Is Whole Life Insurance In Canada A Rip Off?

Whoa, what? You mean to tell me you got ripped off in some whole life insurance? I don't know, man. I'm not so sure about that. But it could be the case. Maybe there was something that didn't work out so well for you or you heard of somebody who got, you know, railroaded on some insurance contract because it wasn't what they wanted or it wasn't set up correctly. Well, we're going to talk all about that, so stick around to the end because we're going to talk about some actual examples that we've seen where the contract didn't meet, what the obligation for the client really was. But more importantly, we're going to really uncover how this can happen for you and how it might show up in your life and it may not be where you expect.

I'm joined today by my incredible friend, Vern. Vern McCarty. We're going to talk all about getting ripped off on whole life insurance. And again, it's all about peeling the onion. When you peel the onion, there's all kinds of layers back there. You got to look at what's behind the curtain. And so we're going to dig into some of those things and where this actually shows up for people. Not always where you expect. Vern, what are your first thoughts on people that get ripped off on whole life insurance?

The first thing that I always think about when I talk to somebody, I do an insurance review or whatever it is and they say, hey, yeah, no, this insurance contract is not a good fit, or the whole life is trash or whatever they have to say. Sometimes they'll just say something like, hey, I have this insurance contract. I'm just not sure if it's the right fit, specifically for implementing the process of becoming your own banker. And that right there is, is hitting the nail on the head. I always say to clients, I go, look, all these products are actually really good. These contracts are great. There's just bad placement. So if I had a specific objective in mind and I got this, any old, whatever term insurance, whole life insurance, universal Life, Part Age 100, Non Participating Policy with values, no values, whatever, there's all these different types of policies. So I might not have the right knowledge, I might not have a really good coach to, to help actually guide me along the process, whatever the objective might be. So now I might wind up with some insurance contract that might be a good policy or a good contract. It just might not be good for my specific objective. So that's generally what I've experienced when it comes to being Ripped off just means I have the wrong tool for the job.

What pops into my head is like a house analogy. So a lot of people, like, you know, if you're familiar with houses, most people have lived in one, certainly been in a couple along the way. Maybe you attended a kitchen party somewhere in eastern Canada at some point in time in your life. Well, you have a house and you know, you want to go buy a house for the family. Well, you have a certain set of objectives that you're looking for for the house. Maybe you need a certain number of bedrooms. There's a certain thing about the kitchen you want. Maybe you need a certain size, maybe you need a double attached garage because you got two cars and a motorcycle and some quads. Whatever it is, you're going to go into that deal with some specific things. Now you might want this, you might be wanting the, you know, the house with the four bedrooms and the finished basement and the deck and the hot tub and all these fancy things. However, you might be on a one bedroom condo budget. You're not going to end up with this on the one bedroom condo budget. More importantly, here's the other thing that happens. You might go and go walk into the property and say, hey, you know what, I think this one will fit. It has most of what we need, but you know, we really need that fourth bedroom. Oh, well, this one down here in the basement isn't really a bedroom and it's not really finished. But with a little bit of extra capital, we might be able to put that bedroom in and then we can turn it into what we want. So again, what are the options that are available, what's the flexibility and what's there? Can you work with it now and then it can grow into the objective you have. So these are some ways that people look at a piece of real estate. And the similar concept can happen when it comes to an insurance contract. And understand, just like a house, they're built differently by different builders. They, they have different features and benefits, they have different trimmings on them, you know, paint colors and different root, you know, asphalt shingles that last for 30 years versus for 15. The same kind of premise about the options available on an insurance contract exist. Maybe there's not as many, but recognizing what is your need going into the deal and then understand that over our lifespan you might have started with this house, the starter house, let's call it, and then things change in your life. You had another kid, you had some of this, you started a business. You're, you need more Equipment, you're getting older, you're making more money now you might need to upgrade the house, you might need to shift or change or add, do an addition onto the house to expand the need. Your objective has changed like Vern talked about. So the same way you would make modifications in your housing arrangement over your life is the same thing you should be thinking about with your insurance. It's important to go meet with a coach, go check in. How are we doing? This is what we originally had in mind where we were at life. Now here, here's what's changed. Do we need to tweak anything, add anything, build another room onto the house? This same kind of conversation needs to happen. So although you might be looking at a contract that was set up way back here, like you said, the objective was a certain thing at that time doesn't mean you got ripped off because it doesn't match to the same thing now. It just means that you might need to make some changes and some modifications or you might need to add some more. Or it could mean that you ended up with a pup tent for a living accommodation or, you know, a camper on a 1979 Ford truck in compared to, you know, the house that you actually wanted. So it's important to be able to meet with someone that can assess that for you properly and you can have a really good discussion about it.

