Hi. It's Kim Butler, and today Todd Langford and I are gonna do all whole life one zero one. Now does that seem kinda funny for whole life friendly agents? Yes. And we're gonna do it anyway. Todd? Any thoughts before we dig in? No. You know, this is just an interesting thing. It's just a hard concept. I think sometimes to get across to to clients. It's a hard thing for sometimes us to understand as advisors too, just the power that exists in the in the policy. And so we're trying to break it down in a simple way and use an analogy, I think that'll that'll kind of fit and make it clear into how this actually works and why we use participating whole life insurance. Awesome. Well, I've got my handy little pen. Let's see how well it works, and I'll let you talk away. Okay. So while life insurance whole life insurance is more like a savings vehicle. It's really not an investment vehicle. I'm gonna use an investment in the analogy just because I think it'll help clarify things. And I'm gonna use, an example of Coca Cola stock. It'll just make it easier. So Think about this. Why if I buy Coca Cola stock, why do I get paid a dividend? And the reason is, as a stockholder, I'm a partial owner of Coca Cola. So their profits get distributed in the form of a dividend, to me, whole life insurance works on that same premise. The reason I get a dividend from the life insurance company is because they have to share their profits with their policy holders who are actually partial owners of the life insurance company. So when we think about the dividend, the dividend with Coca Cola is an example. Is it guaranteed what it'll be? Nope. No? So it's based on whatever the profits are each year. The same thing is true with my whole life insurance policy. The dividend is not guaranteed because we don't know what those profits are gonna be until the end of the year, which is where they declare their dividend. Right? So they pay out dividends based on profits, which is an unknown, and those vary. So there's no guarantee on that dividend play, amount. So in both cases, with Coca Cola stock, with my whole life insurance policy, the dividend, and either one is not guaranteed. Now let's go back to the example with Coca Cola Stock for a minute. If I were to get paid a dividend, say, last year, And I do what is typical, and that is to roll that into additional Coca Cola stock. So that dividend bought more stock And now this year, Coca Cola has a bad year, and it loses money. What happened to the dividend I got paid last year? It's gone because the stock went down. Right. So it lost value. This is where one of the big differences is with a whole life policy. And that is once while we don't know what the dividend's gonna be because that part's not guaranteed, once it become well, this is paid, it becomes part of the guarantees. It resets the floor, so it's guaranteed not to ever lose value from that point on. So a big difference there. While we don't know what it's gonna be, we know that once it's paid, it resets the floor. So let's think about that a minute in relation to the guaranteed cash value in the life insurance policy. So here in this life insurance policy, we see our base guaranteed column, and zero in the first year, zero in the second because this policy is, I actually showing just all base just to make it a little easier. On the left hand side is just so we're clear. Yes. So as we go down through here, what we what we see is as the policy increases along the way, This is all just pure guaranteed base premium. It has no dividend affecting it. Once a dividend gets paid, the base guaranteed cash value column is at that point guaranteed to be more than what's on this illustration. It reset the floor. And I think a lot of times what we think about and what certainly what our clients think about when they see the base guaranteed cash value column, is that while it may pay the illustrated amount for a while, and we look over here, say, on the net cash value column, Those are the illustrated values. And let's go down there to the tenth year, and we see, three hundred and sixty three thousand dollars at that point in time. Three fifty three. Sorry. Three hundred and fifty three thousand at that point in time. And so what we think about is, wow, what if we earned all the way down to here? And now the insurance company had some issues, and it could drop to a hundred and eleven thousand seven hundred, which is the number in the base guaranteed column. It can't do that. Because at that point in time, it in that tenth year, if it paid out those dividends, just like that along the way, then the floor is three hundred and fifty three thousand dollars, and it's guaranteed to go up the next year from that. Based on whatever the guaranteed cash value increases, not a percentage, a dollar amount increase, which is also really important to understand. With some other products outside of whole life insurance, their guarantees are based on a rate. And so it's a rate of increase but what we don't know is what are the expenses, what are the mortality charges, what are all those other pieces. So while the rate may be guaranteed to go up, The expenses could consume all of the gain. In a whole life policy, the increases on the guarantees or a dollar amount net. So this would be the amount that they would increase when we look at that. So a big difference between the two Coca Cola stock and a life insurance policy dividends because again of the way the guarantees are around it. Great. Oh, hope hopefully, this clarifies the dividend piece and makes this a little more understandable. Anything else you wanna say just in light of death benefit increasing or any any other pieces of this illustration? Sure. I mean, that's an another obvious huge piece is the fact that our death benefit is also increasing because as those dividends in this case are structured to purchase additional paid up additions, which are kinda like little additional, policies. It pushes the death benefit up each year by those paid up additions. So we have an increasing death benefit over this time frame. Now one of the things, also that we may wanna talk about is a little interesting, there are people out in the media that say things like, oh, you, you know, you get the cash eventually and you don't get any of the death been fit. But what you see here is the cash grows over this time frame, and so does the death benefit. So while this started as a million dollar death benefit. Here, we'll look at that same tenth year. If death would occur, a million five hundred and seventy eight thousands paid out. So, yes, that is the base death of benefit. Was actually more than what the cash value is. So, you know, some people say things that, aren't totally true. And do you wanna talk about endowment a little bit? Sure. So when we get to the bottom, one of the things that happens with our life insurance policy The way the guarantees are structured is that in such a way that if it went to the guarantees all the way out, then at the end, the cash value would be the same as the death benefit. So in other words, a million dollars, and we see that down here on our base guaranteed cash value. So that's that's the way the policies are structured. That's what has to happen a whole life policy, so they would endow it at, you know, at age a hundred and twenty, in this case, eighty one years out, meaning they'd pay the million dollars out, whether you were alive, or whether you died. At that point in time. But what we see on the right hand side, the net death benefit is actually twenty four million three hundred and seventy nine thousand dollars. I'd say that's a little more than the million dollars that we started with. So the idea that it we don't get both the value of the growth in the policy and the death benefit, I don't completely understand where those numbers are coming from because we can clearly see it on the policy. Now, one of the things too that we wanna look at and and talk about is I think the difference between the guaranteed and non guaranteed, do we talk about the guarantees? I like the client to know that the guarantees exist. Right? Because what else has a guarantee? There's no other product, that has a guaranteed growth, a guaranteed amount over time. And so we shouldn't shy away from that. At the same time, if we're making a comparison of a life insurance policy against another asset, It's kinda silly to use the base guaranteed cash value column, unless we're gonna compare it against their guarantees. Right? Which I'm perfectly fine with, and you think about, while again, this is a a savings vehicle, not an investment, we think about a market asset, the only thing they can guarantee is minus a hundred percent. So this base guaranteed column certainly exceed whatever that was on anybody else's guarantees, but what typically happens is people wanna guarantee their gross hope that happens in the future against the guaranteed life insurance, column. That's not really a fair comparison. So I'm perfectly comfortable, using a conservative illustrated value over a long period of time and the net cash value with dividends, based on the way the company determines what those might look like into the future based on real, values, real dividend paying that they did this year, forwarded all the way out into the future, not some super hypothetical idea. Right? Fabulous. Anything else you wanna share? No. I think that really, simplifies some of the pieces and parts here. Hopefully, that helps your understanding and gives you, a way to explain some of this to your client as well. Thank you very much.
