cash value could be significantly lower if that were the case. And the last factor that I'll talk about in this video in particular is your goals. Like, what is it that you're trying to accomplish? Right. Are you trying to maximize cash value? Are you are you more so focused on the legacy or estate planning and the long term death benefit? Like whatever your goals are, that matters likely more than anything else when it comes to the structure of your policy, because that dictates the structure of your policy. Right. Those sorts of things, whether it's cash value or legacy and estate planning, they're going to require. very different design choices. So even when both policies are good, one may be optimized for income and the other may be optimized for a legacy. But when that's the case, the policies are not going to look exactly the same because they can't when the goals are just different. And here's a part where most people forget or maybe just don't realize. And it's that, well, you and I, we may be looking at it from a standpoint of the policy being a savings and growth vehicle. The life insurance company, they're looking at it in terms of the risk that they're undertaking. So they're looking at your policy from a standpoint of how much are they liable for? When are they likely to have to pay out the death benefit? And how can they remain profitable while also fulfilling on those promises? Right. And that's why they have these strict rules about how much you contribute, how much insurance is required, how much how the policy has to be structured and things of that nature, because they're looking at it from a standpoint of of risk, which gives us the benefit that we see within cash value. And also to pause, just kind of back up a little bit, because if you've ever compared two policies and thought to yourself like mine doesn't look as good, you're probably at least probably missing one of these variables. You're missing one of the things that I talked about before. We're missing age. You're missing gender. You're missing health rating, the goal, the design, something of that nature, because even changing just one of those variables can can shift the entire picture. And usually what's happening is more than one of those variables is being shifted from person to person. And so let's say you have a 45 year old man with a standard health rating. They compare their policy to a 30 year old woman at a preferred health rating. That would be like comparing a Honda Civic to a Tesla Plaid and asking why they accelerate differently. The difference is in how they were designed, how they were engineered, the ultimate type of person that car was made for, right? Does the car accomplish the result that the buyer wanted? And I would even argue that that's probably more important than anything else when you're Look at me at it. the two. And so here's the idea that I really want to drive home. I want to drive home the fact that there's no such thing as a bad policy on paper, but there is a such thing as a policy that doesn't match someone's goals. That's the standard that we should be evaluating when looking at life insurance. That's the standard that we should use when we're evaluating life insurance, not does this look good, but is this right for me based on and anchored in the goals that I have. for myself and for my family. Hey, it's Demetrius. Just wanted to pause the video real quick, because if you're a high earning professional, an entrepreneur, someone who just wants more control over your money, we offer something called a clarity call. It's a one-on-one conversation where we walk you through how an overfunded whole life insurance policy could help you build safe, liquid tax advantage foundation for your wealth. There's no pressure, no fluff, no hype, just real clarity on whether this strategy is right for you. So go ahead and click the link in the description or the tag comment below. and we'll walk you through exactly how we can help you. Back to the video. And so if you've been looking around, you've been comparing illustrations, watching YouTube videos, reading as much as you can, and you're thinking to yourself, maybe perhaps I've missed the window. Maybe I'm not healthy enough. Like I would say, and I would encourage you to not count yourself out because you could be surprised what's possible at your specific age, with your specific health, and your goals, if only you spoke with someone who could really walk through all of that for you and with you. And so if you want clarity on what's possible for you, Go ahead and just schedule. a free call with someone on our team. The link should be in the description or maybe the pinned comment below. And in that call, here's what you can expect from us. You can expect us to walk through your goals. Like what do you want and why have a full fledged conversation about that? Show you real numbers. If it makes sense to move forward with, from that original call and then help you figure out which design actually fits with what you're trying to accomplish. Thanks for watching. I'll see you in the next one.