If I was going to purchase a home, I know what houses are, but I'm not a real estate expert, I'm not a mortgage professional, I'm, I want to make sure that I get connected with a realtor or whoever it is, but somebody who actually has experience and who can walk me along the path if they go, oh, you need a house, Hey, I got houses here, let me help you out. Well, hold on a second. They're actually trying to create some sort of a solution. Before they even know who I am, did they stop and maybe ask me some questions about what I value? Do I have a family? How much money do I make? Is this a short term home burn? Are you planning on renting it out down the road? Is this your forever house? What are your thoughts? So in other words, if you're sitting down with a life insurance advisor, God bless you, you probably trust this person and you think, well, they're the life insurance expert, they're going to give me what I need. You tell them that they need life insurance, but who knows, maybe they're just have a different process or they're just trying to make a quick sale or whatever it is if that person is talking more than they're listening, might not be the best fit. Because are they actually getting to know your situation and getting those specific details that Richard was alluding to, like what is the objective, what is the short term, what is the long term? How might this change over time? What do you really value? What do you care about? Are you trying to build up cash? Are you trying to look for a death benefit solution? There's all these different things that we need to do a really good job of gathering information and finding what your specific objectives are so that we can actually craft the proper solution to help you solve the objective rather than just giving you any old insurance contract. And sadly, you're watching this today. You might have been, you might have got caught in that trap where you walked away thinking you had one thing and then you met with Richard, somebody who's really capable and able, and he did a review and you found out, I don't have what I thought I had at all.

It's not that you got ripped off, it's that we didn't have the right understanding, we weren't being able to ask the right questions or we didn't ask the right questions. Oftentimes the advisor who helped put that contract in place, they didn't have any ill will or ill intent. They gave you what they thought you wanted. They gave you what they believe was the best fit at that time in their heart of hearts with their education base, that's what was sensible. Generally. It's not like they intended to do anything wrong or incorrect. It's just that when it, when we actually get down to the real core of it, maybe it wasn't exactly what you need. It wasn't the right fit ultimately. And if you're wondering about this, you want to understand more about how this process works and the types of questions and things, the mindset you need to have to understand how to implement specifically the process of becoming your own banker. Really important thing to do is head on over to watchibc.com, go to watchibc.com and you should see a link down in the description because you can really start to dig into this thing and you'll learn the types of questioning that you need to be asking when you meet with it with a coach about this process. And so circling back to whole life, again being a ripoff. There's another couple of pieces that I want to tie in here because one thing that also people aren't aware of is just how many different houses are on the Market, how many different styles there are bungalows versus two stories versus single floors and all this kind of stuff. Well, if you have something called non participating whole life, which is still sold today, most insurance companies have a product like that on their shelf and they've had it for, I don't know, 60 some odd years or however long they've had it. That is a whole life insurance contract. It has the same foundational contractual elements. However, it is designed really to just be a pure insurance contract. It doesn't mean it's bad, it's not good, bad or otherwise. It just is what it is. It has certain characteristics and so it's non participating. It does not participate and share or get a dividend or share in the profitability of, of the money pool with the insurance company. So maybe it has a, might have a slightly lower premium or something for a certain amount of coverage, but you also give up a lot of benefits. And so again, doesn't make it bad, it just might not be what you really wanted. And so when people think that, oh, they put money into whole life and it takes forever to build the cash value or I don't really have anything available to work with, often what they're talking about is a product type or design that simply wasn't the fit for, for that purpose. And you know, usually we are, we're looking at policies that are like this, that they've been on the books for 10 years or 20 years. And so what you could go and get and look at 10, 20 years ago, the best thing to do is to start, you know when to plant a tree is 20 years ago. The second best time is today. So the good news is you planted a tree. Maybe it wasn't the tree that you ultimately, it's not bearing the fruit you wanted, but the tree still grew, it still did something, it still protected your family over that 20 year period of time. That's fantastic. You can't discount the value of that and the peace of mind that having that insurance that in place creates that it solved a problem at the time. But now with what's available, the type of resources folks like Vern and I and our team have available Again, go to watchibc.com to learn more about that. You can create some very cool custom design programs that are really a fit for flexibility, creating options and immediate access to liquid cash values the moment you start a contract and if you're funding it. Right, right. So again, it's all about understanding and education and the insurance industry as a whole isn't really trained, they're not training advisors to go in and teach this, what we're sharing with you now. They train you to help try to figure out a person's needs and try to match a product, a product to meet some kind of a need without getting into a huge amount of discussion about long term planning and, and what are the things that are going to change over your life over the next 30 years and what else should we be adding in to accommodate for those objectives? I was on a call earlier today with a couple, young couple, great folks. They got two kids, two twins actually. And they have a disability plan with a popular insurance company in Canada with disability and they thought that they also had critical illness. Now these are two different types of animals. It's like a cat and a dog essentially. And you might think you have a cat and a dog, but that's actually the neighbor's cat that just keeps coming into your house through the dog door and eating all the food. And so your brain's like, oh yeah, well we see a cat around here frequently. We must have a cat. No, it's not your cat. It actually belongs to somebody else. So they believe because these products are similar, maybe that they had one of these. The reality is they didn't have one. And so now they're six, seven years in. They remember having a conversation about it with an advisor. An advisor probably was trying to let them know the importance and that they should get it. And he probably quoted them a premium and they chose not to accept. So again, our brain doesn't always remember things the same way after time passes. If you haven't spoke to anyone, hadn't had a regular review, you may not recall a recommendation that was made 10 years ago. I don't know about you brain, but my brain doesn't always remember every conversation I had 10 years ago.

