Nelson Nash explains where to put your money using life insurance policies. He walks through premium computations and financial strategies, arguing insurance is a better place to park cash than traditional savings.
This is a scale that I created years ago back in my equitable days that every life insurance policy plan lies on this scale. Everything begins with a computation of a premium. With a computation of a single premium policy.
You pay a lump sum down, never paid any more. This guy's at 25 years old, will say.
He wants to buy a hundred thousand dollar policy. It might cost him $20,000. A lump sum, you never have to pay any more all through to pay dividends such like you saw there on the state farm graph while ago with the policy I bought back in 1959.
Now you can finance that single premium policy.
You can rent that finance policy route that single premium policy through term insurance one year term insurance 10 year term, 20 years term, whatever, whatever but positive it paying is remote.
Home office folks, can y' all tell me what.
Term insurance, how often do they actually pay off? You know, less than 2%. Y' all got a D? Do you have a better idea?
It's very rare that it pays off. Yeah, we like to think, we like to think. Okay, now you can finance this over the theoretical lifespan. In Canada it's whole life 100. Now if he's 25 that's a, a what?
75 pay plan. I mean Auburn graduate can calculate that.
Now you can shorten it by going L65. Well if he's 25 that's a 40 pay plan, right? I told you this is complicated.
Now you can shorten it by going to 20 pay life. Y' all got a 20 pay life at you? Yeah.
Now some folks still have a 10 day life.
Guardian used to have a 10 pay life and I sold the daylights out of that thing because it's so simple to explain. Plus the fact that I borrow a lot.
Well in the British home office they took it out of the portfolio. I was mad at them for doing that but I got over it.
I said you know if I can take this policy here and put some money here and put a paid a petition rider on it now I can put it anywhere in the scale I want it. So I got over it. But I was mad at them. But Blitzkin and stuff they have put it back in the portfolio. Now I hear.
But this is a line for banking purposes that you don't want to cross. But, but this is not an earth shaking result. I think life insurance agents overplay this. They get again fascinated by minutiae and there's no need for at all, just multiplicity. Policy solves the whole cotton picket works. Not only that gives you a lot More flexibility. But if you get on this side of the neckline modified endowment contract in the usa let's say that you had cash payers over here and you were to make a loan to buy an automobile or something that's fairly substantial. Say might cost you 20 or $30,000. Some of that is going to be treated as income that year to be taxed. Well again that's not an earth shaking crisis. But for practical purposes you would just want to stay on the right side of the line that is snuggle up to the metal line, that's all. And now when we go from right to left, what's going to happen to the premium guys going up man, what's the mindset of everybody out there about insurance? They want to go, they want to go the other way, right? Don't, don't, don't want to pay much money that life insurance company because all these financial geniuses told you that's a bad place to put money. And they got to be right because there's so many avantes and they have Harvard MBAs and stuff like that. So they bound to be educated.
Now let's prove that this is the point to be okay. These are 25 year old twins.
They're both preferred and one of them puts $2000 into a life payment 100. The other puts 1200 into that same life paper 100. But they put $800 into pay. The pet of the outlay is the same. Now let's look at it. One of them put 2000 here, the other one put 1200 here and put a router of 800 there. Same outlay. Now will suppose they die at the end of the first year.
The conventional thinker delivers 219964 to then a first street. My guy only delivers 130. Delivers 133 on 22.
Now it looks like that's a better deal. But what's the probability of those guys dying at that point? Slim and none. Now his dash values are zero. My guy's dash values is 784. This is 97% of that very lifting. Now let's go down to 22 years. At that time these guys are 47 the chances of one of them dying. Now it picked up a little bit but you saw the scale there a while ago. It's much better today than what you see on that scale on that curve, that graph. Right. All right. At that point you notice the death benefit is probably within a few dollars of each other. But as it a significant difference in the cave and.
Same outlay. Now let's move down to 61 years. Now they're 86 chances. One of them dying there picked up a good bit, but they might be like Bob and still hanging around. Right.
Now the conventional Thinker's death benefit, 2.305. My guy, 2.596. Same outlay. Now we'll. If we do that, we've taken the Life Aid 100 and by the pay permission driver, we've moved it to right here.
We're not where I said to be, are we?
We should be here for backing purposes. Now let's reverse the outlay wheel. Put 800 here and 1200 here.
Now if we do that, will this number will go down.
The initial death benefit will go down.
The cash value will go up. The point of equilibrium won't be 22 years. It'll be maybe 17 years, maybe 16.
And this number will go much higher.
Well, we've only moved it to here we are where I said to be. Do I need to keep drawing pictures?
But you see, that's the way life insurance folks think. Out there in the big wide world.
They got to see numbers and so forth. They can't just do things logically. Reason to tell you this.
Doesn'T require all that minutiae that's out there, but it prevails. And they'll argue with one another about, oh, my deal is better than yours because of so and so numbers or so and it's not so how you behave is much more efficient than a much more function is more effective than how the insurance company affects. See those investments that I made from State Farm policy? State Farm didn't have a thing to work to do with those.
And the results of Mac was much better than what you see on the.
Performance of the State Farm colors.
The life insurance stuff there is. Where do you get the wherewithal to do something that you know is a good deal?
And good deals are out there because people do get in trouble and they need help and you can help them out if you got ready access to wherewithal. By the way, there are no policy loans out there on our policies now.
They're all paid off. Everything's paid off. There's no debts, no mortgages, no nothing. It's a very peaceful, transparent way of life and fun.
All right, now here's something. How are you doing on time, Jason? Doing good. We've talked just under an hour. He's got the stage hood so.
