What If A Life Insurance Company In Canada Goes BANKRUPT?

And based on this data they are managing, they're actually charging a little bit more money than the projected mortality in order to stay profitable in case of any pandemics, in case of any wars, and many other factors to make sure that even if too many people die in a given year, the company stays afloat, the company is still profitable. And if not so many people die in a given year, then insurance company is revisiting all the numbers and they are looking at their profitability.

Hi, my name is Roman Pushkar. I'm with Ascendant Financial. I'm an infinite banking practitioner and in today's episode I'm going to be answering your questions about the infinite banking concept. So these questions came from one of our boot camps or webinars that we did for our clients. So we thought that it would be great for us to record a video and answering specifically these questions because if someone asks this question, chances are this question is a frequently asked question. Right. So let's get started. Question number one, what if the insurance company goes bankrupt? So the insurance companies are financial institutions that, you know, deal with money and many people are wondering what happens if the insurance company goes bankrupt in this situation, the insurance company is going to be sold. Basically all insurance companies assets will be transferred to a different insurance company which is solvent, right? So insolvent insurance company is going to be liquidated basically. But all the assets, including policies, including assets, including all the guarantees and benefits must be transferred to a different company. And there is one entity, it's called Assurance. So Assurance, guarantees, protection, death benefits and cash values in your policies even if the insurance company goes bankrupt and all the insurance company's assets are being transferred to solvent insurance company. Now Assurance CA is the website where you can read more about that. I just wanted to draw your attention to a video that Jason and Richard recorded on Wealth Without Bay Street Podcast. And this video explains in details what happens exactly in the case of insurance company goes under and you can learn more about what happens to your policy and how you're protected in a couple words. So there are death benefits that are protected and there are also cash values that are protected and minimum 85% of all death benefits and minimum 85% or more of your cash values are protected by assurance. So Assurance is a nonprofit organization that is regulated by Canadian laws and regulations and Assurus is an organization where every insurance company in Canada has to be a member of Assurus even to start selling life insurance products. So answering your question is you are protected at least 85% of your death benefit and your cash values are guaranteed, it may be more, maybe 90%, maybe 95%, but minimum is 85%. Second question, how are we compensated?