Oh, well, unfortunately Rich, as a young man I was, I took a lot of headshots as a young fellow. So I don't think I have the greatest memory. We're talking about the infant banking concept, implementing the process of becoming your own banker for Canadians. We're talking about critical illness insurance, whole life insurance, we're talking about disability insurance that you can better available to you in Canada. We have a lot of really great companies here in Canada. But you hit a really important point, Rich, that a lot of times people look at insurance when they're buying insurance to protect their family. It's a pretty important thing, right? I'm protecting my most valuable asset that's available, which is my Ability to earn an income. You're watching this video today. You're dependent on your income today. It's not that you can't create financial freedom or passive income and all those kinds of things, but right now your most valuable asset is your ability to earn an income. So it's pretty important to get it insured properly. And you should probably have more regular reviews. You look at these products in Canada, we think, oh, it's just insurance, whatever, I got it for the family. We're all good. People are looking at it like a commodity. I can go online and go to some website and buy life insurance off from a robot. That is madness. You need to be working with somebody. You need to be working with somebody who actually knows your family intimately. They know what you're trying to create. They know what your long term objectives are. You're meeting with somebody regularly. If that person's a hard person to get a hold of after you've signed on the dotted line, maybe they're not the greatest. You know, we're talking about tools to solve an objective. Well, that human being might not be the right human to help you solve your long term objectives. If you have some things that you're trying to accomplish for your family and you want to make sure that you're protected long term. Rich, how many times have you met with somebody who's now in their 50s, 60s, maybe even their 70s, and they're going, I don't know, you know, I had the kids and the car and the house and the wife and the job and the. I was busy. I just got this term 20. I thought it was enough. I didn't know what, I don't really know what it is. And now we're hitting a renewal. Maybe they have a health issue. Our options are now limited. Like if we could have done some things in the past or if we planned ahead, looking forward, thinking long range, all these great things that Nelson taught us to do. If we were doing all that ahead of time, we wouldn't be dealing with these kind of problems and trying to find a quick fire solution to deal with the problem that we have today that we could have prevented had we done something in the past. Right now what me and my family are doing is we're aggressively building our policy system here and we're purchasing new policies as often as possible. Joke with my clients, say, look, I wouldn't coach you to do what I'm doing. I would coach you to build a system that you can implement over time that's sustainable. I know that Somebody could hold a gun in my head and I would. There's no way I would cancel one of my policies. I say to them I can. Not that I'm not saying to pay back your policy loans, but I can backfill a policy. I can repay a policy loan anytime in the future. But what I can't do is jump in a DeLorean and go back five years and pay premium. So I'll never be this age ever again. I'm depositing premium aggressively. I have a ton of term insurance rich, but I also have a ton of, of permanent, participating, dividend paying whole life insurance in place as well. Because I recognize, hey, I'll never be 37 again. The earlier I can start to capitalize, the more value the policy system is going to create long term for me and my family.

