If you missed out on the December open enrollment for January coverage, don’t despair. You can still enroll for a February 1st effective date if you enroll before January 15th.
Fill out this contact form so we can help you get started. We will contact you with quotes on different levels of coverage and can complete your enrollment in as little as 30 minutes.
Most people incorrectly look at life insurance as an expense- Actually life insurance is both an asset and a asset class on it’s own
Let’s start with the definition of an asset and an asset class.
An asset is something you might pay for today and hope for some cash flow in the future. Insurance is like this. The cash flow is contingent on some event — it is clearly an asset. An asset class is a group of assets that have common characteristics. Investors traditionally view asset classes to include things like stock, bonds and real estate.
Like other asset classes, insurance provides the contract holder with cash flow under some specific circumstances. The timing and size of the cash flow are quite different from traditional asset classes, like stock and bonds. So, insurance deserves its own category and is more similar to options than stocks or bonds. Insurance is unique in a return and risk sense. Distribution of return is highly non-normal. Insurance doesn’t conform to traditional asset classes.
What asset class is insurance most like?
They are most like option contracts. Options are in their own asset class — derivatives — insurance can be viewed in a similar way. If you take a whole life policy for example it has a cash value. We can dissect the whole life policy into two components — the cash value is one – it may look like a bond. The second is the insurance part, the contingent claim that will pay off. That’s the derivative part.
Investors should never view insurance as a stand-alone product. In any and all cases it should be associated with some other asset class, whether it’s your house, or outliving your assets.
What is the advantage of recognizing insurance as an asset class?
It allows investors to better understand financial products. For example, whole life insurance is actually two asset classes in one. The first asset class is the cash value, which typically behaves like a portfolio of cash with modest returns. The second asset class is insurance, specifically term insurance in this case.
Given this information, what can an investor do with it?
For one, they can more accurately measure their asset allocation. Suppose an investor has a whole life policy with a $100,000 cash value. And let’s say the investor also owns $200,000 of fixed-income mutual funds and $300,000 stock mutual funds. Most of us would conclude that their asset allocation is 40% bonds and 60% equity.
Understanding insurance as an asset class allows us to see that the investor really has $300,000 of fixed income exposure ($200,000 fixed income mutual funds and $100,000 cash value in the whole life policy). Their true asset allocation is 50-50.
Are there other benefits of thinking about insurance as an asset class?
Yes, understanding that a whole life policy is partly cash and partly insurance allows investors shop around for a better deal.
Suppose a whole life policy with $100,000 of insurance coverage and $50,000 of cash value would cost an investor $70,000 if purchased with a single premium today. Let’s say the investor could alternatively buy $100,000 of term insurance for the rest of their life for the equivalent of $15,000 today. He or she would be better off purchasing the term insurance and investing $50,000 in a bond fund (spending a total of only $65,000) than purchasing whole life insurance for $70,000. Both alternatives produce the same result, but one is less expensive.
But in reality, term and whole insurance are paid for with a series of premiums over time rather than a single up-front premium.
Yes, that is true, but the concept is the same. Whole life premiums are higher than term life premiums because they include a cash value. Investors will often accumulate more “cash value” on their own by purchasing term insurance and investing the extra money they would have been used to buy whole life in a bond fund.
Can investors apply the same logic to other insurance-like products, including variable annuities and equity linked insurance contracts?
Yes. By breaking these products down into their principle component parts, investors will get a better understanding of their true asset allocation and may find ways to achieve the same result at a better price by purchasing the parts separately.
For more information:
Larry Robinson
CA Life License 0D66701
Orange, CA 92868
I’ve been involved in the insurance industry for nearly 35 years and I’ve NEVER met anyone who was OVER-INSURED.
Ask yourself these questions
1. How could you possibly leave “too much” to your family?
2. How is it possible to have ‘TOO MUCH” retirement income?
Here are some examples of premiums that are truly affordable
39 year old male, excellent health and build $500,000 10 year term policy for $18.57 a month
29 year old female- excellent health and build $500,000 10 year term policy for $12.62 a month!
34 year old male, excellent health and build, $250,000 Indexed Universal life earning 8% annually would have $363,583 CASH for tax free retirement at age 67 with a death benefit increased to $432,664
To get a customized quote fill out the form and we will contact you within the next 24 hours.
Are you Self Employed? Do you own a Home Based Business? Do you have an established plan for retirement or are you hoping for some potential pot of gold? Do you know that you can set up a SEP IRA and not only establish a tax deferred retirement account, but enjoy a TAX DEDUCTION on your annual contributions? Take a few minutes to learn more about it.