We as insurance brokers are compensated from insurance companies. So when we work with our clients, when we coach them on the infinite banking concept, so in essence, the infinite banking concept is done with whole life insurance product, right? So, and this is insurance product. And when a client decides to move forward and close the deal, basically open a whole life insurance policy, then insurance company pays us a certain amount of money. And based on how much our company gets, we as agents also get compensated based on our commission. So this is how we get compensated. So this compensation happens once and it's just based on how many policies we open and based on the size of the policies as well. So yeah, this is insurance product and it is standard for the industry. It's not just our company, it is standard for the whole industry, industry. And this amount, how much our company is getting is not negotiable. We cannot, you know, negotiate with insurance company saying, hey, pay us more, pay us less. We cannot regulate that. Third question, how are insurance companies able to pay such huge sums on policies? Don't they just go bankrupt ever? So as I understand, paying such huge sums of policies, this person is asking about death benefit pays out, right? I understand that it goes about death benefits and how insurance company is able to pay death benefits. So insurance company, we need to understand that in Canada and also in many other countries, insurance companies are managing mortality risk, which means they have statistical data on how many people of certain age will die in a certain age. Right. So they are managing this risk by charging cost of insurance. Right. Basically based on specific number of projected mortality, insurance company knows how much they have to be charging based on $1,000 of protection from each group of the insured persons. And based on this data they are managing, they're actually charging a little bit more money than the projected mortality in order to stay profitable in case of any pandemics, in case of any wars, and many other factors to make sure that even if too many people die in a given year, the company stays afloat, the company is still profitable. And if not so many people die in a given year, then insurance company is revisiting all the numbers and they are looking at their profitability. Fewer people die, the higher profitability of insurance company, and they're paying back to the policyholders, they're paying back something called a dividend. And this is how insurance company always has enough cash to pay to the death Claims and, and make sure that the insurance company stays profitable. Answering second question. Don't they go under the insurance companies? Yes, yes, insurance companies can go under if the insurance company is poorly managed. But in general, insurance companies are more stable financial institutions than even banks because banks have higher risk and they actually lend more money than they have on reserve. So something like bank run may happen with a bank, but it may not happen to an insurance company because insurance company does not lend more money than insurance company actually has. That's why insurance companies are far more stable in financial institutions than even banks. Okay, next question. How does the insurance company make more money on this policy if they're paying out more than we, the policyholders are putting in? And I wanted to combine this question with the next question, which also is very similar. How does the insurance carrier make money to fund the growth and the dividend? So the insurance companies are growing our cash value to have cash available to pay out for the death benefit. So this person is asking a question in regards to this policy, which means he's asking about a whole life participating dividend paying insurance policy. Now the whole life is a very unique product which works in a very specific way. In order to make sure that insurance company has all this cash ready for you when a life insured passes away, insurance company has to have this cash ready for you. Right when the insurance company sells you a whole life product. Insurance company knows that at some point, provided that the policy doesn't lapse, will pay out a death claim because it is not a term insurance. Term insurance only pays out a death claim only if the insured dies in a specific period of time. With whole life, it is an insurance protection for the whole life. And regardless of when the insured passes away, there has to be a payout at some point. So insurance company knows that they cannot risk our money. They cannot put our money at risk, for example in crypto or in stock market. And they have to be very careful managing our money and growing it. So how insurance company is building this cash? How insurance companies invest in our money? This is a very good question. So insurance companies are investing in very low risk and very reliable and stable environment. For example, a big portion of insurance companies investments is bonds, bonds, it's government bonds, corporate bonds, which produce a low risk yield and the yield is not very high. But at the same time it is very predictable and very stable. Another one is real estate and commercial mortgages. Insurance companies lend money to big corporations, to governments, municipalities, to development projects. And they are making sure that they have A collateral on that project in order to lend money to them. So they're investing very carefully and they are getting, making sure that at some point they will get their money back because they cannot risk our money in a very, you know, risky environment. So the investments they are putting money in are also very high class investments. So the investment rating has to be at least A or double A or aaa. Sometimes they will invest in triple B investments as well, but usually it is a double A or triple A rating. Next question. How about major market corrections? Can there be significant erosion of value? This is a really good question. We understand that for participating dividend paying whole life insurance, all the risk is with insurance company. Insurance company is managing the risk of good growing our cash. And that's why we may assume that they're investing in something risky. So it is not a correct suggestion, it is not a correct assumption. Insurance companies are investing our money into something that is not really exposed to a market. If there is some equity they are investing in, the equity is a very stable Canadian equity that produces dividends, produces cash flow and something like big utility companies, you know, big producing energy generating trading companies and stuff like that. Insurance companies do not invest in something like S&P 500 or IT sector. They cannot risk our money. That's why if there is a market crash or market correction, the PAR fund, which is participating fund which is being invested on our behalf in our interest is not exposed to this market risk. That's why in the environment of, you know, market crashes or corrections, participating policyholders still get their guaranteed growth and their daily growth still goes up no matter what happens with market. That's why the beauty of infinite banking is guarantees. So I as a participating policyholder don't have to think, don't have to worry about ever losing my money because all the risk is with insurance company. And in the worst case scenario, even if anything bad happens to the insurance company, I'm protected. And I know that my money is very well managed and is not exposed to any market risk or crypto or anything like that. And the last question is what do the insurance companies invest in? Bonds, equity or a mix? Yes, like I already mentioned in this video. So insurance companies mostly investing in bonds also there is some equity, but it is a very, very specific equity like infrastructure or power generating equities, producing dividends, producing cash flow. And they are investing in a very, very long period of time. They're not investing to, you know, buy and sell, buy and sell and make any, you know, speculative income. They are investing in the long run for 10, 15, 20, 30 years. All right. I hope this video was helpful. If you have any questions, please reach out to our team and make sure that you learn more about the product about the infinite Banking concept. If you haven't read Nelson's book, please get a copy of Nelson's book Becoming your own Banker to learn more about how infinite banking works and get yourself a copy of this book and read it also is on to watchibc.com again it's watchibc.com to learn more about how any Canadian family or business can grow their money on a tax free basis and become your own banker in order to succeed from being dependent from banks and grow your wealth in the long run. Thank you so much for watching and I will catch you at the next one. Bye.