Right now I'm in the process of aggressively growing my system as well. And I have a policy under a term conversion right now it's on my wife now. I set up the term insurance probably eight years ago before I'd even proposed to my wife. Or maybe it was right after proposal. I know somewhere in that timeframe it was before we had kids anyway, we were in a particular house and it was before we actually, you know, we bought an acreage. So there was a lot of things that had yet to happen in our life. Many things have happened since that was initiated. But my initial plan intention was number one, I should have this in place to protect us. I need to get it now while she's in good health condition, etc. And I'm putting a seed in place for the ability to convert that into another banking system policy for my family, for the family bank when the time is right and I have the cash flow resources to make it happen. Well, boom, here we are eight years later. Ish. And I'm in the process of initiating that right now. And knowing that I had that ability, I had that plan in mind and I could reflect on it, I knew what I wanted to do. I'm actively trying to increase the amount that I'm able to put into premium that I control in my family system. I get to make a deposit, flexible deposits into whole life policies, multiple policies that I have on my life, on my wife, on my two kids, that I get to control that financial value that's accumulating to do everything in life that I'm already going to be doing anyway. So again, really, really important to understand that there's a lot of capacity here and there's a lot of things that you can do that maybe you couldn't do 20 years ago that we can do now. And you know Nelson Nash, bless Nelson Nash, our mentor who wrote the book Becoming youg Own Banker. We talk a lot about him in our a lot of our training. You can learn more about Nelson when you go to watchibc.com we talk about him in one of our webinars. There he would say the best policy is the one you started now doesn't mean it was the perfect policy and it was everything you had. And maybe there was another one three years later that could have been slightly better. But we don't have a DeLorean and that one's in operation and we locked in your insurability and your age at that time. It's amazing. Now another way that people get ripped, you know, quote unquote ripped off or they believe the perception is that they've been ripped off in insurance is just not having enough understanding about how the insurance world works. Now there's something referred to as permanent coverage. But permanent coverage has these two main category buckets. Whole life is a bucket, universal life is a bucket. But then underneath that there's all kinds of segments. You have participating whole life, you have non par whole life. And then you have iterations of those things. In the universal life bucket you have multiple kinds that you can get. Now here's the thing. Sometimes people will own a ul policy and they will think or understand or believe that it's a whole life policy and sometimes vice versa. Now if you have a policy that's not going to do the things you wanted because it was a totally different machine and structure again different objectives. It wasn't what you what you thought it is. You didn't get ripped off by anything. You simply just didn't do your research. You weren't paying attention. You didn't actually recognize what you were buying at the time. Because we're often thinking about these things as a product versus as a lifestyle. The infinite banking concept is not a product, it is a lifestyle. It is a method of how you think of how cash flows into your life and out of your life. How much of that cash can you control in an entity that's always accumulating and growing for you. And the worst case scenario is that somebody dies. You get taken out by a city bus and a bunch of tax free money shows up for your family. Woo hoo boy, what a great scenario. I mean if the city bus is going to hit you anyway, I would rather it happens. And the tax free money shows up. I don't know about you. Hopefully if you're watching this, you're putting your hand up now. So again, we're not saying anything about these other policies being good or bad, but they're considered to be, quote, unquote, permanent. However, on paper, a lot of these policies, Vernon, we've seen, we're seeing this, we see this in meetings that we have. People show up and they show us a universal life policy they have. And it was set up in such a way where if they would have funded it well, maybe they'd be okay if, and I mean if they got great returns on their quote unquote invested portion. It's basically, it's basically a term insurance policy with a Vegas style slot machine on the side of it. It's like a term insurance with a roulette table. That's really what a universal life contract is. You want to take those risks on and you want to absolve the insurance company of taking the risk and you want to go do it on your own. All the power to you, knock your socks off. But that certainly isn't infinite banking. It's not becoming your own banker. That's an investment vehicle with a whole bunch of risks that you're now accepting the risks of. Now here's what happens in these contracts over time. A lot of them, the cost of the insurance, that underlines everything, it increases each and every year. It's called yearly renewable, term or annual normal return. And so every year that you age, the whatever the insurance amount is, there's an incremental increase in that cost. Now that looks really small in the early years, but then you get out to like 60, 65 and it starts to jump more because you're closer to death. Sorry, didn't mean to like offend anybody, but it's going to happen. So then you get a little bit older, you get a little bit older and these increases start getting more and more and more because the insurance company has to cover the actuarial cost of providing that death benefit to you. That's how they've assessed it. Now when that happens, at that point in time, everyone else has been trained to stop putting money into the insurance. So you stop putting money in. But yet it's costing you more to keep it going. Now if you've built up a reserve of, you know, whatever investments in your slot machine, in your, in your Vegas style, you know, insurance contract here, that has to come out, those values have to come out and pay for the cost of the insurance. Well, if we have A market downturn or you didn't fund it very well, or that these numbers don't line up, which you will not know and find out until age 70. 75. 80. 85.

Get the cash call.