The Simplified Employee Pension IRA (SEP-IRA) is one that lets self-employed folks have a greater opportunity to establish a solid Retirement Plan that reflects your success as an entrepreneur. Why bother, you might ask, if they can just use regular, non-SEP IRAs? Well, because the Roth and traditional IRAs have annual contribution limits of $5,500 in 2013 and 2014 ($6,500 for those 50 or older). With an SEP IRA, the limit for 2014 is the lesser of 25% of the employee’s pay or $52,000. If your income is $100,000, that’s $25,000. Even for a more modest $60,000 income, it’s a substantial $15,000.
Here are some more details:
The contribution is made on a pre-tax basis, so it lowers your taxable income for the year of the contribution.
The value of the account will grow, tax-deferred, over time.
When withdrawals are ultimately made in retirement, they’re taxed at income tax rates, not long-term capital-gains rates.
You are ALWAYS 100% vested in the accounts, meaning that the contributions made belong immediately to YOU.
SEP-IRAs using Fixed Index Annuities are GUARANTEED to never lose money!! They are safe, secure investments. Many have Bonus interest during the first 5 years of 8% or even more.
The SEP IRA’s large contribution limit offers flexibility that’s good for businesses with variable cash flow, so that more substantial sums can be contributed in good years and less in not-so-good years.
Early withdrawals will face a 10% extra tax if the withdrawer is younger than 59 and a half.
Beginning at age 70 and a half, required minimum distributions must be taken annually, as with traditional (but not Roth) IRAs.
I am a registered California Life, Health, and Annuities Agent and Professional Tax Preparer with more than 33 years of Insurance, Financial Investment, and Tax Planning/Preparation. The SEP IRAs that I offer are through the top insurance companies in the US.
Contact me by phone or fill out the information form below to find out how to establish your retirement plan.
Larry Robinson
CA License 0D66701
Tax Preparer ID: P00817312
714-561-1138
Would you like an EXTRA $2000 a month or more in 2014?
There are many ways to make income off the internet, and learning how to harness this powerful communication tool may be one of the best steps you take in your career or small business. The internet is a great way to expand your sales, start an online job or promote your services. In fact, more and more people are turning to legitimate online opportunities to earn supplemental income, make extra money or even replace a full time job. While you might start slowly, you can build up your online presence and income sources until you have a large chunk of money coming in each month from online efforts that are paying off.
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We have a very uncertain global economy. Job security is a quaint term that is almost obsolete. So many people recognize this but have NO PLAN B. An Online Business is perhaps the most used vehicle for changing your financial future and security. Have you been curious about starting an online business, but didn’t know […]
I see far too many businesses, new and old, trying to sell their products and services online, and doing it all wrong. If you think it’s the great features of your product that will persuade people to buy, you have it backwards.
People buy from you, only when they can envision the benefits your product can bring them. That means buying is actually an emotional decision in nearly all cases. If you don’t believe that, think back on any recent online purchases you have made.
What really made you click the buy button on those last few products? Was it because the merchant explained how the product worked? Or did that merchant show you exactly what could be in it for you. Perhaps how it could somehow make your life better or easier?
This same “selling logic” applies offline as well.
Why do some people buy a BMW or a Jaguar? If you think it is for comfort, you should watch their ads again. The main selling point is the prestige of owning a luxury car. Luxury car ads emphasize these points in their sales presentation to arouse emotional desire in potential customers.
Now that we know people buy primarily on emotion, we can pinpoint 12 specific reasons why people buy…
1. to make more money
2. to save money
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4. to be like others & have what others have
5. to have better than others
6. to reduce work or effort and save time
7. to be more comfortable
8. to get rid of pain
9. to learn & satisfy curiosity
10. to have fun
11. to feel good about themselves
12. to get a bargain
Additionally, you can add a “so that….” to the end of each one of those 12 reasons. For instance, we don’t buy a time-saving device just to save time, we buy it so that we can have that time to do something more desirable or more beneficial to us in some way.
We don’t buy a money-making plan just to get more money. People don’t want more money just to have the money, they want more money so that they can have more security in their lives. They also want more money so they can buy something else they would love to have.
Now let’s apply these principles to your product or service. Do you truly understand what the “so that…” for your product is? There might be different “so that’s” for different groups of people and if that’s the case, great, because you have more than one market and the opportunity to make more sales.
Once you realize that there is emotion attached to buying, you will understand that how people feel when they are considering a purchase makes a big difference to the likelihood of you making a sale. If you can tap into these feelings when you advertise your product or service, your chances of making sales will skyrocket.
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