Boom. Yeah. Oh, hey, get. Sorry. To keep that life insurance tax free there for your legacy and protecting you. We're going to need $80,000 to keep that going. Can you just send us a check? Yeah, Rich, sorry, it's not going to happen. These, these are designed to implode. And so if you, if you have one of these, I would think you would want to know about it. Again, they're not bad contracts. It depends on what are you doing as a policy owner. How much education do you have about it and is it actually going to meet the objective? So when you begin to understand these things and you meet with people to discuss them, you can get a fresh perspective on. Is the thing that you have what you thought it was? Is it going to do the thing you believed it was going to do? And are you doing the things that are necessary to make that a reality? So you can't have a conversation and say that, you know, you got ripped off on something if you yourself are abdicating the responsibility because you're the one that moved forward with it because you didn't ask enough questions. So what's the lesson? What's the teaching point is you got to get off your butt. You got to watch videos like this. You got to keep engaging in the learning process and important things that are important to your financial life, like your legacy, like protecting your family, like growing capital so that you can use it in more than one place. These are things you would probably want to meet and talk about on a regular basis.

When you're building your insurance portfolio in Canada, when Canadians are out there working and trying to achieve their objectives, you should be thinking about your insurance as an actual asset class and stop thinking about it as a cost or a liability or something you have to pay for. The thing serves a specific objective. Even if you have term life insurance. I talked to a lot of people who want to, you know, people I talk to want to implement the process of becoming a real bank.

Vert.

I don't want any term insurance. Look, man, I got boatloads of term insurance to your point, because I'm thinking ahead so I can convert it later on or, you know, I'm going to create a lot of wealth in my lifetime, but I don't know how much time I have to create that wealth. So I build my whole Life portfolio. I build my banking system and I add on a bunch of term insurance to make sure that my family never has a bad financial day. As long as I'm here or after I'm gone. If I don't have as much time as I think that I'm going to have or that I need to create the wealth that I want, I better do something about it today when I'm sound of mind, which is put the proper type of insurance in place to make sure that no matter what happens, my family's going to be looked after.

Right. Very recently I was on a call with some folks and great couple again, you know, in their, you know, late 30s, early 40s, you know, two kids, young kids and you know, got a house, got a mortgage, got all that stuff that's typical for people in that age range, making okay money, good income, you know. But there was a, there was an incident, you know, like a vehicle accident that happened, you know, in a couple of years ago. And so one of the spouses is now on a disability situation. Got a lot of unfortunate stuff that's happened, not a circumstance you could have controlled. Comes out of left field. Now there's a perpetual impact to her ability to generate income at this point. So thankfully they had some private insurance in place to help with that. But is it enough? We don't know that yet. And then additionally now we're in a situation where there could be long term effects, you know, concussion, like things that happen in a big vehicle accident where there may not be the ability to actually go and get another coverage. The insurance company might not want to take the risks of that on. And so thankfully they already had insurance in place, they had term insurance. Now they may be able to work with that and to do a conversion into something that is permanent so they can have some options available. But you know, I'm sure when they got that policy originally settled and sold, you know, a decade ago, they weren't thinking about that at the time. They just needed coverage to protect their family. But because they had the foresight to do it, they cared enough to protect their family. They've also created some options on their tomorrow. Now if you work with someone, if you understand this process of becoming your own banker, you want to be able to implement this. Maybe not today, but a future point in your life, maybe right now, but maybe you're not ready, maybe it's not. You don't have the capital or the cash flow or whatever that is. But you know, it's something you want to look at or you want to have the option available in the future. Well, then you better start putting the steps in place today to create the option that you need. That doesn't mean just going out and getting some random amount of random term insurance, because if you get it with the wrong company, great that you have the coverage, but it's completely useless for the conversion. So you need to be working with a coach that understands where does that make sense to do and if that's actually part of what you want to do. Let's set the pieces in place. Let's take the necessary steps to create the outcome that you're looking for. Even if you're not able to do it. Even if you don't get the thing that you want eventually, you can't fund it, or you decided you don't want to do it at a later date. That's cool. But at least you had the groundwork in place so that Imagine you want to go build a house and you get the blueprints drawn up for the house. You go to the city, you get them stamped and approved by the engineer, they're ready to go. You acquire the land. All that's waiting is for you to put the shovel in the ground and pay some money to the builder to start constructing the house. Does that make sense?

Absolutely.

Great. That's term insurance. You're ready to go construct the house to get the good policy to build a foundation to create the equity. Now you got to go pay the builder to start construction that's converting the policy.

We know that you got a ton of value and some really good things to think about. If you have questions, don't be shy, leave a comment. Make sure you click the link in the post description below. Go to watchibc.com that's watchibc.com to learn more about the process of becoming your own banker. Don't forget about the playlist here to my left.